A new survey by Financial Executives International (FEI) found that compliance with Section 404 cost companies less in 2006 than in each of the first two years.

Total compliance costs fell 23% to an average of $2.92 million per company - 35% lower than the first year, when costs averaged $4.51 million, according to Washington-based trade group FEI.

Most of the decline came from inside companies. Executives said it took 18,000 hours to comply with Sarbanes-Oxley, down 10% from 2005. An additional 3,400 hours were spent by people outside the company - down 14% from the previous year. Companies spent an average $809,145 on these external costs, about 15% less than the previous year.

But in spite of the fall, 78% of the 200 executives polled said the cost to comply with Section 404 still outweighed any benefits. Still, that was down from last year’s 88%.

The survey did however find that there was hardly no reduction in the costs companies paid to external auditors, who are required to test management's own assessments. The figure stood at an average of $1.2 million in 2006, compared to $1.3 million the previous year.

The survey was conducted last month and includes responses from executives at 172 U.S. companies with a market value of more than $75 million, with the remaining 28 executives coming from smaller firms and non-U.S. companies.