Compliance

A January 2004 Financial Executives International (FEI) survey of more than 300 of its members who work in public companies of all sizes revealed those entities expected to spend more time and money to comply with the section 404 internal-control requirements of the Sarbanes-Oxley Act of 2002 than anticipated in a smaller poll taken less than a year ago ( www.fei.org/download/section404_summary.pdf ). For each of the largest companies, the survey found, first-year section 404 compliance costs could exceed $4.6 million. On average respondents estimated they would expend approximately 15,000 hours of internal and external staff time and face a 38% increase in audit fees. They expected to spend the most on external costs. The May 2003 survey, in which 83 companies participated, had found complying would consume, on average, about 6,000 staff hours and would raise audit expenditures by 35%. The FEI said that until the Public Company Accounting Oversight Board and the SEC issued final rules implementing section 404, companies and auditors could only estimate the effect on audit fees.