SOX costs higher than expected

The cost for public companies to comply with Sarbanes-Oxley is higher than expected, according to a recent Government Accountability Office (GAO) report.

The report, released by Republican senators Olympia Snowe and Michael Enzi, indicates companies are choosing to go private in order to sidestep the rules.

In order to address the concerns, an official advisory committee has recommended that small companies be awarded exemptions from SOX. Legislation is currently being drafted to exempt companies with market value under US$700 million from a requirement to have external auditors sign off on internal reports concerning financial controls. This exemption would be relevant to about 70% of all public US-based companies.

However, this could hinder progress made in encouraging publicly held companies to tighten anti-fraud protection, the GAO report warns. Nevertheless, the authors of the report say it is necessary to decrease the financial damage SOX has done to small companies.

Snowe, head of the senate’s small business committee, says complicated regulations may “place small businesses in a paralyzing state of regulatory limbo and damage their ability to create jobs.” Alternatively, Snowe suggests the SEC develop rules specific to small businesses.

SEC chairman Christopher Cox feels the regulations should represent internal-controls requirement applicable to all companies.