'02 Law Driving Costs of Auditing

by Luke Jones  on Monday, Sep. 19, 2011 12:00 am  

They say money talks, and if that's true, companies pay their accountants millions to listen.

Wal-Mart Stores Inc., for example, handed $17.4 million over to Ernst & Young for auditing services in fiscal year 2011, and $16.5 million the year before.

(Click here for a PDF table of fees Arkansas' public companies paid their accounting firms in the most recent fiscal years.)

Of Arkansas' 18 publicly traded companies, seven spent at least $1 million on their auditors in the most recent fiscal year. And most of the prices are only going up.

Twelve of the companies paid more to their firm this year than the previous. Some of that increase, according to Gary Peters, assistant professor of accounting at the University of Arkansas' Sam M. Walton College of Business, can still be blamed on the 2002 federal accounting reform law called Sarbanes-Oxley.

"In recent history, it's attributable to the learning curve associated with the additional requirements of the Sarbanes-Oxley," Peters said. "Right after Sarbanes-Oxley kicked in, audit fees went way up. They almost doubled."

The act was written and approved to avoid repeats of the early 2000s-era scandals at Enron, Tyco International and other corporations where longstanding accounting partners were acting as enablers for corporate misdeeds.

The new rules require corporations to change their signing partners every five years.

"It took a tremendous amount of effort to get all the required documentation and testing associated with Sarbanes-Oxley," said Windstream Corp. CFO Tony Thomas.

Once the act's infrastructure was set up, Thomas said, the law became less burdensome and prices declined. But companies still have to deal with finding new partners every half-decade, a process the Little Rock telecom recently underwent.

"It does require some work," Thomas said. "The new audit partner has to have a relationship with me, the CFO, and, really, all members of management. It simply takes some time getting up to speed and the learning complexities associated with a large public company."

Thomas' said Windstream's new auditing partner, Tom Leonard of PwC, formerly known as PricewaterhouseCoopers, was a former auditing partner for other telecoms, including Alltel Corp., of which Windstream is a spinoff.



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