If you think that a lot of your enterprise’s resources are being drained on Sarbanes-Oxley (SOX) compliance, you’re not alone. Despite three years of experience with Sarbanes-Oxley, auditors and enterprises still struggle to achieve a balance between effective compliance, and the high cost sustaining the SOX initiative. Kenneth Wilcox1, President and CEO of SVB Financial Group, alleges that his company paid over $20 million to the Big Four accounting firms in 2006 - an increase of more than five times what it paid in 2003. In particular, he says audits today are prolonged, require more personnel, and auditors have an overly broad definition of "materiality", than what is relevant to SOX.
The soaring SOX costs have not gone unnoticed by the Public Company Accounting Oversight Board (PCAOB). The PCAOB has seen how the accounting firms have run up huge fees, and forced clients to spend millions of dollars on redundant IT systems and unnecessary controls. In response, on May 24, 2007, the PCAOB adopted a new auditing standard – “An Audit of Internal Control Over Financial Reporting That Is Integrated with an Audit of Financial Statements” (AS5) - that replaces the relevant guidance in Auditing Standard 2.
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