What Will Non-Accelerated Filers Have to Pay for the Section 404 Internal Controls Audit

What Will Non-Accelerated Filers Have to Pay for theSection 404 Internal Control Audit?byR. Mithu Deymdey@saunders.rit.eduRochester Institute of TechnologyMary W. Sullivanmsull@gwu.eduThe George Washington UniversityApril 16, 2009Address correspondence to:Mary W. SullivanDepartment of AccountancyThe George Washington University2201 G Street, NW, Suite 601Washington, DC 20052msull@gwu.edu(202) 994-5189Acknowledgements: We are grateful for comments from William Baber, Fred Lindahl, AngelaGore, Stan Hoi, Chris Jones, Ashok Robin and participants of the accounting research workshopsat the George Washington University and the Rochester Institute of Technology. We also thankSteve Hansen for discussions that helped us develop the study.What Will Non-Accelerated Filers Have to Pay for the Section 404 Internal Control Audit?AbstractStarting in December 2009, small companies classified as non-accelerated filers must obtain aninternal control audit to comply with Section 404 of the Sarbanes-Oxley Act. This studyestimates the cost of the internal control audit for new accelerated filers in 2006 and 2007 andassesses whether the new internal control auditing standard, Auditing Standard No. 5, hasreduced Section 404-related audit costs. The study finds that the median cost of the internalcontrol audit as a percentage of total audit fees is 42% for new accelerated filers in 2006 and37% in 2007. This suggests that Section 404-related audit costs have fallen ...