Cost Of Being Public Falls, Though Audit Fees Rise

June 15, 2006
For manufacturers and other companies, the overall cost of being public fell 16% last year for firms with less than $1 billion in annual revenues and 6% for companies with more than $1 billion in revenues, figures Foley & Lardner LLP. In 2005, lost ...

For manufacturers and other companies, the overall cost of being public fell 16% last year for firms with less than $1 billion in annual revenues and 6% for companies with more than $1 billion in revenues, figures Foley & Lardner LLP.

In 2005, lost productivity, legal fees and set-up costs associated with corporate governance reform were lower than in 2004, while audit fees, director and officer insurance costs and board compensation rose, says the Chicago-based law firm in a study released June 15. Its study included results from 114 company surveys and a statistical analysis of proxy-statement data from more than 850 companies.

The study shows audit fees for S&P small-cap companies increased 22% in fiscal 2005, 6% for S&P mid-cap companies and 4% for S&P 500 companies. " . . . We did not expect to see the continued increase in audit fees over fiscal year 2004 -- a year in which [Sarbanes-Oxley Act] Section 404 drove costs to an already unprecedented level," says Thomas E. Hartman, a partner at Foley & Lardner and director of the study. Section 404 mandates an annual assessment of a company's financial controls. "Corporate governance reform continues to present a more significant financial burden for smaller public companies than it does for larger ones," concludes Hartman.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

 John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.
      
      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).
      
      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.
      
      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”
      
      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.
      
      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.
      

 

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