The Controversy Over Sarbanes-Oxley Compliance Costs

Mark Thoma has opened a discussion of the allegedly excessive costs from the application of Section 404 of the 2002 Sarbanes-Oxley Act governing internal company-financial controls with a focus on The Committee on Capital Markets Regulation. Mark questions whether this committee was truly independent pointing us to an article by Carrie Johnson:

Investor groups sounded alarms yesterday after it emerged that a foundation with ties to a pair of well-heeled business donors and an executive battling civil charges had funded a controversial new report seeking to slash corporate regulation. The Committee on Capital Markets Regulation, which argues that U.S. markets are suffering under overzealous enforcement and unwieldy rules, said it received $500,000 in financial support from the C.V. Starr Foundation … Barbara Roper, director of investor protection at the Consumer Federation of America, went even further, asserting that the capital markets group had preordained its conclusions and carefully selected statistics to make its case that more companies were listing their stocks on foreign markets because of burdensome U.S. rules.

But even if one concedes that companies had to spend a lot of resources in the first couple of years under Sarbanes-Oxley – are these continuing costs or simply start-up costs? It seems at least one of the Big Four is attracting audit clients with promises of making the process more efficient over time. I would presume the other accounting firms are acting similarly.