New law raises accounting fees

The Sarbanes-Oxley law, which was a direct result of the accounting scandals at WorldCom and Enron, is proving a financial drain on mining companies.

Newmont Mining, for example, saw huge increases in the fees it pays accountants to audit the just-released 2002 books.

Fees paid by companies on Standard & Poor’s 500 index rose 27% over 2001 levels. Moreover, fees shot up a whopping 35% on the S&P Midcap index, and another 28% on the S&P SmallCap index. (Increases are usually in the 5-7% range.)

There are many reasons fees are up, including the demise of Arthur Andersen, once a top competitor among accounting firms. Also, many fees that used to be listed as “other,” such as audits of employee benefit plans, must now be disclosed as audit fees.

Audit fees at Newmont nearly quadrupled to $4.1 million as new auditor PricewaterhouseCoopers pored over previous audits by Arthur Andersen. The re-audits uncovered problems with a contract the company entered into in 1999. Consequently, Newmont had to restate its earnings back to 1999, reducing earnings by $6.5 million.

Fees will probably rise again in 2003 as more regulations kick in.