Europe needs to pull its SOX up

European companies listed on US stock exchanges will see audit fees jump by more than a third as they are forced to comply with the Sarbanes-Oxley (SOX) Act.

The increase means an additional annual financial burden of some €370m per year, or €1.35m per company per year, according to a study from IT firm HandySoft.

The company claims that many businesses will experience difficulties using technology to help implement SOX without costs escalating, as few non-US firms have yet focused on the impact of the regulations.

The average external audit cost for a US-listed European company will rise to €5.19m from 2005, an increase of some €1.35m over current average audit costs, the report found.

HandySoft went on to claim that a quarter of these companies will fail to implement systems and procedures capable of identifying and resolving financial anomalies by the 2005 deadline.

In addition, half are not expected to implement automation that will significantly reduce compliance costs.

"Companies that choose not to meet the SOX schedule are likely to find the analysts and the credit rating experts marking their stocks down," said Wendy Cohen, director of EMEA sales at HandySoft.

"Suffering this kind of ignominy during a tentative market recovery, and in a period when institutional shareholders are increasingly exercising their muscle and influence, is a chief finance officer or chief executive's worst nightmare."