The Dreaded 404

The provision of Sarbanes-Oxley that has caused by far the most extra costs for companies and work for accounting firms is known as Section 404.

That section of the act requires companies to first review and report on their internal controls and then to upgrade them to standards laid out in the act.

The largest public companies had to come into compliance with Section 404 in 2004 and 2005. Smaller companies have lobbied the SEC to get their deadline extended to 2007 to 2008.

So, said Wayne Pinnell, managing partner of Haskell & White, “We’re plateauing, but with another wave coming.”

Noting that about 3,500 of the 16,000 public companies in the U.S. came into compliance last year, Pinnell said that leaves some 12,500 companies facing the coming deadline, and they’re the smaller public companies not necessarily using Big 4 firms.