According to The Sarbanes-Oxley Investment: A Section 404 Cost Study for Smaller Public Companies , a study by SOX research and consulting firm Lord & Benoit, the total average combined costs of complying with section 404(a) and section 404(b) was $78,457. The costs ranged from as little as $23,000 for a small software company to as much as $197,000 for a manufacturer/distributor with many locations.
The average costs of complying with a section 404(a) management assessment for all non-accelerated filers included in the study were $53,724 (ranging from as low as $15,000 to as high as $162,000).
In general, the study found that manufacturing and distribution companies incurred higher internal control compliance costs. These companies' robust purchasing, multiple subsidiaries, inventory controls, complex IT systems and large capital expenditures contributed to higher costs.
The average projected costs of complying with section 404(b) for non-accelerated filers included in the study were $24,750. The range of audit fee increases was from as low as $7,500 to as high as $86,000.
Because the standard was not yet effective, the study authors derived the audit fee increases related to section 404(a) by taking the actual 2006 audit fee of each company times the projected audit fee increase that was obtained from The Audit Analytics 2006 Audit Fee Briefing Paper , a study by Audit Analytics, that indicated audit fees for smaller accelerated filers increased by 27% from section 404(b).
To download a complimentary copy of the report, visit www.section404.org.
Source: The Lord & Benoit Report, The Sarbanes-Oxley Investment: A Section 404 Cost Study for Smaller Public Companies.<% server.execute /pubs/jofa/includes/footer.htm %>