The costs of complying with Section 404 of the Sarbanes-Oxley Act (SOX) dropped a dramatic 41% in 2007 from the previous year as confidence in the accuracy and reliability of financial reports grew, according to a Financial Executives International (FEI) survey. Part of that drop was attributed to a 5.4% decline in spending for 404 attestation by outside auditors, FEI said, citing responses from 185 companies, most of which have market caps over $75 million. "As companies continue to find efficiencies in complying with Section 404 and make compliance part of a routine practice, we have seen a continued decline in costs," says Michael Cangemi, FEI president and CEO.

That's not so surprising. What is surprising, however, is that the drop in 404 auditor costs was more than offset by a 5% increase in the average hourly rate (about $210) charged by outside auditors for all audit jobs in 2007, not just SOX-related charges. As a result, overall spending for integrated financial reporting and controls climbed 1.8% to an average $3.6 million for larger companies, FEI said.

Moreover, not all financial executives are prepared to admit SOX is a good thing. While confidence is clearly increasing, sentiment remains split, according to Cangemi. The survey indicates that a little more than half (50.3%) the respondents believe financial reports are more accurate, up from 46% a year earlier; 56% believe that financial reports are more reliable, up from 48% last year–but only 43.6% believe 404 compliance has helped prevent fraud, higher than the 34% reported last year but still less than half the respondents. Almost 70%, however, agree that SOX has accomplished what it set out to do: Increase investor confidence in financial reports, compared with 60% a year earlier.