Today is the day that Section 404 of the Sarbanes-Oxley Act comes into effect.
Section 404 says that publicly-listed companies in the US must have in place an adequate internal control structure and procedures for financial reporting, and holds corporate management accountable for inadequate controls. To ensure compliance with Section 404, enterprises must have data retention and retrieval processes in place, as well as solid documentation of all financial records.
Non-US companies listed in the US, together with smaller American companies, are not required to comply with Section 404 until late next year.
The Financial Times says that the cost of complying with Sarbanes-Oxley corporate governance legislation has risen to $5.1 million for the average large US company, with a further $3.7 million in ongoing compliance bills.
The vast bulk of this cost relates to updating and documenting internal management controls, the part of the Act relating to Section 404. Some very large companies such as General Electric say they have spent $30 million on this alone, the FT reports.
The latest average figures are for Fortune 1000 companies and were published last Friday in one of the largest surveys yet of corporate governance attitudes conducted by Korn/Ferry, an executive recruitment firm.
Financial Times | Sarbanes-Oxley compliance costs average $5m (Subscription required)
Related NevOn posts: