Companies spending more time and money on compliance activities amid a drive to achieve long-term value
MENLO PARK, Calif. – May 19, 2015 – According to the annual Sarbanes-Oxley Compliance Survey released today by global consulting firm Protiviti (www.protiviti.com), SOX compliance remains a costly challenge for businesses, as the intensity around modifications continues to increase. This is largely driven by the new COSO internal control framework, as well as the Public Company Accounting Oversight Board’s (PCAOB) inspection reports of external auditors that are driving these firms to spend more time on audits of their clients’ SOX compliance processes.
In Protiviti's 2015 Sarbanes-Oxley Compliance Survey, more than 460 audit executives and professionals responded to questions about changes in their organizations' approaches to SOX compliance, and their plans to address new regulatory requirements and industry guidelines for the 2015 fiscal year, as well as the cost of compliance.
The survey found that compliance programs are undergoing substantial changes, particularly in the areas of high-risk processes, baseline testing of IT reports, and entity-level controls. Changes in these areas have increased by nine percent, 13 percent, and 10 percent respectively, compared to Protiviti’s 2014 SOX survey. The automation of internal controls also continues to present a key area for development. There is a notable year-over-year increase in large organizations with significant or moderate plans to automate more IT processes and controls. In 2014, 40 percent of large company respondents reported having significant or moderate automation plans; this year, 58 percent of large organizations describe their automation plans as significant.
Not only are SOX compliance programs undergoing major modifications, but the level of intensity of these changes has increased significantly since last year. Sixty-seven percent of respondents reported an increase in hours dedicated to addressing SOX compliance; more than half indicated that hours had increased by least 16 percent or more.
Fees related to external auditing and scrutiny are also increasing. As a result, at least in part, of the PCAOB’s inspection reports of external auditors, the costs of SOX compliance are going up, with 58 percent of all companies surveyed reporting increased external audit fees in the latest fiscal year. In terms of overall internal compliance costs (excluding external audit fees), 58 percent of large company respondents spent more than $1 million on SOX compliance in their most recent fiscal year, while 95 percent of small companies spent less than $500,000.
"As we approach the 13th anniversary of the Sarbanes-Oxley Act, compliance remains dynamic and complicated to master for most companies," said Brian Christensen, an executive vice president with Protiviti and global leader of the firm's Internal Audit and Financial Advisory practice. "This year’s survey shows that a majority of companies are not only spending more time and money on reporting requirements, but are also making significant changes to their compliance programs.”
Highlighting the Positive:
- Among companies surveyed, the majority (78 percent) used COSO’s new framework to guide their SOX documentation efforts in fiscal year 2014. While 63 percent of those companies needed to make some refinements to existing documentation and controls, only 10 percent required remediation work.
- Seventy-eight percent of respondents are currently leveraging their SOX compliance efforts to drive improvement of business processes that affect financial reporting – an 18 percent increase over last year.
- More than half of the respondents (52 percent) reported that in following the requirement of SOX Section 404(b), their Internal Control over Financial Reporting (ICFR) structures have significantly or moderately improved within their organizations. Seventy-three percent of companies beyond their second year of SOX compliance reporting also noted similar improvements to their ICFR structure.
Survey Resources Available: Report, Webinar, Infographic
Protiviti's 2015 Sarbanes-Oxley Compliance Survey report and an infographic of the survey highlights, along with a short video, are available for complimentary download at www.protiviti.com/soxsurvey.
On May 19, 2015 at 10:00 a.m. PDT, Protiviti will host a complimentary webinar to explore the survey results and their implications for internal auditors. Christensen will be joined by guest speakers including Keith Kawashima, Sharon Lindstrom, and Jeff Tecau, Protiviti managing directors from the firm's internal audit practice. To register for the 90-minute webinar, please visit www.protiviti.com/webinars.