As such, small, public companies have been given a temporary reprieve from some of Section 404's strict and costly requirements. In addition, there have been new guidelines set forth for auditors, with a hopes of reducing the cost of compliance of the Section, for all companies (Basilio, 2007; Grumet, 2007).

Bradford and Brazel (2007) note that these costs due indeed seem to be decreasing. In research they quote from AMR, organizations spent $4.5 million on compliance with the Act, in 2004. This was reduced to $3.8 million in 2005, and further decreased to $2.9 million in 2006.

However, despite these decreasing total costs of compliance, the Act is still a costly requirement for public companies. Bradford and Brazel (2007) further cite a study by Foley and Lardner, LLP, in 2005, that indicated costs of corporate governance for smaller publicly traded companies had increased by 233%. And, due primarily to compliance with Section 404 of the Act, large corporations paid $14.3 million in efforts to comply, on average.

These exorbitant costs have led many corporations to reconsider there position as a public organization. From 1998 through 2004, 920 companies voluntarily deregistered their organizational securities, with the SEC. Of that figure, nearly half (450) deregistered in 2003 and 2004, following the implementation of the Act (Bradford & Brazel, 2007).

It becomes increasingly clear that the Act has become a deterrent for corporations considering going public, as they must seriously consider whether these costs of corporate governance are worth the benefits of becoming a public corporation.

Despite these costs, some private organizations are voluntarily implementing the requirements of the Act. These companies are working towards being SOX compliant. Those who are seeking to become an acquisition...

In addition, implementation of internal control documentation may lead to lower lending and insurance costs.
Conclusion:

In the end, the Sarabanes-Oxley Act took control of accounting regulation out of the hands of the accounting industry and placed it in the hands of the Public Company Accounting Oversight Board. The Act was passed in response to several corporate accountants scandals and was intended to restore public confidence in America's capital markets. As such, new and costly corporate governance standards were put into place and civil and criminal penalties for violations were substantially increased.

While some are embracing the Act, voluntarily becoming SOX compliant, others are bypassing it completely, choosing instead to deregister their organization with the SEC.