Audit Fees Down For Filers In ''Year Two'' Of SOX 404.

BOSTON -- New data show that costs associated with The Sarbanes-Oxley Act of 2002 are dropping.

According to a report to published in Compliance Week, large public companies in their second year of Sarbanes-Oxley compliance saw audit fees edge down 0.6 percent last year, after punishing increases in 2004. Overall fees to external auditors fell an even more impressive 7.4 percent last year.

The report, available in spreadsheet form at ComplianceWeek.com, analyzed audit and non-audit fees at large public filers with 2005 revenues of more than $5 billion (median 2005 revenue for companies analyzed was $16.6 billion).

Companies included in the Compliance Week report had Dec. 31 "calendar year" fiscal-year ends. Those companies are among the first to report in their proxies audit fees that reflect a second year of compliance with Section 404 of Sarbanes-Oxley, the onerous internal control provisions that have been the source of frustration and complaints by many public companies. The Securities and Exchange Commission has already postponed the SOX 404 compliance date for smaller public companies, and is soliciting feedback as it considers further revisions to the provision.

For the 47 companies analyzed that met both criteria for inclusion in the Compliance Week report (i.e., companies with revenue of more than $5 billion and Dec. 31 FYE), the median decline for all fees paid to auditors (e.g., audit fees, audit-related fees, tax fees, and "all other" fees) was 7.4 percent.

The median decline for audits (e.g., only audit fees and audit-related fees) was 0.6 percent.

The downward trend runs contrary to recent articles in the Wall Street Journal and elsewhere, which stated that audit fees are still rising, but at a modest pace. The Compliance Week report is unique in that it specifically analyzed companies that had gone through a second year of SOX 404 compliance.

"The Big 4 predicted a decline like this, but few believed them," said Compliance Week managing editor Matt Kelly, referring to a Dec. 2005 study commissioned by Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers. "Many of the proxies reviewed by Compliance Week specifically cited decreased SOX 404 fees," added Kelly, "and companies that spoke with Compliance Week confirmed that the decreases stemmed from 'Year Two' savings on Section 404, as they realized efficiencies from 'Year One,' and gained a better appreciation of where to focus their efforts."

The complete report, in Microsoft Excel spreadsheet form, is available at ComplianceWeek.com. It includes detailed fields such as company; all fees in 2004 and 2005 (audit, audit-related, tax, other); percent year-to-year changes by type; auditor; revenue numbers; fees as a percent of revenue; and related notes from the companies' proxies.

The report is available to Compliance Week subscribers and member of the press; visit http://www.complianceweek.com for details.

About Compliance Week

Compliance Week is a newsletter on corporate governance and compliance that reaches over 40,000 financial and legal executives at U.S. public companies. Available in print and online, Compliance Week features the insights of numerous governance and securities experts, including former Securities and Exchange Chairman Harvey Pitt, and COSO internal control framework co-author Richard Steinberg.