The Costs of Complying with SOX’s Internal-Controls Audit Requirement

Section 404(b) of the Sarbanes Oxley Act (SOX) requires auditors to test and report on the effectiveness of internal control over financial reporting (ICFR) for accelerated and large accelerated filers. Although Iliev (2010) documents substantial costs to initially comply with 404(b), proponents of Section 404(b) argued that compliance costs would decrease over time as companies shift from implementation to maintenance mode and improve efficiency related to ICFR oversight and testing. Likewise, auditor and client experience with the requirements of Section 404(b) may improve the effectiveness of ICFR audits and their ability to detect and remediate existing material weaknesses, thus increasing … Read more