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Financial Executives International (FEI) provides an annual survey on SOX Section 404 costs. These costs have
continued to decline relative to revenues since 2004. As study carried out in 2007 showed that, for 168 companies
with average revenues of $4.7 billion, the average compliance costs were $1.7 million (0.036% of revenue). Also a
2006 study indicated that, for 200 companies with average revenues of $6.8 billion, the average compliance costs
were $2.9 million (0.043% of revenue), down 23% from 2005. Cost for decentralized companies (i.e., those with
multiple segments or divisions) were considerably more than centralized companies.
Study carried out by Securities and Exchange Commission found that Section 404(b) compliance costs have
continued to decline, especially after 2007 accounting guidance.
Various studies carried out towards the benefits derived from Sarbanes Oxley Compliance have indicated
encouraging signs to companies complying/about to comply with the regulation. A study by Arping/Sautner
concluded that companies have improved transparency in their operations post implementation of SOX. Lord &
Benoit Report (2006) indicated that the increased share price enjoyed by companies implementing SOX
outweighed the costs associated with implementation. Also, a 2019 study in the Journal of Law and Economics
stated, "We find a large decline in the average voting premium of US dual-class firms targeted by major SOX
provisions that enhance boards’ independence, improve internal controls, and increase litigation risks. The
targeted firms also improve the efficiency of investment, cash management, and chief executive officers’
compensation relative to firms not targeted by SOX. Overall, the evidence suggests that SOX is effective in
curbing the private benefits of control.”
To conclude, the main motto of Sarbanes Oxley compliance is to enhance the confidence of the public in the
operation of the companies whose stock is traded. And going by the studies, it can be inferred that SOX indeed
has led to strengthened control framework, greater compliance and increased transparency in operations,
thereby meeting the primary objective for which it was formulated.

Acknowledgements:
Sarbanes Oxley Act, bare text
Sarbanes Oxley-101.com
Study/research papers/journals as mentioned in the article

The views expressed in this article solely belong to the author and do not represent in any way, the
views/opinions of the organization to which he is attached or The Institute of Internal Auditors-India.

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