Tuesday, February 28, 2006

SIA: Costs of Compliance in the US Securities Industry (PDF)

This study is intended to contribute to development of a deeper understanding of how and to what extent various regulatory and legislative mandates, like the Sarbanes-Oxley Act of 2002, have impacted compliance related activities at U.S. securities firms. These activities have expanded and grown in importance in recent years in response to increases in compliance-related obligations.

This study was undertaken to acheive three objectives: 1) Develop a deeper understanding of the impact of compliance, 2) Measure compliance-related costs, and 3) Obtain recommendations from industry firms to improve the efficiency of these efforts.

SIA: Costs of Compliance in the US Securities Industry (PDF)

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Sarbanes-Oxley and the Cost of Compliance

According to a press release accompanying the study, SIA found that the cost of compliance for securities firms (e.g., broker-dealers) has risen rapidly, nearly doubling in the past three years - reaching an estimated annual total of more than $25 billion in 2005, up from $13 billion in 2002. SIA states the opportunity costs (which are not as readily quantifiable) could be even greater. Additionally, SIA states that the overwhelming bulk of total compliance costs of securities firms in their survey were found to be staffing-related.

The Sarbanes-Oxley Act (particularly Section 404) was among the "most burdensome" legislative/regulatory initiatives cited by securities firms, as noted in the summary of the SIA survey report.

Sarbanes-Oxley and the Cost of Compliance

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Corporate reform dead; SEC chief should resign

The Enron trial is months away from a verdict, yet its significance already is a faded memory. Reform efforts have faced a mounting backlash from business leaders.

Executives, bristling at the idea of accountability, bemoan the costs of the Sarbanes-Oxley law, spin the myth that companies like Enron were taken down by uncontrollable market forces rather than their own deceit, and complain that the proverbial pendulum of regulation has swung too far.

Now, the SEC is beating down its own enforcement efforts.

Investors, though, are left with a nagging question. Is the market's top cop inept, spineless or a political hack?

Corporate reform dead; SEC chief should resign

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Report raps red tape from Sarbanes-Oxley

The anti-corruption Sarbanes-Oxley law is stunting innovation and growth among smaller Masschusetts high-tech and biotech firms, according to a new report that recommends the feds reduce the red tape burdening companies.

"It disproportionately impacts the (technology) sector," said Paul Guzzi, president of the Greater Boston Chamber of Commerce, which commissioned the study.

But it's ultimately "anti-competitive" due to its expensive accounting and legal requirements that weigh more heavily on smaller firms, he said.

Report raps red tape from Sarbanes-Oxley

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Non-Profit Hospitals Take Action to Comply With Sarbanes-Oxley

Lawyers and others involved in non-profit governance are advising their clients to look to Sarbanes-Oxley to help determine what action to take to improve their accountability in the face of potential attack.

In addition to Sarbanes-Oxley itself, Chicago health care attorney Frederic J. Entin said that many attorneys general and private organizations, such as BoardSource, a non-profit organization which advises other non-profits about governance issues, have issued helpful guidelines that discuss best practices for non-profit organizations, some of which are specific to hospitals.

I recommend to my clients that they know and compare what they are doing with what the attorney general in their state is saying, he said.

Non-Profit Hospitals Take Action to Comply With Sarbanes-Oxley

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Risk Management and Sarbanes-Oxley Driving Growth

The Global Trade Management (GTM) solutions market grew to about $222 million in 2005. The need for GTM is more important today than ever before, considering the continued growth of global trade and the increased risk and complexity associated with the process.

Historically, CEOs and CFOs have failed to grasp the role and importance of GTM relative to financial performance and strategic objectives. But the 9/11 terrorist attacks and the 10-day shutdown of West Coast ocean ports in 2002 taught many executives a lesson on how disrupting the flow of global trade can have significant financial consequences.

Achieving compliance with Sarbanes-Oxley is dependent on having access to timely, accurate, and complete information and establishing process controls — the same factors required to create more secure and efficient global trade operations.

Risk Management and Sarbanes-Oxley Driving Growth

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Allegiance Helps ICMA Comply with "Spirit" of Sarbanes Oxley

Allegiance, Inc., the premier provider of web-based feedback solutions, today announced that ICMA, the authority on local government leadership and management, has deployed Allegiance SilentWhistle technology to help improve employee communications and comply with the spirit of Sarbanes Oxley (SOX).

SilentWhistle is an ethics reporting system proven to mitigate risk and fulfill section 301 of SOX. ICMA has more than 125 employees serving more than 8,200 members, who include chief appointed managers, administrators and assistants representing more than 100 million people in thousands of communities.

"ICMA is a well-known nonprofit organization among local city, town, county and regional governments, and is devoted to operating an honest and ethical organization for its customers and employees," said Adam Edmunds, president and chief executive officer of Allegiance, Inc. "While ICMA is not required to implement SOX-compliant feedback systems, the organization determined that SilentWhistle will encourage better, more frequent and constructive employee feedback."

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Los Angeles Times Gets The Story Right With Sarbanes Oxley

Stellent, Inc. (Nasdaq: STEL), a global provider of content management solutions, has announced the Los Angeles Times has selected the Stellent Sarbanes-Oxley Solution to automate and enhance its document- and content-related Sarbanes-Oxley compliance processes.

The organization has been using Stellent Universal Content Management technology to manage its Sarbanes-Oxley documentation for the past year. By adding Stellent's Sarbanes-Oxley application to its deployment, the Los Angeles Times will further optimize its Sarbanes-Oxley compliance processes.

Los Angeles Times Gets The Story Right With Sarbanes Oxley

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Two Enron trials could run concurrently

The trial of two former Enron Broadband Services executives remains on track for a May 1 start date, meaning two Enron-related trials could be going on concurrently on the same floor of the federal courthouse.

The new trial for Kevin Howard and Michael Krautz, before District Court Judge Vanessa Gilmore, will take place on the 9th floor of the courthouse in downtown Houston, just a few doors down from the courtroom of District Court Judge Sim Lake, where former Enron executives Ken Lay and Jeff Skilling are now on trial.

Two Enron trials could run concurrently

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Sarbanes-Oxley Compliance and Web Application Security

While the requirements for SOX compliance only directly affect public corporations, there has been a trickle-down effect to private companies serving as business associates, consultants, and outsourced service providers. Given this, both public and private companies need to have an understanding of Sarbanes-Oxley compliance to ensure that their daily business practices are aligned with its specific requirements.

Achieving Sarbanes-Oxley compliance is not impossible, but there are a few key elements beyond ethical leadership that are necessary to achieve and maintain it. Public corporations must implement the proper information access controls and possess the appropriate tools to ensure that information is kept secure. These, combined with practical security policies and processes, will go a long way toward keeping corporate executives out of the hot seat with regulatory officials and will also provide value well beyond SOX compliance.

Sarbanes-Oxley Compliance and Web Application Security

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Down To Business: Time To Regulate The Regulations?

When it comes to the mother of all regulations, Sarbanes-Oxley, CEOs of most fast-growing privately held companies like what they see. In a recent survey by PricewaterhouseCoopers, 73% of private company CEOs said SOX has done at least a decent job of improving financial governance and transparency for public companies. One in four of those private companies has voluntarily adopted SOX "best practices." So should Sarbanes-Oxley be applied broadly to their companies, not just to public ones, at the state or federal level? Uh, no. That would be overkill, they say. In fact, more than a third of those same CEOs believe that private companies enjoy a competitive advantage over publicly traded companies precisely because they don't have to run the same gauntlet of regulations.

Says another IT exec: "I'm not driving jack. I'm being driven. We're all being driven by lawyers."

Down To Business: Time To Regulate The Regulations?

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Monday, February 27, 2006

Share Sarbanes-Oxley white papers and case studies, free of charge

After nearly 2 years of gathering news and resources on Sarbanes-Oxley, the Inside Sarbanes Oxley editorial team has decided that—in order to keep this resource growing both in terms of content and value—it would in the best interest of all parties if we put out a call out for white papers, case studies, columns, points-of-view, and other resources that might help our community better understand the solutions and best practices of the industry.

To post white papers, case studies, and columns—free of charge—send them to submissions(at)insidesarbanesoxley.com.

Share Sarbanes-Oxley white papers and case studies, free of charge

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Understand the impact of Sarbanes-Oxley compliance on your disaster recovery plan

No discussion of disaster recovery (DR) and compliance issues would be complete without looking at the Sarbanes-Oxley Act of 2002 (SOX). Originally designed to help avoid the irregular accounting situations made famous by companies like Enron, SOX was passed in 2002 to outline strict guidelines for financial reporting and disclosure for all public companies in the United States. The passage of this act affects much more than your financial reporting, however.

Primarily, SOX details what must be reported from a financial view of your corporation, and when those reports must be made. It also details guidelines for internal compliance operations to ensure that these reports can be created on time and accurately. The SOX requirements have serious implications for your DR planning.

Understand the impact of Sarbanes-Oxley compliance on your disaster recovery plan

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Accountant Admits False Enron Numbers

The former top accountant for Enron Corp.'s profitable trading division said Monday that he improperly raided reserves to increase earnings in mid-2000 when he understood that former Chief Executive Jeffrey Skilling and other superiors wanted results that would wow Wall Street.

Wesley H. Colwell kicked off the fifth week of the fraud and conspiracy trial of Skilling and Enron founder Kenneth Lay, telling jurors he helped the company fraudulently manipulate earnings to meet or beat analysts' expectations by dipping into reserves when Enron needed an income boost that business operations didn't provide.

Colwell didn't say Skilling ordered him to plunder reserves to boost earnings.

Accountant Admits False Enron Numbers

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Sarbanes-Oxley Oversight Board Facing Constitutional Challenge

A group of advocates for free enterprise and limited government that includes former federal independent counsel Kenneth Starr is challenging the constitutionality of the Sarbanes Oxley Act and its provisions that govern the accounting of public companies.

The Free Enterprise Fund of Washington, D.C. filed a constitutional legal challenge to the Public Company Accounting Oversight Board (PCAOB) created by Congress as part of the Sarbanes-Oxley Act, which was enacted in 2002 following a number of corporate scandals.

The lawsuit claims that although the Sarbanes-Oxley Act purports to make the board a private entity, it delegates to the board vast governmental powers.

Sarbanes-Oxley Oversight Board Facing Constitutional Challenge

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SEC proposals won't help European companies

The Securities and Exchange Commission responded to calls from those trapped by its registration rules by proposing a change in December that would enable greater numbers of companies to escape the requirements of the Sarbanes-Oxley Act, should they wish. However, the Financial Times reports that a coalition of leading European business associations will tell the regulator that the changes will make little difference to the number of companies able to deregister.

SEC proposals won't help European companies

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Sunday, February 26, 2006

CEOs: Click Here To Save Your Job

CEOs had a rough year in 2005. Compared with 2004, more died, got fired, resigned, or left their jobs for health reasons, according to consulting firm Challenger Gray. In fact, executive turnover has increased dramatically in the last five years, partly because boards are no longer patient when CEOs misbehave.

Others point to that perennial punching bag, Sarbanes Oxley. Richard Jacovitz, senior vice president at Liberum Research, says the stress and requirements of Sarbox may have induced some executives to retire.

CEOs: Click Here To Save Your Job

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2006 Sarbanes-Oxley Compliance System RFP Template

"Universally recognized as the industry standard tool for evaluating Sarbanes-Oxley compliance systems," the 2006 Sarbanes-Oxley RFP Template provided by the "Alliance for SOX 404 Compliance" (Paisley Consulting, EMC Documentum, Parson Consulting, and the Institute of Management Accounts) purports to provide the information companies require to select a cost-effective solution that incorporates industry best-practices and is tailored to the unique needs of each business. The report is free-of-charge after completing a short form.

2006 Sarbanes-Oxley Compliance System RFP Template

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Saturday, February 25, 2006

When Internal Audits Uncover SOX Woes

The Sarbanes-Oxley Act may no longer overwhelm internal auditors, but it still creates headaches. Of particular concern: how to handle SOX-related issues that arise outside of internal auditors' normal testing work. To address this issue, experts say, companies should have a process for communicating potential problems. According to Matthew Herrington of Steptoe and Johnson, the key is to have "an 'early warning' relationship with the general counsel or a dedicated compliance office," who can then alert the proper executives or directors.

When Internal Audits Uncover SOX Woes

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Old corporate loans remain despite Sarbanes-Oxley

Corporate loans to executives may seem like relics, remnants of the go-go years when executives such as WorldCom Corp.'s Bernie Ebbers and Tyco International Ltd.'s Dennis Kozlowski treated corporate coffers as personal piggy banks. But the loans haven't gone away. In fact, a handful of companies with shaky finances forgave millions of dollars in loans to their executives in recent years.

Corporate reform law Sarbanes-Oxley made new loans by a company to its executives illegal. But loans made before the law went into effect July 30, 2002, were allowed to stand. The existing loan agreements cannot be modified in a "material" way, even if the modification benefits the company.

Old corporate loans remain despite Sarbanes-Oxley

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Scandal heightens pressure for tough corporate control

Accounting manipulation charges against Livedoor, following scandals at Seibu Railway Co. and Kanebo Inc., will also call into question the responsibility of auditing companies.

The Business Accounting Council, a panel under the Financial Services Agency, proposed in December that Japan introduce internal controls on financial reporting. The systems would be modeled on mechanisms under the U.S. Sarbanes-Oxley Act of 2002, enacted following accounting scandals at Enron Corp. and WorldCom Inc.

In Japan, it is expected that internal control reporting requirements will come into force from the settlement of accounts for the year through March 2008.

Scandal heightens pressure for tough corporate control

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Houston Chronicle: The Fall of Enron

Enron Corp in all its glory: the financial collapse, bankruptcy and trials surrounding Houston's biggest corporate scandal. Site includes in-depth analysis, trail timeline, legal commentary, and key players. A comprehensive source of all things Enron.

Houston Chronicle: The Fall of Enron

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Ernst & Young fails to disclose high-profile data loss

Ernst and Young has lost a laptop containing data such as the social security numbers of its customers. One of the people affected by the data loss appears to be Sun Microsystems CEO Scott McNealy, who was notified that his social security number and personal information have been compromised.

"This is an organization that we spend an enormous amount of money on to determine whether we are Sarbanes-Oxley compliant," McNealy said.

Digging through Sun's financial filings, you'll discover that Ernst and Young serves as the company's auditor and handles Sarbanes-Oxley consulting for Sun. A spokesman at Sun confirmed that Ernst and Young is still the company's auditor but declined to out the firm that lost McNealy's data.

Ernst & Young fails to disclose high-profile data loss

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Friday, February 24, 2006

Balance sheet: The limits of outrage

The criminal trial of Kenneth Lay and Jeffrey Skilling, Enron's former chairman and chief executive, started Jan. 30 and is now four weeks on. Although dedicated voyeurs of corporate malfeasance will be happily occupied for the rest of the winter, the focus of the "reporting," if you can call it that, is down to the diminishing number of television crews and a juror's allergic reaction to the cologne worn by Skilling's lawyer.

However this chapter in the sordid Enron melodrama plays out, it recalls the wisdom of the old trial lawyer: that the amount of truth to be found in any lawsuit is a constant, and the only variable is the number of witnesses.

Balance sheet: The limits of outrage

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H&R Block Flubs Its Own Taxes

H&R Block Inc. (HRB), which provides tax advice to millions of Americans, made an embarrassing confession on Thursday. It goofed on its own taxes.

"It wasn't particularly material," said Alexander Paris, an analyst at Barrington Research in Chicago. "And it's not particularly unusual. A lot of companies are going back and reviewing their controls because of Sarbanes-Oxley and finding tax errors. But for a company like H&R Block, it was particularly embarrassing."

The company also cut its forecast for full-year 2006 earnings, blaming, among other things, "a slower start to the tax filing season than in previous years."

H&R Block Flubs Its Own Taxes

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Thursday, February 23, 2006

PCAOB and SEC Roundtable on Internal Control Reporting Requirements

The Public Company Accounting Oversight Board and the Securities and Exchange Commission will sponsor a roundtable on May 10, 2006, to discuss second-year experiences with the internal control reporting requirements under the Sarbanes-Oxley Act of 2002. The roundtable discussion will include issuers, auditors, investors, other interested parties and will be open to the public.

Section 404(a) of the Act and the SEC's related implementing rules require the management of a public company to assess the effectiveness of the company's internal control over financial reporting. Sections 103 and 404(b) of the Act direct the PCAOB to establish professional standards governing the auditor's testing of the effectiveness of internal control and attesting to management's assessment. Those standards are contained in PCAOB Auditing Standard No. 2.

"Last Spring's informative roundtable resulted in valuable guidance," said SEC Chairman Christopher Cox. "We look forward to an update on compliance efforts after year two. I'm pleased that the PCAOB is coordinating this year's roundtable with the SEC. We will carefully consider the facts presented to help develop policies to effectively and efficiently improve the reliability of financial statements for the benefit of investors."

PCAOB and SEC Roundtable on Internal Control Reporting Requirements

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Enron: Does it hurt to be nice?

In other Wednesday news...does it hurt to be nice? Maybe. Collins pointed out several cases where Rieker's words at the time appeared to contradict her testimony now. "Your leadership has been invaluable," Rieker wrote in an e-mail to Ken Lay on the day Dynegy's short-lived deal to purchase Enron was announced. She signed the e-mail, "My best, Paula."

"You would not have praised Mr. Lay...if you had believed he had been engaged in wrongdoing, would you?" Collins asked. Rieker paused, and then said that was not entirely accurate. There were times when she "fell into the role of being a good corporate citizen," she said. Collins then asked if she'd ever told Lay directly that he had done anything wrong. She said that there were times when she said things, but conceded that no, she didn't say it in those words.

Enron: Does it hurt to be nice?

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US PIRG to SEC, PCAOB, and ACSPC: Not so fast (PDF)

As you know, the Advisory Committee on Smaller Public Companies (ACSPC) released recommendations yesterday that would have the effect of exempting roughly 80 percent of all public companies from the requirement that they have their internal controls tested by an independent audit. We are writing on behalf of the nation's leading consumer organizations to urge you not to publish these recommendations for public comment, as originally planned, since they are in direct conflict with the law, would undermine investor confidence, and do not fulfill the Committee's original charge to "conduct its work with a view to protecting investors." Instead, we urge you to disband the advisory group and to start fresh in your search for ways to minimize the cost of regulatory requirements for smaller public companies while retaining their important investor protections.

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Looking Beyond HIPAA & Sarbox

We've heard of the Health Insurance Portability and Accountability Act of 1996 and the Sarbanes-Oxley Act, and our IT departments and data center managers are complying (we hope). But what should be made of the other regulations out there?

Your organization has a responsibility to its clientele as well as to its employees to remain abreast of all relevant laws and directives. Compliance with these lesser-known regulations is mandatory also, and ignorance of their existence is no excuse for failing to abide by them. An overview of some of the more apropos regulations can help your data center staff gain an understanding of where your organization needs to improve (or establish) compliance.

Looking Beyond HIPAA & Sarbox

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Directors call for Sarbanes-Oxley repeal

More than half (58%) of directors in the US feel Sarbanes-Oxley regulations should be repealed or overhauled, according to the latest study from Korn/Ferry International. The study shows that directors worldwide are more discriminating when accepting directorship invitations due to perceived risks. 59% of directors surveyed in the Americas have declined a board position due to the risk associated. Risk was also characterised as the determining factor in turning down board seats by 83% of surveyed directors in Australasia, 77% in Switzerland and 68% in non-Japan Asia.

Directors call for Sarbanes-Oxley repeal

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Majority of Board Directors Feel Sarbanes-Oxley Regulations Should be Repealed or Overhauled

Just four years after the enactment of Sarbanes-Oxley, 58% of Board Directors surveyed feel that the regulations have served only to make boards overly cautious, and should be repealed or overhauled, according to the 32nd Annual Board of Directors Study, released today by Korn/Ferry International (NYSE: KFY), the premier provider of executive search, outsourced recruiting and leadership development solutions.

"Although gross corporate misconduct has necessitated recent landmark regulations, there is a growing contention that the impact of these rules has been negative," says Charles King, head of Korn/Ferry International's Global Board Services Practice. "Many directors believe boards have become exceedingly wary and are not taking necessary risks to drive company growth. These directors are demanding reform."

The most comprehensive, longest-running survey of its kind in the world, the Board of Directors Study examines opinions and practices found in boardrooms of major corporations throughout the world. The findings are based on the responses of nearly 1,200 board members from 15 nations in the Americas, Asia Pacific and Europe.

Majority of Board Directors Feel Sarbanes-Oxley Regulations Should be Repealed or Overhauled

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Wednesday, February 22, 2006

Sun and Deloitte Center for Technology Governance and Compliance

Sun Microsystems, Inc. and Deloitte have created the Center for Technology Governance and Compliance, a collaborative effort dedicated to helping companies understand the impact and implications of governance and compliance requirements on IT strategies, processes, and systems.

The Center for Technology Governance and Compliance (CTGC) can provide executives with insights into how governance and compliance impact IT, and how IT can support efficient and effective governance and compliance. Through its comprehensive approach, the CTGC can help executives integrate critical business and IT objectives in an enterprise-wide governance and compliance strategy.

Sun and Deloitte Center for Technology Governance and Compliance

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Sun, Deloitte Team On Compliance

Sun Microsystems Inc. and Deloitte today revealed a collaborative initiative to combine and services to help companies address regulatory compliance and technology governance.

As part of this initiative, Sun and Deloitte today unveiled plans for the Center for Technology Governance and Compliance (CTGC). Access to the professionals and services within the CTGC is available through Sun Solution Centers.

The CTGC will assist companies in integrating methodologies and frameworks driven by regulatory oversight requirements, such as Sarbanes-Oxley, industry requirements such as the Health Insurance Portability and Accountability Act (HIPAA), and frameworks such as Committee for Sponsoring Organizations (COSO), Control Objectives for Information Related Technology (COBIT), the IT Infrastructure Library (ITIL) and BASEL II.

Sun, Deloitte Team On Compliance

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Donaldson, Levitt Diverge on Convergence

The Sarbanes-Oxley Act also stirred up considerable debate. Levitt said he opposes plans that would indefinitely impose different Sarbanes-Oxley standards on companies, depending on their size. "These are public companies that passed a threshold," he asserted, adding that investors in a small company that fails should enjoy the same protections as large-company investors.

Donaldson noted that while Sarbox's benefits are substantial, initial compliance with the law was flawed. "We told Corporate America, you do not have to count paper clips," he noted, adding that he expects compliance costs to decline and companies to start applying the law more intelligently.

Donaldson, Levitt Diverge on Convergence

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Former SEC chairmen defend Sarbanes-Oxley

A quartet of former Securities and Exchange Commission chairmen rallied around the Sarbanes-Oxley Act, saying the benefits of the law outweigh the costs.

Speaking at an event sponsored by the Council on Foreign Relations, former SEC Chairman William Donaldson said he expects the costs of complying with the law to decline this year as accounting firms and boards grow more accustomed to the law.

"The returns on Sox are good," he said, adding that the initial implementation of the law was "flawed."

Former SEC chairmen defend Sarbanes-Oxley

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Protecting SOX in Its Infancy

More than three years after it's original passage, but still in the infancy of its implementation, the Sarbanes-Oxley Act is facing attacks on a number of fronts.

In med-February a roster of all-stars from the financial world stepped up to defend the legislation, writing a letter to federal regulators and asking that no public company be exempted from the internal controls provisions of the Sarbanes-Oxley Act.

That letter was addressed to current Securities and Exchange Commission Chairman Christopher Cox and the acting chairman of the Public Company Accounting Oversight Board, William Gradison. The communication contained strong words cautioning against an SEC advisory panel's December recommendation to change SOX provisions and exempt an estimated 80 percent of public companies from at least part of the rules.

Protecting SOX in Its Infancy

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Tuesday, February 21, 2006

The Mother of All Roundtables

SEC Chairman Chris Cox must be feeling confident — the only significant outcome of the roundtable last April that I could discern was the departure of his predecessor, William Donaldson, six weeks later (preceded by enforcement director Stephen Cutler and followed, with varying speed and degrees of connection, by much of the SEC's senior staff as well as PCAOB chairman William McDonough).

According to the press release, Cox says that "Last spring's informative roundtable resulted in valuable guidance." Presumably, that valuable guidance included the hint that simply telling auditors to use more personal judgment isn't going to mollify the business community.

The Mother of All Roundtables

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PCAOB: A matter of oversight

Kenneth Starr, the zealous special prosecutor who made Monica Lewinsky a household name, is on the case again. This time it is less titillating, but may be no less consequential. Mr Starr and a team of legal heavyweights are representing the Free Enterprise Fund, a conservative lobbying group, and Beckstead & Watts, a Nevada-based accounting firm, in a lawsuit filed on February 7th against the Public Company Accounting Oversight Board (PCAOB), America's accounting regulator...

The PCAOB: A matter of oversight

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Sarbanes Oxley Act and GPL Compliance

The Sarbanes-Oxley Act, passed in the wake of the Enron and other financial scandals, requires public companies to provide truthful disclosures of information, including ownership of intellectual property. Thus, if a company is violating the GPL, executives who do not disclose the cheating are violating the Sarbanes-Oxley Act, because they are not truthfully disclosing that they do not lawfully own their intellectual property. In other words, GPL evasion is now a criminal violation for executives both of public companies.

Sarbanes Oxley Act and GPL Compliance

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Sarbanes-Oxley may up the ante for GPL violations

What happens if you violate the GNU General Public License (GPL)? Historically, you'd earn the scorn of the Free Software Foundation (FSF) and the open source community, and you might have to disclose or rewrite some code. However, the intellectual property disclosure requirements of the Sarbanes-Oxley Act of 2002 may present an additional threat to companies that violate the GPL.

"If you don't comply with the license, you have no right to use the software. If you're saying to shareholders you do, that is a misrepresentation," explains Jay Michaelson, general counsel for embedded systems seller Wasabi Systems. Wasabi itself uses GPLed code, Michaelson says, and about half of the company's revenue comes from its embedded BSD products.

Sarbanes-Oxley may up the ante for GPL violations

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SOX and Data Integrity

Data integrity is at the heart of Sarbanes-Oxley, the 2002 law that established new financial and accounting regulations for U.S. public companies. SOX requirements are first and foremost requirements to capture, manage, act on and report information. When the information collected is flawed, every other step in the process is equally flawed. As a result with bad data, attempts at SOX compliance become a pointless exercise. For this reason, data integrity is every bit as important as a company's commitment to abide by the law.
There are several ways that bad data can creep into a business and impact SOX compliance and other business requirements.

Erroneous data can enter a company's information systems. This can result from innocent mistakes or fraudulent activity. Given that the driving force behind the enactment of the Sarbanes-Oxley law was preventing fraud, this is definitely the most significant data integrity issue.

SOX and Data Integrity

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Monday, February 20, 2006

Analysis: Effort To Roll Back Sarbanes-Oxley Gains Strength

An SEC advisory panel is expected to suggest changes to allow smaller public companies-- those with market capitalizations under $787 million--to duck out of having to meet some of the law's stringent reporting requirements.

Since its founding in December 2004, the 21 corporate executives, lawyers, accountants, and investment professionals on the SEC advisory panel have used the committee mostly as a forum for complaints about what they see as Sarbanes-Oxley costs that far exceed its benefits.

The SEC said last week that it will hold a second public discussion on the reporting and auditing requirements of the Sarbanes-Oxley Act on May 10.

Analysis: Effort To Roll Back Sarbanes-Oxley Gains Strength

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Is there a silver lining Sarbanes Oxley?

Do just the words Sarbanes Oxley make you sigh and moan that these regulations are costly exercises in bureaucracy? Or could this US law be a useful tool for upper management trying to streamline operations?

Neill Poole, managing director and head of the dispute analysis and forensics' Asia practice at Alvarez & Marsal Asia, argues that the worries of corporate executives have been overplayed. Alvarez & Marsal is a global firm specialising in operational and financial turnaround management and restructuring.

Is there a silver lining Sarbanes Oxley?

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How-to Guide: SOX and Vulnerability Remediation

In this quick, 15 minute webcast accompanying SearchSecurity's SOX Security School, guest speaker Richard Mackey, Principal, SystemExperts, addresses control objectives associated with vulnerability remediation. He provides SOX-related tactics for:

• Monitoring compliance and tracking vulnerabilities


• Doing a regular assessment of systems and applications


• Subscribing to vulnerability services


• Managing and tracking patches


• Doing code reviews


• Dashboards and process insight

How-to Guide: SOX and Vulnerability Remediation

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Legislators to Debate Sarbanes-Oxley; Propose Standards

In what promises to be a spirited debate over the National Association of Insurance Commissioners' plan to apply Sarbanes-Oxley corporate disclosure and accounting rules to non-public carriers, legislators on the National Conference of Insurance Legislators' Financial Services & Investment Products Committee will consider a proposed Resolution on the Application of Federal Sarbanes-Oxley Standards to State Insurance Regulation, sponsored by Rep. George Keiser (ND). The committee will convene on Feb. 24 from 8 to 9:15 a.m., during the February 23 through 26 NCOIL Spring Meeting in Weston, Fla.

The resolution's main thrust is that SOX was intended to apply exclusively to public companies, as opposed to non-public companies such as mutual insurers, and that its original purpose was to protect those companies' investors. It argues that SOX has generated inordinately high compliance costs to public companies and that insurers are already subject to an extensive regime of rules and examinations pertaining to financial solvency, disclosure, and reporting. The resolution then notes that the NAIC has failed to identify specific social or economic benefits of its proposal and says that the plan is unnecessary and will lead to higher premiums. Authorization of any SOX- inspired proposal, the resolution concludes, should occur only through state legislative action.

Legislators to Debate Sarbanes-Oxley; Propose Standards

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Effort to roll back Sarbanes-Oxley gains strength

A Securities and Exchange Commission advisory panel is expected to move forward Tuesday in urging the agency to drop a key part of the Sarbanes-Oxley corporate reform law to ease the reporting burden for small companies.

With a meeting of the SEC's Advisory Committee on Smaller Public Companies set for Tuesday, the panel suggested in draft recommendations that the law's stiff internal controls accounting requirements – known as Section 404 – should be eliminated for companies that meet certain size requirements.

Since its founding in December 2004, the 21 corporate executives, lawyers, accountants, and investment professionals on the SEC advisory panel have used the committee mostly as a forum for complaints about what they see as Sarbanes-Oxley costs that far exceed its benefits.

Effort to roll back Sarbanes-Oxley gains strength

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Superfluous Sarbanes-Oxley

Amidst a lawsuit seeking its repeal and separate pressure to simply reduce its negative impact on smaller public firms, supporters of the Sarbanes-Oxley corporate governance law are mobilizing to keep the bill intact. Former SEC chairman Arthur Levitt is arguably the most prominent supporter of Sarbanes-Oxley, stating his case in a recent Wall Street Journal op-ed.

Levitt feels that if the most stringent aspects of Sarbanes-Oxley were reduced for small businesses, it would be “more difficult for smaller companies to attract capital needed for growth and undermine confidence in the markets.” Maybe so, but if what Levitt asserts were in fact true, why would the small-business lobby be so aggressively seeking exemptions?

Superfluous Sarbanes-Oxley

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Sunday, February 19, 2006

SEC Approves PCAOB Auditing Standard

The Public Company Accounting Oversight Board announced that the Securities and Exchange Commission has approved PCAOB Auditing Standard No. 4 -- "Reporting on Whether a Previously Reported Material Weakness Continues to Exist."

The standard applies when auditors report on material weakness after a date set by management to address the internal control.

"Investors and issuers told the board that this standard would provide assurance that public companies are working to address issues identified during the assessment of the companies' internal control," said acting chairman Bill Gradison, in a statement.

SEC Approves PCAOB Auditing Standard

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Conservative Group Challenges Sarbox

A free-market advocacy group has filed a lawsuit that challenges the legal authority of the Public Company Accounting Oversight Board to police the accounting profession.

The Free Enterprise Fund asserted in a press release that the Sarbanes-Oxley Act of 2002 — the landmark legislation that created the PCAOB — "was rushed into law" with legitimate intentions but "ultimately has produced costly unintended consequences for publicly traded U.S. businesses, entrepreneurs, and capital markets."

Conservative Group Challenges Sarbox

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Sharp end of Sarbanes-Oxley shows it means business as agent for change

Log on to the careers website of the US audit regulator and it seems you are not dealing with a shrinking violet - an impression UK accountants will soon be able to test.

"The Public Company Accounting Oversight Board is aggressively seeking accountants . . . to perform on-site inspections of registered accounting firms," it says. "Professionals who join [us] will . . . become focal points of systemic, defining change in the public accounting profession."

And some are crossing the Atlantic to do just that.

Sharp end of Sarbanes-Oxley shows it means business as agent for change

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Friday, February 17, 2006

When Insider Threats Meet Sarbanes-Oxley

Many security practitioners divide security into three distinct but related areas: external threats, internal threats and compliance. While it is fashionable to say that security doesn’t equal compliance, and compliance doesn’t equal security, one must acknowledge that there is a tremendous amount of overlap between the two. This is certainly the case when considering Sarbanes-Oxley compliance and insider threats.

Insider threat and Sarbanes-Oxley share many of the same dire consequences: loss of intellectual property, compromised data, damaged or destroyed assets and severed communications, to name a few. Failure to protect sensitive data and meet regulatory requirements can destroy customer trust, spur government fines, damage stock prices and invite lawsuits.

When Insider Threats Meet Sarbanes-Oxley

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Sarbox Takes a Constitutional

By challenging the constitutionality of the Public Company Accounting Oversight Board, plaintiffs in a lawsuit filed last week believe that they can spur the courts and Congress to undo the entire Sarbanes-Oxley Act.

While many federal laws have a "severability" provision that enables Congress to change a section of a law without dismantling it entirely, Sarbanes-Oxley doesn't, according to Michael Carvin, a lawyer with Jones Day in Washington and lead attorney for the plaintiffs. A successful lawsuit might prompt a "remedy broader than fixing the board," he adds, and perhaps "force Congress to face the issue" of passing legislation to overhaul Sarbox as a whole.

Sarbox Takes a Constitutional

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SEC, PCAOB Plan Roundtable on Sec. 404

The Securities and Exchange Commission and the Public Company Accounting Oversight Board (PCAOB) have announced they will co-host a roundtable discussion on May 10 to discuss second-year experiences of implementing the reporting and auditing requirements of Section 404 of the Sarbanes-Oxley Act. Section 404 deals specifically with a company's internal controls over financial reporting.

The roundtable participants will include issuers, auditors, investors, and other interested parties, according to the joint announcement. This is the SEC's second roundtable on the topic. "Last spring's informative roundtable resulted in valuable guidance," said SEC chairman Christopher Cox. The opinions and facts gleaned from the discussion will help the regulators develop policies to improve the reliability of financial statements, he noted.

SEC, PCAOB Plan Roundtable on Sec. 404

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Thursday, February 09, 2006

AIG to Pay $1.64 Billion in Settlement

American International Group Inc., one of the world's largest insurance companies, has agreed to pay $1.64 billion to resolve allegations that it used deceptive accounting practices to mislead investors and regulatory agencies.

The deal -- believed to be the biggest concluded by regulators with a single company -- also requires the New York-based firm to adopt changes in its business practices that will ensure proper accounting procedures in the future.

AIG said in a statement that the settlement was approved by its board "in the best interest of the company."

AIG to Pay $1.64 Billion in Settlement

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Is Sarbanes-Oxley bad for business?

A free-markets lobbying group and a small accounting firm are challenging the constitutionality of the Public Company Accounting Oversight Board, potentially opening the door for other efforts to roll back the Sarbanes-Oxley corporate-governance law.

The move comes as some groups, realizing they can't get rules and laws overturned, are turning to the courts to chip away at some recent reforms prompted by accounting scandals at some prominent U.S. companies, The Wall Street Journal reported.

Is Sarbanes-Oxley bad for business?

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Tuesday, February 07, 2006

Court challenge seen to U.S. audit watchdog board

The challenge would question the constitutionality of the Public Company Accounting Oversight Board (PCAOB), said Peter Wallison, a resident fellow and financial issues specialist at the American Enterprise Institute, a Washington-based conservative think tank. The argument would be that the PCAOB 'is unconstitutionally created, that it violates the appointments clause of the constitution as a regulatory body that was created without an appropriate appointment by the president, which is required,' Wallison said.

Court challenge seen to U.S. audit watchdog board

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