For Darryl Baker, it's hard to tell which is worse: the sheer cost of complying with Section 404 of Sarbanes-Oxley or the aggravation. Baker, controller of Mobility Electronics Inc., a Scottsdale, Ariz.-based company with $85.5 million in revenues, has had to go through the auditing process every year since SarbOx went into effect. During that time, auditing fees have more than doubled, to $633,000. But simply enduring the excruciating process itself has proved equally painful. "I've seen auditors spend most of their time on lower-level controls, like making sure vouchers for purchases of supplies were properly authorized," he says. "They focus on things that ultimately have little real impact."
Now, thanks to new proposed guidelines from both the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB), Baker and executives at other small-and-midsize public companies might experience some relief. The pertinent question, of course, is how much.