The total average cost of Sarbanes-Oxley Section 404 compliance reached $1.7 million last year, according to a newly released survey.

Financial Executives International polled 185 companies to gauge their experiences with Section 404 internal control audit compliance in fiscal 2007. The organization found that total audit fees for U.S. accelerated filers averaged $3.6 million, a slight increase of 1.8 percent from the previous year.

Costs of SOX 404 compliance have been on the decline, according to the report. "The internal costs are decreasing," said Christine DiFabio, vice president of technical activities for FEI. "Companies are not outsourcing as much now and they're getting more efficient." She added that companies are also making better use of judgment and making their internal control audits more risk-based, which adds to efficiency.

However, as more small companies and non-accelerated filers begin to comply with all the Section 404 requirements, DiFabio expects to see the costs go up for them.

Companies reported requiring an average of 11,100 people hours internally to comply with Section 404 in 2007, a decrease of 8.6 percent from the previous year.  An average of 1,244 external people hours were required to comply with Section 404 in 2007, a decrease of 13.7 percent from the prior year.

Meanwhile, auditor attestation fees paid by accelerated filers in 2007 constituted 23.7 percent of the accelerated filer's total annual audit fees and averaged $846,000, representing a 5.4 percent decrease from 2006.

Companies with centralized operations had lower total costs of compliance in 2007 than companies with decentralized operations. The total average 2007 compliance costs for companies with centralized operations were $1.3 million. For companies with decentralized operations, the costs were $1.9 million, 30.1 percent higher than for those with centralized operations.

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