Sarbanes' Pain Getting Sharp for Some

Because those workers have had little extra time to meet the internal controls requirements, Allied has hired PricewaterhouseCoopers to help review and structure its internal controls before its regular auditor, Grant Thorton, can assess them, Meyer said.

As a result, he estimated that complying with the internal controls provision could cause the company's auditing fees to double the $340,000 the company paid last year. If so, the company's auditing fees would amount to nearly 8% of the net income it posted last year.

"This has proven to be extremely costly," Meyer said. "This has been extremely time-consuming and frustrating."

Many observers expect the costs to subside somewhat after the first year, attributing much of the jump in fees and expense to companies having to get up to speed with the new rule. But some companies and experts warn that many of the costs may be a continuing expense.

Under SEC rules, for instance, companies and their auditors will have to test their control systems annually.

How much of the costs are one-time and how much are recurrent is a "real concern," said Jack Endean, president of the American Business Conference, which represents small and medium-sized growth companies.

"I don't think there are any reliable, objective studies because the experience is so new," Endean said.

Some observers think the auditing industry is responsible for much of the rising costs. Auditors are -- or will be -- closely scrutinizing companies' internal controls. After the demise of Arthur Andersen, none of them want to be held responsible for letting something slide, accounting experts say. While understandable, that extra scrutiny entails extra costs, critics say.

The accounting firms are being "totally protective of themselves," said Jeff Brotman, managing partner of Ledgwood Law Firm, which represents a number of public companies working to comply with the internal controls rule.

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