Spending on Sarbanes-Oxley compliance will top $6 billion in 2006, on par with the $6.1 billion spent in 2005,...
according to a new report out today from AMR Research Inc. But the emphasis is shifting, the Boston-based consulting firm found, with a greater percentage of the budget going to technology, as companies seek to automate and monitor the many controls required to comply with the 2002 federal act.
AMR is predicting that budgets allocated to head count will fall by 8% next year to $2.3 billion, or 39% of total spend on SOX compliance. Technology spending will grow by more than 13% in real dollars over 2005, to $1.9 billion or 32% of total spend. Money funneled into external consulting, excluding audit fees, is expected to hold steady in 2006 at $1.8 billion or 29% of the total SOX spend.
AMR Research compliance guru John Hagerty attributes the shift in spending in part to better guidance from the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB), the watchdog for public accounting firms. The SEC, under fire last year as SOX spending ballooned, issued statements in April, urging management and accounting firms to abandon a "cookie cutter" approach to SOX and exercise professional judgment "focused on reasonable, as opposed to absolute, assurance."
The better guidance apparently has given companies the confidence to move beyond the generic checklist approach to SOX. AMR found that many companies focused their SOX efforts this year on refining their existing business and IT control in preparation for automating through technology. According to the AMR survey, more than 80% of companies said they expect to reap business benefits by adding or improving their SOX compliance regimens.
The two biggest areas for SOX investment in 2006, says AMR, will be compliance management software and continuous controls monitoring software. The report is a sneak peak at the firm's annual comprehensive survey on SOX spending. A full report survey is due out in January.