The Sarbanes-Oxley Act of 2002 has been likened to an 800-pound gorilla — impossible to ignore and downright painful for some publicly traded companies that might happen to get sat upon.       As president of a small software company with just $1 million in annual revenues, CE Software Inc.’s John Kirk has been brushing off a lot of gorilla fur lately.

The West Des Moines-based company recently completed legal proceedings to have its common stock deregistered from the OTC Bulletin Board, as a move to eliminate costs associated with complying with Sarbanes-Oxley reporting requirements.

“It’s really expensive to audit internal controls when you have a dozen employees,” Kirk said. “You can’t have this department checking that department; it’s all the same person.”

Kirk estimates going to a non-reporting status will save his company between $100,000 and $150,000 per year in costs, including nearly $40,000 in additional auditing fees.

“We can concentrate on running the business now, worrying about customers and marketing and things like that, rather than, ‘Are we following this rule or that rule and are we reporting it properly to shareholders?’”

Sarbanes-Oxley, which became law two years ago in response to public reporting scandals at companies such as Enron and WorldCom, has had far-reaching consequences in how much effort publicly traded companies must expend to prove the effectiveness of their internal controls and financial accounting procedures.

Though many companies are still apprehensive about meeting the act’s deadlines and dealing with the costs, the overall mood seems to be shifting, said Kevin Prust, partner in charge of McGladrey & Pullen LLP’s Des Moines office.

“Now I think the pendulum has swung from shock to acceptance,” said Prust, who has 26 years of audit experience with the firm. “I think there’s still apprehension about how the outcomes will be used, but now I think there’s more a sense that there will be useful outcomes to this. Overall, from the top I think this is sensed as being a good thing, in order to start the process of repairing the integrity and everybody’s confidence in the system, that now this is the benchmark that will be used.”

In a recent national survey of 153 directors of publicly traded companies conducted by Corporate Board Member magazine, 60 percent of the respondents said they thought the law has had a positive effect on their companies, and nearly 70 percent said it’s been positive for their boards.

Section 404 of the act, which companies are finding to be the most time-consuming and costly provision to comply with, requires a company to state in its annual report management’s assessment of the effectiveness of its internal control structure and financial reporting procedures. It also requires the company’s auditor to attest to and report on that assessment by management, in accordance with standards established by the recently formed Public Company Accounting Oversight Board.

A survey of 321 public companies conducted earlier this year by Financial Executives International estimated that publicly traded companies last year spent an average of 35,000 additional worker-hours internal hours on compliance, $1.3 million on external consulting and software related to the act, and $1.5 million in additional audit fees.

According to the survey, released in February, 25 percent of respondents have already established compliance with Section 404, while another 52 percent expect to do so this year.

Having to accelerate reporting of financial results is one reason for increased costs, said Jim Shaffer, chief financial officer for Casey’s General Stores Inc.

Casey’s, which ends its fiscal year on Friday, will have 75 days this year in which to release its annual report, rather than the 90 days it had prior to Sarbanes-Oxley taking effect. Next year, the deadline moves up by another 15 days.

“It’s a major task, and now they’re asking us to do it faster,” he said. “Any time you have to do something faster, it costs more.”

Another significant cost of Sarbanes-Oxley is the documentation of internal controls, Shaffer said.

“You’re talking about a couple of fairly high-level people working on something nearly full time for a year,” he said. “We are working on that and we will be in compliance with that. Then you have to pay the auditors to attest to the accuracy of that.

“There is some benefit in that, because it’s a chance for a company to look at everything all at once. I’m not sure you would intentionally go through this, that there’s an adequate risk-reward ratio.”

According to AMR Research, a Boston-based independent research firm, the total cost of Sarbanes-Oxley compliance this year will be approximately $5.5 billion. A study by Stamford, Conn.-based research firm Gartner Inc. indicates that publicly traded companies are offsetting those costs by cutting expenditures in areas such as external consulting, enterprise resource planning and acquisition activity.

The Ernst & Young accounting firm conducted a national survey in January in which publicly traded companies ranging from $1 billion to $5 billion in annual revenues estimated that complying with Sarbanes-Oxley would require an average of 14,000 hours of additional work at each company during the first year.

“What we’re finding is that as companies get into the process, it’s taking more time,” said Dave Christens, a partner in Ernst & Young’s Des Moines office. “And we’re finding they’re not factoring in time required to deal with discrepancies found in the audit process.”

The effect on audit fees has been “significant,” but has varied widely depending upon the size and complexity of the company, he said.

“I believe the first-year implementation of this will have significant costs, and there will be some efficiencies achieved in future years,” Christens said.

For FBL Financial Group Inc., “it is taking substantially more time to complete these activities than before these rules became effective,” said Jim Noyce, the insurer’s chief financial officer. “Just with consultants and additional audit fees, (the additional cost) is approaching half a million dollars, and that’s not counting internal time spent.”

Though companies receive some value from the additional work required by Section 404, “it also means some of the work they were focusing on before isn’t getting as much attention,” he said.

As with other publicly traded companies, Sarbanes-Oxley has also prompted new procedures related to FBL’s board of directors.

“One of the things we’ve done to reflect (the emphasis on board governance) is to create a new committee called a nominating and governance committee that will have oversight on those activities,” Noyce said. Procedures are now being drafted that include provisions for such things as annual reviews by the board of individual board members, which could potentially improve their performance and attendance.

“One concern I have is that it’s all well and good, as long as it doesn’t detract from the primary responsibilities of the board,” he said.

From a stockbroker’s perspective, the act should provide a greater measure of confidence to investors, but that only goes so far, said Michael Sherzan, president and chief executive of Broker Dealer Financial Services Corp. in Johnston.

“If I find anything about a company I’m not comfortable with from a legal or reporting base or that doesn’t pass the smell test, then Sarbanes-Oxley is not going to make me feel any better about it,” he said. “You have to be able to trust people at the executive level by their actions.”

Having management take greater responsibility for the strength of their internal controls is important, said Ernst & Young’s Christens.

“Some have viewed that as an internal auditor’s role, but first of all it is management’s role. I think what companies are seeing right now is the expenditure of a lot of dollars, and they’re looking forward to seeing the benefits of it.”