Sarbanes-Oxley section 404 average compliance costs have not fallen significantly over the last two decades. According to Protiviti, for example, large accelerated filers had average internal § 404 compliance costs of $1,335,000 in 2016 and $1,338,000 in 2018.[1] Firms with more than two years of compliance experience had average internal compliance costs of $1,183,000 in 2016 and $1,105,300 in 2018.[2] Fifty percent of large accelerated filers reported that their external audit fees went up in 2017 relative to 2016.[3] In 2019, Protiviti reported that the hours and effort level committed to SOX compliance had not decreased significantly in the preceding decade.[4]
Protiviti’s 2022 report found that § 404 compliance costs continued to rise, as did the number of personnel hours expended on compliance.[5] It also reported that external auditors were requesting greater amounts of SOX-related information in connection with § 404(b) evaluations.[6] The average cost for companies in their first year of § 404(a) and 404(b) compliance was $1,477,500.[7] Large accelerated filers had average internal compliance costs of $1,450,800 in 2022.[8] Firms with more than two years of compliance experience had average internal compliance costs of $1,468,300.[9] The percentage of large accelerated filers paying more than $2 million per year rose from 24 to 26 percent, while the percentage paying less than $500,000 fell from 24 to 16 percent.[10] At least some of the increase was due to pandemic-related factors, such as labor shortage and employees working remotely,[11] but it remains striking that 20 years after § 404 was adopted costs continue to rise.
[1] Protiviti, Benchmarking SOX Costs, Hours, and Controls 4 (2018).
[2] Id.
[3] Id. at 7.
[4] Protiviti, Benchmarking SOX Costs, Hours, and Controls 4 (2019).
[5] Protiviti, SOX Compliance: Amid Rising Costs, Labor Shortages and Other Post-Pandemic Challenges 2 (2022), https://www.protiviti.com/sites/default/files/2022-sox-compliance-survey-protiviti.pdf (last visited August 23, 2022).
[6] Id.
[7] Id. at 5.
[8] Id.
[9] Id.
[10] Id. at 6-7.
[11] See id. at 27 Idiscussing factors).