Audit costs almost doubled between 2001, the year before Sarbanes-Oxley took effect, through the end of 2006, primarily because of a median 345% jump in audit fees, according to an in-depth analysis of public companies' financial data by The Corporate Library. The huge jump in fees, in fact, overshadowed a big drop in consultancy costs, which occurred because projects commissioned before SOX are no longer part of the outside auditor's responsibilities. As a result of this changing paradigm, the proportion of fees as a percentage of total audit costs, or how much auditors were paid vs. general expenses, rose from 40% to almost 95% of the total bill, according to the study: The Audit Landscape: 2001-2007."


"We have witnessed a major shift from 'other costs' to audit and audit-related fees," notes John Hodgson, senior research fellow at The Corporate Library. According to the independent governance research organization's report, median auditor costs per company actually climbed to $2.74 million in 2006 from $1.42 million five years earlier. Total audit fees paid in 2006 were $10.5 billion, with $6.4 billion paid in 2001.


Stiff audit fees have held up even as general SOX compliance costs have declined, an anomaly that industry experts attributed to the unrelenting complexity of the rules and continuing insecurity by accountants and corporations about all the law's provisions. Expect costs and fees to come down in 2008, says Hodgson. "New guidance this year, including Auditing Standard 5 and clarifications by the Securities and Exchange Commission, will make accounting far less complex," he says. And far less expensive.

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