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How Low Can You Go?

Sarbanes-Oxley compliance costs declining.

Ventana QuickTake™

A research survey published in December 2005 by CRA International and sponsored by the "Big Four" accounting firms (Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers) found Sarbanes-Oxley Act compliance costs were likely to have declined in 2005. The reduction reflects the absence of initial one-time implementation and documentation, the benefit of learning curves and fewer remediation requirements. In addition, survey participants expected fewer key controls would need to be tested. For larger companies, controls tested by the auditor were forecast to decline 19 percent, to 540, and for smaller ones 22 percent, to 206.

In our view, the decline in Sarbanes-Oxley compliance costs is an important first step in what should be a steady reduction over the next several years. We think a significant share of the incremental cost of Sarbanes-Oxley compliance can be offset through more efficient financial processes and more effective controls. We advise companies to address the root causes of these compliance costs rather than looking for cheap fixes. Manual processes, stand-alone spreadsheets and poor systems integration are the main factors almost all companies should address, and changing these can drive down costs in the finance organization. In addition, corporations that did not take a systematic approach to designing their controls should be looking for ways to streamline them, which will reduce their internal and external audit costs.

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About Ventana Research
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