GSA Corporate Governance Survey Results

Public Company Survey Results

Sarbanes-Oxley is an attempt at improving corporate governance and reducing financial fraud. However, Section 404 is having a dramatic impact, particularly on small- and medium-sized companies. Implementation costs are reported to be disproportionately expensive to smaller companies. Section 404 is believed to be demonstrating little return in terms of fraud detection, and is negatively impacting the ability of high-tech companies to compete.

To gain first-hand knowledge on its effects on the industry, FSA surveyed CFOs and other financial executives at public fabless companies and IDMs on Sarbanes-Oxley’s 404 compliance issues and costs.

The survey results below include 29 respondents unless otherwise noted.

View Raw Data in Spreadsheet Format

1. What are your company’s annual sales?

2. Has your company had to postpone or put other company-based initiatives on hold as a result of having to focus on the financial systems required in Section 404?

3. Do you believe the additional costs of Sarbanes Oxley compliance will negatively affect your earnings per share?

4. How many internal people hours do you expect to need to comply with Section 404/Management Report on Internal Controls?

5. What percent of these internal people represents work performed by internal audit staff?

6. How many external people hours do you expect to pay for to comply with Section 404/Management Report on Internal Controls?

7. How much have your auditing costs increased as a result of Sarbanes Oxley compliance?

8. What is your estimated cost for external consulting, software, and other vendor charges needed to comply with Section 404/ Management Report on Internal Controls, excluding auditor’s fees for attestation?

9. What is the additional audit fee you expect to pay for the public auditor attestation report required by Section 404?

10. What percentage is this fee of your total annual financial statement audit fee?

11. What percentage of total revenues is covered by your documentation?

12. The total year-one cost of compliance is defined as the sum of internal staff costs, costs of external consultants and vendors, and additional auditor attestation fees. What are your estimated total year-one costs of compliance?

13. Who handles your auditing needs?

14. Have you changed auditing firms as a result of your company’s Sarbanes Oxley needs?

* Needed more detailed service and attention

15a. Have you met all requirements for Section 404 compliance?

15b. If no, what penalties do you expect to be levied on your company for lack of compliance?

16a. What are the perceived benefits of Sarbanes Oxley compliance?

16b. Other: Specified

• Clearer documented processes and procedures
• Better controls
• Better policy definition
• Minimal
• More comfort on reliability of financial results
• Tighter controls/processes
• Improved understanding, identified areas for improvement to minimize future risk, some improved efficiency
• Empirical evidence for attestation
• Better financial controls
• Less risk of error in financial reporting
• Improved system controls and documentation
• 1) Process improvement 2) Confidence in internal control structure through external validation
• Stronger internal controls
• Better controls, better policy definitions, clearer documented processes & procedures

17a. Has your company received a Corporate Governance rating?

17b. If yes, do you agree with the rating score?