Survey Shows Companies Expect Cost of Sox Implementation to Decline Slightly in Second Year; Smaller Companies Expect No Cost Savings

Washington and New York - (10/5/05) - A survey conducted by The Nasdaq Stock Market, Inc. (NASDAQ:NDAQ) and the American Electronics Association (AeA) has found that public companies anticipate slight cost reductions during the second year of implementing the governance and financial reporting practices required by the Sarbanes-Oxley Act (SOX). Companies expect the costs of implementing SOX 404 – intended to improve internal control over financial reporting - to decline 7.4% this year. Smaller companies, as defined as having market caps less than 120 million, will see virtually no change in their costs.

Executives from 298 companies of all sizes and from various industries responded to the survey, which was conducted in early August 2005. It focused on the second year costs of implementing SOX 404 and streamlining its implementation. This poll complements two prior surveys conducted by NASDAQ and the AeA.

The survey also found that auditors have improved their performance since SOX was first implemented. Companies believe their auditors are well-trained and qualified to complete the implementation of 404. This is in sharp contrast to findings in the April 2005 survey when 30% of the respondents believed the accounting industry had sufficiently trained staff to implement 404.

Experience and better training among auditors were cited as factors leading to expectations of lower costs. Another factor was the “Additional Guidance” memo the Public Company Accounting Oversight Board (PCAOB) presented to auditors in May 2005. The memo gives guidance as to how SOX 404 internal audit procedures can be streamlined. The most widely implemented suggestion from the memo and the highest perceived benefit is to integrate the 404 implementation with the financial audit.

While NASDAQ companies of various market capitalizations were surveyed, the results show that the costs of implementing 404 are still most serious for smaller companies. As a percent of revenue, smaller issuers in 2004 spent approximately 11 times more on SOX implementation than larger companies.

Additionally, the surveys confirmed that 74% of the respondents believe that the Sarbanes Oxley legislation was necessary, but the concern was in the implementation of the legislation.

“We believe that SOX is a necessary and beneficial act”, said NASDAQ Executive Vice President Bruce Aust. That is why we hope these findings will spark a spirited discussion among key influencers who value the vital role smaller companies play in the capital formation process. If the PCAOB, the auditing community and companies work closely together, we firmly believe the costs of implementing 404 can be lowered over time.”

“The survey confirms what we have been hearing, particularly from the small-and medium-sized companies,” said William T. Archey, President and CEO of AeA. “Auditors are treating these smaller companies as if they were multi-billion dollar businesses and imposing the same auditing requirements. AeA has argued that a ‘one size fits all’ approach to SOX 404 imposes unnecessary and costly burdens on smaller companies without improving investor confidence.”

About AeA
AeA, founded in 1943, is a nationwide trade association that represents approximately 2,500 public and private companies in all segments of the technology industry and is dedicated solely to helping our members’ top line and bottom line. We do this in partnership with our small, medium, and large member companies by lobbying governments at the state, federal, and international levels, providing access to capital and business opportunities, and offering select business services and networking programs. AeA also produces a number of reports, which analyze the technology industry from a state, national, and industry perspective. For more information, please visit http://www.aeanet.org.

About NASDAQ
NASDAQ is the largest U.S. electronic stock market. With more than 3,200 companies, it lists more companies and, on average, trades more shares per day than any other U.S. market. It is home to companies that are leaders across all areas of business including technology, retail, communications, financial services, transportation, media and biotechnology. NASDAQ is the primary market for trading NASDAQ-listed stocks. For more information about NASDAQ, visit the NASDAQ Web site at http://www.nasdaq.com or the NASDAQ Newsroom at http://www.nasdaq.com/newsroom/.

####

Editor’s Note:
The Sector breakdown of the companies that responded to the survey is as follows:

Market Cap Total%
Large Cap 63 24.7%
Small Cap 117 45.9%
Micro Cap 75 29.4%
Anonymous 43 -
Grand Total 255 100.0%

This page was last updated on 10/05/05.