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September 29, 2004 --
At the SEC’s Annual Government-Small
Business Forum on Capital Formation (“Forum”), held on
September 20, 2004 at the SEC’s headquarters for the first
time, a topic receiving a great deal of discussion and
attention was the state of readiness for compliance with
Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX
404”) by small public companies.
Many of the management
of the small public companies in attendance expressed
concern in dealing with the costs of compliance with the
Sarbanes-Oxley Act in its entirety.
The data accumulated and distributed at the Forum
included the following estimated costs and resource
required:
|
Company
Size (Annual Revenue in $)
|
Annual
Costs of Compliance (in $)
|
Company
Hours Expended on Compliance
|
|
$25 to $99 million
|
$740,000
|
3,080
|
|
$100 to $499
million
|
$780,000
|
5,100
|
|
$500 to $999
million
|
$1 million
|
6,900
|
Additionally, the costs and efforts of
compliance with SOX 404 are exceeding companies’ original
estimates. The
following information is based on surveys performed by the
Financial Executive Institute of its public company
membership with annual revenues less than $100 million, in
January 2004 and July 2004:
|
|
January
2004
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July
2004
|
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Number of internal
hours required to comply with SOX 404
|
1,025
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2,143
|
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External
consulting hours required to comply with SOX 404
|
505
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837
|
|
Cost of external
consulting to comply with SOX 404
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$136,000
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$192,000
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Additional cost of
attestation report by independent auditor required by
SOX 404
|
38% |
53%
|
|
Expected average
cost of annual audit and SOX 404 attestation
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$185,400
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$259,500
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For small public companies which have
not begun to strategize how they will address SOX 404
compliance, the clock is ticking!
The time for planning and action is now.
Waiting until next year may be too late–do not be
left without having access to the appropriate resources.
For
more information, contact Joe Beach at 215-564-1900.
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