Addressing continued rise in Sarbanes-Oxley Act compliance costs

By Bryan Strickland

Technology tools have the potential to stem the tide of rising costs and time spent complying with the Sarbanes-Oxley Act (SOX), but current conditions faced by companies may be slowing the rate of progress.

Protiviti polled 562 company representatives — half of whom are CFOs — and found that 53% reported an increase in SOX compliance hours, the same percentage that reported an increase in 2021. Twenty-one percent did report a decrease in SOX hours, an uptick from 18% one year ago.

Protiviti, conducting the survey for the 13th consecutive year, found that the number of companies spending more than $2 million during the 2021 fiscal year on internal SOX compliance efforts increased, while the number of companies spending less than $500,000 decreased. In addition to more SOX compliance hours adding up to more SOX costs, Protiviti asserted that inflation and labor shortages were among the reasons for greater SOX spending. Protiviti also cited technology-driven transformation for additional costs, although that very transformation could hold the key to eventually reducing costs.

The 2022 Sarbanes-Oxley Compliance Survey reported that 25% of companies' SOX compliance programs are utilizing technology tools. Although the 2021 survey didn't provide a comparable percentage, another question asked in both surveys suggests that automation is increasing: Year over year, the average percentage of automated key controls increased from 33% to 50%.

The survey indicates there is room for the portion of SOX compliance programs using technology tools to grow. While 51% of respondents believe "many areas of the SOX control environment are not conducive to automation," that means that nearly half of respondents don't feel that way. About half cited "lack of time to spend exploring automation" as a challenge facing greater use of automation, while about 4 in 10 mentioned lack of knowledge about automation options, limited effort invested in implementation, and lack of funding or executive support as further challenges.

Forty-one percent of SOX internal costs are for outsourced resources, up from 37% in the 2021 survey.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.

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