Wednesday, April 09, 2008

US company restatements soared 1997 to 2006--study

The frequency of financial restatements by U.S. public companies began to increase before the Sarbanes-Oxley corporate reform law was passed in 2002, according to a study commissioned by the U.S. Treasury Department and released on Wednesday.

But restatements associated with fraud and revenue declined after 2001, said the report authored by Susan Scholz, a University of Kansas professor of accounting.

Restatements jumped to 1,577 in 2006 from 90 in 1997, although much of the increase came from small companies that are not traded on major stock exchanges, the report said.
Scholz found fraud was a factor in 29 percent of all 1997 restatements, but only in 2 percent of 2006 restatements.

US company restatements soared 1997 to 2006--study

Labels: fraud, restatement studies, sox, Susan Scholz, US Treasury

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Tuesday, February 05, 2008

Commentary: Postal Service readies for Sarbanes-Oxley Act

The 2006 Postal Accountability and Enhancement Act includes a mandate that the U.S. Postal Service comply with Securities and Exchange Commission rules that implement the Sarbanes-Oxley Act (SOX) by fiscal 2010. The act requires corporations to report on the effectiveness of their internal controls, with the goal being to ensure the accuracy of financial reporting.

The Postal Service is the first federal agency mandated to comply with the act and thus faces unique challenges. With those challenges come exciting opportunities. Sarbanes-Oxley Act compliance includes both business and information technology components, each with its own requirements. Given the reliance on information technology to move the mail and report financial transactions, the Postal Service IT infrastructure and the management thereof play a significant role in ensuring the integrity and reliability of the organization’s financial reporting and in supporting Sarbanes-Oxley Act compliance.

When passage of the Postal Act was announced, the IT organization immediately went into action, proactively using the Sarbanes-Oxley Act as a trigger to advance improvements throughout IT. The newly established IT SOX team began developing key controls and related tools in preparation for required documentation, assessment and reporting. Coordination with the finance organization was also conducted to perform comprehensive risk assessments and to ensure project alignment.

Commentary: Postal Service readies for Sarbanes-Oxley Act

Labels: 2006 Postal Accountability and Enhancement Act, 2010, sarbanes oxley, sox

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Saturday, October 13, 2007

Compliance Provides Benefits Beyond The Obvious

Recent requirements place a stronger business focus on the acquisition and implementation of security controls. Consumers are expressing growing concern over the security of their personal information, and companies that increase security through compliance activities can sometimes gain a competitive edge. The privacy aspects of compliance call for proper and effective security controls. Privacy clarifies what needs to be protected, and a supporting risk assessment helps determine the appropriate level of security controls. This is particularly critical as the security perimeter now extends to mobile laptops and PDAs. With many data breaches caused by ignorance or a lack of policy, compliance can be used to increase awareness of and attention to data protection requirements and practices.

Compliance Provides Benefits Beyond The Obvious

Labels: compliance, gramm-leach-bliley act, hipaa, sox

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Wednesday, May 23, 2007

Getting SOX Right

Recent talk of overhauling accounting regulations has the potential to turn the business world upside down.

Last week, Federal Reserve Chairman Ben Bernanke argued in favor of the U.S. developing a U.K.-style, principles-based, risk-focused approach in its financial market regulation. This comes only a few weeks after the chairman of the Securities and Exchange Commission, Christopher Cox, said the U.S. and Europe should be able to achieve a single accounting standard by 2009. But perhaps more urgent, on Wednesday the SEC is expected to release its final guidance to management for implementing Section 404 of the Sarbanes-Oxley Act of 2002.

The SEC is certainly keeping busy, but is it taking the right approach?

Getting SOX Right

Labels: sec, sox

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Saturday, May 19, 2007

Fraud too pervasive to roll back SarbOx

Teamwork counts, especially when it comes to committing crimes at a corporation.

In a new examination of 374 companies accused of securities fraud between 1997 and 2002, an average of seven people were implicated in each case, including CEOs, chief financial officers, chief operating officers, general counsels, board directors and auditors.

"Far from being a solitary act, securities fraud necessarily requires complicity," said William Black of the Kansas City, Mo.-based Institute for Fraud Prevention, which sponsored the study.

The institute is a coalition of universities funded by the Association of Certified Fraud Examiners, the American Institute of Certified Public Accountants, accounting firm Grant Thornton LLP and D-Quest Inc., a risk-management firm.

Fraud too pervasive to roll back SarbOx

Labels: fraud, sarbox, sox

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Thursday, April 19, 2007

Will the SEC Embrace a Softer Sarbanes-Oxley?

When the Sarbanes-Oxley (SOX) Act was passed by Congress and signed into law in 2002, its goal was to protect investors through increased disclosure and stiffened internal controls. The law was passed following accounting frauds at Enron, WorldCom and other U.S. companies.

But on April 4, 2007, the Securities and Exchange Commission announced it will revisit some of SOX's rules. The primary focus will be the heavy financial costs of Section 404, which requires auditors of most publicly listed companies to verify the effectiveness of the company's internal controls and procedures for financial reporting.

Will the SEC Embrace a Softer Sarbanes-Oxley?

Labels: congress, sec, sox

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Small biz hits Sarbanes-Oxley law

Lawmakers and regulators in Washington, D.C., yesterday heard an earful from small-business owners, including some from Massachusetts, who claimed the Sarbanes-Oxley Act is burdening firms and stifling growth.

Complaints ranged from the costs associated with the act’s accounting regulations to firms balking at going public if it means spending so much money complying with provisions.

“From my perspective as an entrepreneur, the atmosphere for raising capital in the U.S. has taken a turn for the worse,” said Joseph Piche, chief executive of Franklin-based Eikos Inc., a privately held nanotechnology firm. Piche, whose firm has explored going public, and others testified at a hearing of the U.S. Senate’s Small Business and Entrepreneurship Committee, headed by Sen. John Kerry(D-Mass.).

Small biz hits Sarbanes-Oxley law

Labels: small business, sox

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Thursday, April 05, 2007

SEC Tells Staff to Revise AS5

The Securities and Exchange Commission is sending its accounting staff to work with the Public Company Accounting Oversight Board on additional revisions to the auditing standard that has been criticized by public companies and legislators for creating costly audits of internal controls.

At a Wednesday SEC hearing, staff members of the Office of the Chief Accountant asked the commissioners for permission to work with the PCAOB to address several concerns that were raised during the current public comment period on the revised Auditing Standard No. 2 — which both regulators loosely refer to as AS5. Saying the staff will be "fine-tuning" AS5, the commissioners voted unanimously on all the staffers' requests.

SEC Tells Staff to Revise AS5

Labels: 404, as5, pcaob, sec, sox

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Tuesday, February 06, 2007

Help Wanted: A Call for Peer Network

As a consultant interested in participating in challenging projects while working with great people, it seems that, as independents, we have the contacts or the opportunities, but not always the right network of professionals with the necessary availability to deliver the specific details of a project. I want to make an effort to remedy this challenge.

I am keen on making contacts with independents that are interested in developing an informal relationship with other specialists in this space to share work in challenging projects. Given the wealth of areas for specialization in the risk and control field, I am interested in cultivating relationships with professionals interested in project work, or looking for assistance in efforts that have lined up.

I would love to hear from folks interested in expanding their network of professionals for possible project work in the future.

For those that have been reading Inside Sarbanes Oxley since it launched in the fall of 2004, I hope we've done a good job of keeping you informed of emerging issues and developments around the regulatory impact of Sarbanes Oxley. You will recognize that we've not done much in the way of connecting with readers and practitioners within this community, because so many professionals have been buried beneath the chore of just getting projects across the finish line. I now want to reach out, making connections with people that are still grooving on this work after a few implementations.

As Publisher of Inside Sarbanes Oxley and a risk and controls consultant, I continue to thrive on this work. I love the opportunities that come with a new engagement and control environment implementation, and seeing the dramatic changes that occur within an organization in a period as short as a few months. I also appreciate the new opportunities for learning that come from working with new people, and drawing new insights from their experiences.

As the breadth of the on-going compliance requirements continue to be hashed out, it occurs to me that full implementations (risk assessment through year 1 testing) will continue to shrink. Obviously there a few opportunities that remain, but the vast majority of work seems to already be shifting toward outsourced testing resources and internal control environment managers (solo artists asked to oversee the health over testing results and manage change into the documentation developed to-date).

I recognize that not everyone shares the risk tolerance of the independent consultant. I also recognize that not everyone is interested in engagements across the country or around the globe. That said, I welcome the opportunity to begin conversations that could lead to collaborative opportunities for the many of you running small (or individual) consultancies.

If gaining visibility to such a community would be of interest to you, please drop me a note at toby.lucich@insidesarbanesoxley.com, or connect to me at LinkedIn (http://www.linkedin.com/in/tobylucich). Note that connections via LinkedIn are public, so contact me at toby.lucich@insidesarbanesoxley.com for a more discrete point of contact.

I would welcome discussion about what you love to deliver to a client, the type of challenge you would love to land next, and upcoming availability or opportunities. I look forward to discussions of areas of expertise (i.e. projects managed, cycles documented, processes redesigned, industry experience) as well as your level of interest in future projects (regionally within the US or on a global basis).

Labels: consulting, implementation, independent, network, sarbanes oxley, sarbox, sox

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