Commentary
11/30/2005
03:21 PM
Mitch Irsfeld
Mitch Irsfeld
Commentary

Prediction No. 2: Manpower Reductions

With more and more manual processes associated with Sarbanes-Oxley compliance activities being automated through technology, we expect the people costs for SOX to fall off dramatically in 2006. This is actually a pretty safe bet since it will be the third year that large public companies have had to manage SOX compliance. One could assume that everyone is getting more adept, including the independent auditors, so manpower costs should go down as a percentage of overall costs associated with SOX



With more and more manual processes associated with Sarbanes-Oxley compliance activities being automated through technology, we expect the people costs for SOX to fall off dramatically in 2006.

This is actually a pretty safe bet since it will be the third year that large public companies have had to manage SOX compliance. One could assume that everyone is getting more adept, including the independent auditors, so manpower costs should go down as a percentage of overall costs associated with SOX.

But automation will be the key factor in driving down the man hours. AMR Research recently surveyed more than 300 IT and business managers and found that SOX will drive and increase in technology spending in 2006, while actual headcount numbers dedicated to compliance efforts will decrease.The AMR report found that overall SOX compliance spending will be approximately $6 billion, essentially unchanged from the $6.1 billion expected to be spent in 2005. But it looks like more of that money will be earmarked for technology next year as the study found that 2006 headcounts for SOX compliance are expected to fall by 8 percent

Meanwhile, the SOX technology allocation will grow by more than 13 percent in real dollars over 2005 numbers, according to AMR.

That can only mean one thing: Companies are substituting sustainable automated processes for manual approaches to compliance management. And the good news is that such automation will also reduce the manual processes that auditors will need to perform and help drive down auditing costs as well.

Pat yourselves on the back.

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