Wednesday, November 17, 2004

The costs of Sarbanes-Oxley

A short article by Kevin Fogerty in Baseline Magazine (Sep2004) assesses the typical cost of complying with the Sarbanes-Oxley Act in the U.S. It also contains a handy standard calculation sheet that you can use to calculate your own costs of Sarbanes-Oxley compliance. You can also buy the spreadsheet here ($50).

The amount of money a corporation spends complying with the Sarbanes-Oxley Act depends to such an extent on its existing processes, organization, and technology that it is hard to estimate the total cost, analysts complain.

According to a survey of its members, Financial Executives International says a typical company will spend $4.6 million in 2004 on Sarbanes-Oxley, plus an additional 38 percent per year for future audits. AMR Research predicts compliance budgets will go up 10 percent per year after the act goes into full effect in December 2004.

Those expecting big bills are the smart ones, says Robert Kugel, vice president and research director of Ventana Research. Taking an on-the-cheap approach and then having to re-do the documentation will be far more expensive, even if you do not include potential fines, he says.

Companies are wise to use compliance projects to streamline their processes through business process reengineering efforts, says Brian Wood, research director at Gartner Inc.