Compliance Costs Fall, Study Finds

Large U.S. companies spent less than expected to comply with the Sarbanes-Oxley corporate governance law last year, according to a study commissioned by the four largest accounting firms.

The study released Tuesday by Boston-based CRA International, an economic consulting firm, found that the average costs for the nation’s largest publicly traded companies dropped 44% in 2005 to $4.8 million. The consulting firm predicted in December that the falloff would be 42%.

The biggest reason for the decline was the “learning curve effect,” said Gregory Bell, a group vice president at CRA. “This is the second year with Sarbanes-Oxley, so there were significant efficiencies from doing it the second time.”

Accounting firms have benefited from the law, passed in 2002 to tighten public accounting rules after the collapse of Enron Corp. Companies have criticized as overly expensive the law’s requirement that publicly traded firms hire an outside auditor every year to certify their internal financial controls.

The CRA study found that smaller companies weren’t seeing as steep a decrease in costs. Total compliance costs for companies with market capitalizations of $75 million to $700 million dropped 31% to $860,000 last year. The December study had expected a drop of 39%.

The latest study, the third of its kind by CRA for accounting firms Deloitte & Touche, Ernst & Young, PricewaterhouseCoopers and KPMG, examined the costs of 58 large companies and 66 small companies.

An SEC advisory committee on small companies last week reiterated its intent to recommend that the SEC exempt 80% of public companies from having outside auditors certify their controls.

The advisory panel’s proposal would limit the outside-auditor requirement to public companies with more than about $787 million in stock market value.