NEW YORK, November 02, 2005—Most senior executives take a positive view of their company’s initial compliance with Section 404 of the Sarbanes-Oxley Act. The majority has since moved on to align their quarterly Section 302 reporting with their annual 404 assertion—and beyond, to establish a year-two compliance process.

Sarbanes 404 compliance seen as valuable and successful. The majority agrees that work on Section 404 compliance has helped their company in terms of motivation, understanding, and improvement of internal controls and processes:

Motivation to improve internal controls	76%
A better understanding of company processes and controls	70%
Motivation to improve risk management	65%
Impetus to streamline underlying processes	61%

“We find that well planned and executed actions taken to achieve most kinds of regulatory compliance also support the achievement of fundamental business objectives. These results suggest that this has been the case for many companies in their response to Sarbanes-Oxley,” Nancy Beacham, Partner, of PricewaterhouseCoopers commented.

Cost reductions expected. Surveyed executives expect they will be able to reduce the total cost of their Section 404 compliance. Tighter scoping of required actions is the number-one area in which executives expect to achieve reductions in the cost of year-two compliance. Major or moderate savings opportunities are also expected by a majority of respondents from more efficient use of consultants and external resources as well as improvements in the control environment, policies and procedures, and accountability. Improved use of technology is cited by one-third:

	Percentage of Respondents Reporting
Cost Reduction Opportunities	Major or Moderate Cost Savings Potential
Tighter Scoping of required actions	63%
Improved use of consultants and external resources	52%
Improving control environment by streamlining and automating controls (eliminate duplication, replace manual, etc.)	51%
Establish clear accountability (roles, responsibilities) and an improved operating structure (policies, procedures)	50%
Improved control environment by streamlining the underlying business process	43%
Improved use of technology in managing the compliance process	35%

“Tighter scoping, the cost-saving opportunity mentioned most often, is likely an aggregation of several components--related to properly identifying and testing only key controls that achieve the relevant financial statement assertions and leveraging the “top down/risk based approach,” Beacham commented. “It is noteworthy that of the five cost reduction opportunities specified most frequently, two are related to how the compliance effort is managed, and three are related to how the business is managed. Over time, challenges in managing compliance activities will be worked out and the major on-going opportunities for cost reduction are likely to come from improving underlying business processes,” Beacham commented.

Internal reaction is positive. A solid 81 percent reports that their company’s Sarbanes-Oxley project is viewed as a success internally—including 41 percent who say it is seen as a success throughout their company; another 25 percent who say the company’s Sarbanes experience is given high marks mainly by executive and financial management; and 15 percent, seen as a success primarily by financial management. Only 17 percent say their company’s 404 experience was less than a success. Two percent did not report.

Quarterly alignment is proceeding. The majority of surveyed companies (57 percent) have already aligned their quarterly Section 302 reporting with their annual 404 assertion—and an additional 14 percent have plans to do so. Only three percent have no plans, 21 percent are uncertain, and five percent did not report.

• 67 percent who say Sarbanes compliance is seen as a success throughout their company have already completed alignment, and another 13 percent have plans to do so.

No clear consensus on leadership of future Sarbanes-Oxley matters. Going forward, surveyed companies’ Sarbanes-Oxley matters will be led by a variety of groups, including: Internal Audit (37 percent), the CFO or Controller (31 percent), an existing task force or work group (23 percent) and/or new or existing risk management functions (16 percent).

Half (50 percent) plan to use Internal Audit in an oversight or quality control role, while a testing-only function is designated for Internal Audit by 37 percent.

“In our experience, housing leadership of the Sarbanes-Oxley compliance effort in the finance organization can send the message that compliance is finance’s problem when, in fact, nearly all operational processes in a company feed the financial reporting stream, and thereby have a role in compliance. Housing leadership in the internal audit organization can also be problematic if management and the board want to rely on internal audit to perform a quality control role,” noted Beacham.

PricewaterhouseCoopers’ “Management Barometer” is an established quarterly survey in the U.S. These surveys are developed and compiled with assistance from the opinion and economic research firm of BSI Global Research, Inc.

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services for public and private clients. More than 120,000 people in 144 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders. “PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

Direct questions about Management Barometer to Pete Collins, survey director and publisher, at 646-471-4496 or e-mail to: pete.collins@us.pwc.com.

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