The total costs of first-year compliance with Section 404 of the Sarbanes-Oxley Act could exceed $4.6 million each for of the largest U.S. companies. That cost breaks down into 35,000 hours of internal manpower, $1.3 million on external consulting and software, and additional audit fees of $1.5 million.
The average cost-of-compliance estimate for all companies is just under $2 million for 12,000 hours of internal work and 3,000 hours of external work, plus additional auditor fees of $590,000.
This is according to a survey by Financial Executives International (FEI), which says that these expected costs are significantly higher than those estimated in an earlier FEI survey.
Colleen Sayther, President and CEO of FEI, says: "It stands to reason that larger, more complex companies will incur higher costs for implementing the internal control-related provisions of Section 404, but even for small companies the estimates are almost equally significant in proportion to revenue. Only time will tell how this first-year cost will compare to the benefit for shareholders."
On the bright side, the average survey respondent expects to spend the most on external costs ? which is good news for software vendors and consultants.