A two year study conducted by the SEC revealed two very interesting statistics. First, Small companies pay more for SOX compliance than do Large companies. Not in absolute terms, but in relative terms. This information comes as no surprise to CFO's of small companies.
"Although larger companies incur higher compliance costs, smaller companies incur higher scaled costs (i.e., relative to their assets) on average," the SEC wrote in a report released Friday.
Second, internal SOX compliance costs are larger than external audit fees by a large percentage. This comes directly from the CFO.com article:
"What may come as a surprise is that the majority of Sarbox-compliance costs aren't going into auditors' pockets; rather, companies' in-house work to follow the 2002 law's internal-controls provision — Section 404 — is more largely to blame for the expense. The highest cost of Sarbox, the SEC said, is "internal labor costs," followed by audit fees and then costs related to another third party, such as a consultancy, used for help with compliance."
This all comes on the heels of the 4th extension the SEC has given Small Caps to comply with Section 404 of the Sarbanes-Oxley Act. As stated in an earlier post, Vonya Global has a proprietary methodology for helping Small Caps and IPO companies comply with the rigors of Sarbanes-Oxley. Sox OnPOINT™ is a top-down risk based approach which streamlines the compliance effort and is consistent with the PCAOB Audit Standard Number 5. Sox OnPOINT™ helps our clients reduce the cost of compliance.
For more information please visit our website or send us an email.
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