July 30 marks the four-year anniversary of the signing of the Sarbanes-Oxley Act.
Since its passage, SOX has raised the ire of public companies forced to comply with its provisions. In particular, detractors have railed against Section 404 of the legislation, which requires companies to validate the effectiveness of internal controls put in place to protect financial reporting processes.
The biggest complaint has been the cost of compliance. Analysts estimate companies accumulate $1 million in SOX expenses for every $1 billion in revenue.
But lately things are looking up, industry watchers say.
Companies today are in a better position to comply with SOX, says John Hagerty, a vice president at AMR Research. The Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) have begun to issue more clear implementation guidance. As part of that effort, the SEC and PCAOB are advocating a risk-based approach to compliance that encourages companies to focus on areas that present the greatest risk to financial reporting accuracy.
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