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Thomas Brandt Jr., CFO of Telecommunication Systems Inc., a $143 million producer of wireless software, keeps in his office a paper-based reminder of his first-year compliance under Section 404 of Sarbanes-Oxley, even though everything is also stored on computer systems. Despite the Annapolis, Md.-based company’s relatively small size, the 404-compliance project fills 18 ringed binders with all the process documentation, records of testing, interim testing and follow-up testing. “It was documented to an extreme, which is not to fault our auditing group that made the judgments,” says Brandt. “They had to cover their exposures and err on the safe side.”

Telecommunication Systems’ recurring audit and related fees more than doubled during year one compliance, to $768,000, and as year two reporting winds to a close, Brandt expects those costs to be down by less than 10% at best. And Brandt, a Wharton School MBA and former PricewaterhouseCoopers auditor, considers his company one of the luckier ones, given that he had on hand a number of finance employees with Big Four backgrounds who could help guide the company through the new requirements, including Auditing Standard 2 (AS2), the guideline for Section 404 audits, which, like most aspects of Sarbanes-Oxley, only comes in one size. “It was the only comprehensive written guidance, and that meant it was for GE, IBM, Exxon and also me,” says Brandt.

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