Sarbanes-Oxley third anniversary: by slim margin, financial executives now say act is "more of a net gain to investors" than a net loss

Survey of CFOs and Financial Executives Finds Cautious Optimism, Lower Costs

VIENNA, Va., July 29, 2005 -- Three years after the Sarbanes-Oxley Act was signed into law on July 30, 2002, amid harsh criticism from the business community, more financial executives now perceive the Act as a net gain overall for investors, as opposed to a net loss. The narrow majority - 44 percent versus 43 percent - was revealed in a survey by business software company Approva(R) Corporation that suggests a gradual turnaround in the business community's perception of the controversial legislation.

An overwhelming majority of senior financial managers (87 percent) also cited Sarbanes-Oxley as a "top priority" for their company boards. "It is extremely important and lets our stakeholders know that we are committed to making sure we are financially sound," reported an executive at a large utility, one of 200 financial executives who responded to the survey.

Overall, the survey reveals a more optimistic picture than is typically portrayed in reports and news coverage assessing Sarbanes-Oxley. Asked to choose a single phrase to describe the Act, 42 percent of respondents took the positive view that it is a "way to improve our business controls and processes," with an additional 8 percent saying it will primarily "improve investor confidence and help our business." Another 28 percent answered negatively, describing the Act as "a corporate tax."

"We have always believed that Sarbanes-Oxley was an opportunity to be seized - a perfect chance to improve company controls and business processes in general," says Prashanth (PV) Boccasam, president and CEO of Approva. "It is great to have validation from financial executives that this is also the direction in which their sentiments are shifting. As we move into the next phase of Sarbanes-Oxley compliance, it will become increasingly clear that forward-looking companies will derive many operational benefits and that the end result will be better-run businesses, as well as more confident investors."

Lower spending than previously believed

Although one senior tax specialist called Sarbanes-Oxley the "Accountant Full Employment Act," the survey indicates that spending has not increased as much as generally reported. In key areas such as external and internal audit, IT tools, outside consultants and additional personnel, a substantial majority reported that costs had risen by less than 25 percent, with almost a quarter of respondents saying their costs have increased by less than 10 percent.

Larger companies with more than $1 billion in revenue were more likely to report keeping cost increases to a minimum. Of those surveyed, 75 percent of large organizations said they have held any cost increases for auditors, tools and other staff to below 25 percent - in fact, 52 percent reported cost increases of less than 10 percent. This finding runs counter to studies and anecdotal evidence claiming a "doubling" of costs related to Sarbanes-Oxley.

Asked to characterize their attitudes toward complying with Sarbanes-Oxley, a number of financial executives described it as initially cumbersome, but many said it gets easier as processes are implemented and become routine. "Documenting processes and controls is helping our overall business," reported one CFO.

Technology Aids Compliance

The use of technology to better document company controls was cited as the primary method - and forward-looking strategy - of automating compliance and holding down costs. Of financial executives surveyed, 66 percent currently are adopting advanced documentation tools and 42 percent are automating the testing of controls, but only 24 percent are outsourcing compliance efforts. Only 5 percent said they believe outsourcing is the most effective way to reduce Sarbanes-Oxley spending, while 37 percent said documentation tools are most effective and 29 percent consider automated controls testing their key approach.

Auditors Gain, CFOs Have Mixed Feelings

Despite recognition of business gains under Sarbanes-Oxley, there were some continuing negative feelings. Among the common complaints, 80 percent of financial executives said that "auditors have profited greatly from a situation they helped create." One executive complained that, "All it really does is codify what auditors should have been doing all along."

If auditors have gained, CFOs have mixed feelings. A clear majority of 62 percent responded that the CFO position is less desirable now than five years ago as a consequence of Sarbanes-Oxley regulations. Interestingly, however, only 50 percent of respondents who are currently CFOs agreed about the desirability of the top job in finance.

Another 57 percent of executives surveyed complained that Sarbanes-Oxley has made U.S. companies less competitive in the global marketplace. "We do it because we have to. It is a waste of time and money, and as an international company, it is impossible to maintain consistency with our global partners," one executive said.

Survey Methodology

Lake Snell Perry Mermin and Associates/Decision Research designed and administered the survey on the Internet from July 20-25. Respondents were 200 financial officers, including CFOs, controllers, department heads, directors, general managers, principals, treasurers, vice presidents and auditors. Of the total, 84 percent work for companies with revenues exceeding $1 billion and 16 percent work for companies with revenues between $500 million and $1 billion.

About Approva Corporation

Approva Corporation enables large organizations to transform compliance efforts into competitive advantage. By offering unique, continuous and actionable insight into business processes, Approva software provides sustainable compliance and delivers improved control, increased profit and enhanced shareholder confidence. The patent-pending Approva BizRights platform is the first product to allow all corporate compliance stakeholders - including business managers, auditors, and information technology specialists -- to collaboratively manage controls and optimize related processes. BizRights provides continuous, independent visibility into ERP activity, producing business-friendly reports that both business and IT managers can act upon. The software correlates user, transaction and system setting data against pre-defined and configurable rules to proactively pinpoint control violations and business exceptions. Valuable risk analysis ranks the impact of potential violations for improved prioritization. With BizRights, companies can resolve issues faster, prevent new control conflicts and create complete audit trails for change management. Global brands such as Colgate-Palmolive, Wrigley, Pratt & Whitney and others are reducing the cost of compliance, minimizing business risk and increasing operational efficiency with Approva solutions. For more information, visit us at

FitzGerald Communications
Rurik Bradbury, 212-771-3687

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