Standards

Easing of Sarbanes-Oxley rules

The US Securities and Exchange Commission (SEC) has approved measures that will ease internal control requirements under the Sarbanes-Oxley legislation.

The new guidance, unanimously agreed by SEC commissioners, is designed to allow company management to focus on the internal controls that best protect their particular organisation against the risk of material financial misstatement. The SEC said this will enable firms to strengthen their internal control and reduce unnecessary costs.

Christopher Cox, SEC chairman, said: “With the Commission’s new interpretive guidance for management on the evaluation and assessment of its internal controls over financial reporting, companies of all sizes will be able to scale and tailor their evaluation procedures according to the facts and circumstances”.

This followed news that the costs of complying with Sarbanes-Oxley's rules on internal control dropped by 23% last year, according to a survey by Financial Executives International (FEI).

FEI polled 200 companies and found total average cost for compliance with section 404 on internal control to be $2.9m for fiscal 2006. This is the second year in a row to see a significant decline in SOX compliance costs. The poll also discovered a 10% drop in staff time spent on compliance.

Michael Cangemi, FEI president, said: “While there is still work to be done, we have come a long way, and total compliance costs have dropped about one-third (35%) since year one. This drop is largely attributed to increased efficiencies, a positive learning curve, and technical systems and software rollouts”.

June 2007