The anecdotal evidence was already there, but now the hard numbers are in from an SEC report that proves smaller companies are paying a disproportionately high cost to comply with Sarbanes Oxley.  As CFO Magazine reports in a recent story on audit fees:

Small companies’ perceived cost burden is important because it’s caused a series of delays in the deadline for full Sarbox compliance. The SEC has been dogged by small-business advocates wanting extensions to Sarbox since soon after the regulator first estimated that compliance would cost firms an average of $91,000. In late 2007, under pressure from members of Congress who called for specific cost-benefit dollar figures, then–SEC chairman Christopher Cox responded with the promise of the type of study that was completed [last] Friday.

The report notes that much of the cost is allocated to in-house work necessary to get internal controls in shape.  This is a topic we’re well familiar with, as we’ve spent a great deal of time battling to help small to mid-sized companies.  An article by our Managing Patrtner, Carl Famiglietti, discussed How CFOs Can Control Rising Audit Costs [pdf] and suggested that:

Given the powerful undertow of Section 404, it is of course easy to fall into acceptance of rising fees…but there are ways to take back control of the bottom line.  Companies can follow two distinct yet equally important lines of attack:  easing costs associated with non-audit CPA advisory services and mining governance initiatives for extended ROI.

In the spirit of Carl’s article, MFA is routinely on the front lines alongside the financial departments of small to midsized companies.  With the news last week that small companies received an extension for SOX compliance to on or after June 2010, we are encouraged that the additional time will help us and non-accelerated filers craft strategies that will keep their costs down and their return on investment up.

No surprise to see that the saga around IFRS (International Financial Reporting Standards) lives on.  New SEC Chair Mary Schapiro implied that recent discussions may be wiped from the chalkboard (or at least significantly reconsidered), saying that she “will not necessarily feel bound by the existing roadmap that’s out for comment.”

As noted in the AICPA’s blog on IFRS, any delay is welcome when it comes to preparing for such a major change in standards.  As I discussed in my post on September 3 or last year, I had my own take on the situation and predicted that the existing timetable would not persist.   A shift of such enormous scope will take a great deal of patience and learning on the front end,  and it will not be easily accepted in the financial matrix of the United States.

Even so, we stand by our take in last year’s Perspectives article (Three Steps Financial Executives Should Take Towards IFRS) that getting that learning process underway can only help matters in the long run.  In that Perspetivce, we point to three key steps financial departments can take even this far away from implementation:  keep your radar on, get educated, and prepare to mobilize.  When the tide does eventually rise on IFRS, it will come with a litany of obstacles - but with all this back and forth, getting caught off guard shouldn’t be one of them.

We at MFA wish you all the best in the Holiday season, and we look forward to resuming our blog entries in 2009.

Happy Holidays!