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Law firm and inside legal costs of SOX compliance

An article in The Metropolitan Corporate Counsel (June 2005, pg. 48) presented a teaser of data on the costs of compliance with Sarbanes-Oxley Section 404. Jeffrey Steinberg, an Ernst & Young partner who was interviewed for the article, explained that E&Y’s most recent study “indicated that fifty percent of the incremental cost of Section 404 are internal costs of the organization; twenty-five percent are extra costs from the audit firm; the other twenty-five percent are external costs…” Thus, inside counsel show up in the first category and outside counsel in the third category – but the study apparently dug no deeper.

In-house counsel, to be sure, spend time on Section 404 reviews. Steinberg said “[w]e have worked with corporate counsel in every one of my Section 404 experiences.” [See my posts of May 30, 2005 regarding Adecco’s costs and May 10, 2005 regarding SOX and IP audits.]