External auditors are placing more focus on evaluating internal controls over financial reporting, leading to higher fees for companies.
Nearly 13 years after the passage of the Sarbanes-Oxley Act, the money and time spent to comply with its disclosure requirements continue to increase for companies, according to a new survey.
Sixty-seven percent of the 460 audit executives and professionals polled by the global consulting firm Protiviti reported an increase in the hours that their organization dedicated last year to addressing SOX compliance. More than half indicated that those hours had increased by at least 16%.
On the cost side, 58% of companies said their external audit fees increased in fiscal 2014, reflecting, in part, the Public Company Accounting Oversight Board’s inspection reports of external auditors and the adoption of the Committee of Sponsoring Organizations‘ new Internal Control — Integrated Framework to guide documentation efforts. Fifty-eight percent of large company respondents spent more than $1 million on SOX compliance last year.
“As we approach the 13th anniversary of the Sarbanes-Oxley Act, compliance remains dynamic and complicated to master for most companies,” Brian Christensen, an executive vice president with Protiviti, said in a news release.
“This year’s [Sarbanes-Oxley compliance] survey shows that a majority of companies are not only spending more time and money on reporting requirements, but are also making significant changes to their compliance programs.”
Protiviti cited changes in the areas of high-risk processes, baseline testing of IT reports, and entity-level controls. Changes in those areas have increased by 9%, 13%, and 10%, respectively, compared with the results of Protiviti’s previous SOX survey.
There was also a notable increase in large organizations with significant or moderate plans to automate more IT processes and controls. In 2014, 40% of large company respondents reported having significant or moderate automation plans; this year, 58% describe their automation plans as significant.
While costs may be higher, survey respondents. especially those from large companies, seem to feel SOX compliance has improved significantly or moderately the relability of their financial reporting.
“Although the way [SOX] is adhered to, audited, and regulated continues to change, most companies are investing in the resources and intelligence necessary to adapt to these changes in an effective and cost-efficient manner,” the report concludes.
“And more and more organizations are focused on driving long-term value out of their SOX compliance efforts.”