Sunday, April 30, 2006

Starr leads conservative constitutional assault on Sarbanes-Oxley oversight board

In the latest legal assault on the Sarbanes-Oxley Act, conservative business organization the Free Enterprise Fund has asked former US solicitor general and Whitewater special prosecutor Kenneth Starr, former US assistant attorney general Viet Dinh, and 2000 Bush legal team member Michael Carvin to challenge provisions of the law that set up the Public Company Accounting Oversight Board (PCAOB). The PCAOB is a four-member body tasked with overseeing accounting practices in publicly traded companies; consistent with the overall purpose of Sarbanes-Oxley.

Starr leads conservative constitutional assault on Sarbanes-Oxley oversight board

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Saturday, April 29, 2006

Sarbanes-Oxley law could be headed for high court

A constitutional challenge by conservatives to the law that reshaped corporate governance after a wave of business scandals probably will end up before the Supreme Court, says lawyer Kenneth Starr.

The challenge that Starr is mounting against the Sarbanes-Oxley anti-fraud law is one of several cases testing it, as small companies push for exemptions and some lawmakers prepare legislation to change it.

Sarbanes-Oxley law could be headed for high court

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Friday, April 28, 2006

Senior US official hints at relaxation of Sarbanes-Oxley

In an interview with the Reuters news agency the new US ambassador to the EU, C Boyden Gray, said: "My sense is that Sarbanes-Oxley could use some review in the United States."

Officials from the New York Stock Exchange said this week it was losing new listings in part due to the increased regulation.

Mr Gray said: "My gut instinct tells me ... that this has in a perverse way benefited London.

"There may be more IPOs [initial public offerings] listed now in London than there would have been. Some of the exchange activity may be a reflection of that. Certainly deregistration is."

The comments of the new ambassador, who was a Washington lawyer and Republican activist, reflect growing concern in the US about the impact of Sarbanes-Oxley on business.

Senior US official hints at relaxation of Sarbanes-Oxley

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AIM grabbing Nasdaq business: U.S. companies find new investors on London market

A growing number of U.S. companies, leery of Wall Street in the age of Sarbanes-Oxley regulations, are turning to a relatively unknown market in London to go public.

It's called the Alternative Investment Market, or AIM, and last year 19 companies from the United States floated shares on the market. Run by the London Stock Exchange, the market now boasts 37 listed U.S. companies, eight of them from California.

"There's a lot of good stuff in Sarbanes-Oxley about corporate governance, but they went overboard. I think Sarbanes Oxley was thrown together extremely quickly without thinking about the consequences," said Ted Schlein, a managing partner with the Menlo Park venture capital company Kleiner Perkins Caufield & Byers.

AIM grabbing Nasdaq business: U.S. companies find new investors on London market

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Starr mounts Sarbanes-Oxley challenge

The legal action that Starr is mounting against the Sarbanes-Oxley anti-fraud law is one of a trio of assaults targeting it, as small companies push for regulatory exemptions and some lawmakers prepare legislation to change it. With memories fading of the corporate fiascos of 2002 that began with Enron Corp.'s collapse, opponents of the law and its mandates on public companies and the accounting industry are banking on a changing political climate.

"This constitutes an excessive delegation of power by the executive branch," Starr said in a telephone interview Thursday.

The five-member Public Company Accounting Oversight Board, endowed by the law with subpoena power and the authority to discipline accountants, "is a board that exercises real power in the marketplace."

"This is a cop on the beat," said Starr.

Starr mounts Sarbanes-Oxley challenge

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SEC Approves PCAOB Auditor Rules

The Public Company Accounting Oversight Board announced that the Securities and Exchange Commission has approved the board's recommended ethics and independence rules for auditor independence, tax services and contingent fees.

The ethics rule establishes a general obligation for registered public accounting firms and employees to be independent of the firm's audit clients throughout the audit and professional engagement period. The rules also identify circumstances in which the provision of tax services impairs an auditor's independence, including services related to marketing, planning or giving an opinion in favor of certain tax treatments.

SEC Approves PCAOB Auditor Rules

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More Congressional Hearings Address SOX, SEC, and American Competitiveness

This week, the subject of Sarbanes-Oxley Section 404 was not only brought up in the widely reported U.S. Senate Banking, Housing and Urban Affairs Committee hearing on "Current Issues in Securities Regulation" on April 25, previously summarized here, but also at a less widely publicized hearing on April 26 sponsored by the U.S. House Committee on Financial Services, Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises entitled, "America's Capital Markets: Maintaining Our Lead in the 21st Century."

Additionally, the National Venture Capital Association (NVCA) and the Free Enterprise Fund came out with announcements today which related in part to Sarbanes-Oxley as it impacts American Competitiveness.

More Congressional Hearings Address SOX, SEC, and American Competitiveness

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Legislative Panel Addresses Sarbanes-Oxley Issues and Solutions

On Thursday, the Free Enterprise Fund held the first-ever legislative panel to discuss reform of the Sarbanes-Oxley (SOX) Act of 2002. Among the topics discussed by participating legislators were the compliance burdens the Act places on small businesses and the constitutionality of the Public Company Accounting Oversight Board (PCAOB).

"The Free Enterprise fund is proud to host this important event and grateful to have such a distinguished list of legislative leaders engaged on addressing needed reforms to Sarbanes-Oxley," Free Enterprise Fund Chairman Mallory Factor said in a prepared statement to the media. "Sarbanes-Oxley is now widely viewed as an inappropriate and categorical response to episodes of corporate malfeasance better addressed under existing laws and legal processes. No one disputes that those who break the law should be held accountable, and they are, as witnessed by the ongoing trials of Enron executives and others, but to date, we have yet to see a single prosecution or conviction under Sarbanes-Oxley. What we have witnessed, however, is the disastrous consequences the law has had on our nation's entrepreneurs, investors, public companies and small businesses who have played by the rules and the aggregate financial implications this had on our capital markets."

Legislative Panel Addresses Sarbanes-Oxley Issues and Solutions

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Thursday, April 27, 2006

Do U.S. regulations drive away start-ups?

Regulations such as the 2002 Sarbanes-Oxley law, which includes tougher requirements for internal auditing and executive certification of financial statements, are particularly burdensome to small companies and "threaten to make the U.S. less hospitable to company creation," said Robert Grady, the chairman of the National Venture Capital Association.

Not all venture capitalists and entrepreneurs blame new regulations for the IPO slowdown. Jim Breyer, a partner at Accel Partners in Palo Alto, Calif., says one networking company backed by his firm, Riverbed Technology Inc., this month filed for a Nasdaq IPO despite having to comply with the Sarbanes-Oxley law. Although concerned about the reduced number of venture-backed stock offerings, Mr. Breyer says he is "cautiously optimistic" the market will improve this year and isn't recommending any of his portfolio companies consider listing on London's AIM.

Do U.S. regulations drive away start-ups?

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Nasdaq official says Sarbanes-Oxley regulations too tough

Vice President Edward Knight told a news conference in Mexico City that even though "good regulation is good business," some of the rules of Sarbanes-Oxley were difficult for small and foreign firms to comply with.

"There is continued sensitivity in the United States to make sure our laws are not harming the ability of non-U.S. companies to access (our) capital markets," he said.

Critics say over-regulation is prompting many firms to finance themselves with private equity or go to foreign stock exchanges, rather than listing in the United States.

Nasdaq official says Sarbanes-Oxley regulations too tough

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Wednesday, April 26, 2006

SEC, PCAOB to 'Aggressively' Address 404 Implementation, SEC Chairman Cox Tells Senate Banking Committee

At the April 25, 2006 hearing on "Current Issues in Securities Regulation" sponsored by the U.S. Senate Committee on Banking, Housing and Urban Affairs, SEC Chairman Christopher Cox responded to a question on Section 404, saying the SEC "will aggressively be working on implementation [of Sarbanes-Oxley Section 404] with the PCAOB, so we get all the benefits of 404, without needless cost." He also emphasised repeatedly that his goal was to make Section 404 work, and that it was a "question of how, not whether" to apply it.

SEC, PCAOB to 'Aggressively' Address 404 Implementation, SEC Chairman Cox Tells Senate Banking Committee

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NYSE exec urges easing Sarbanes-Oxley's internal controls

Stricter regulations imposed by the 2002 Sarbanes-Oxley Act may be driving business from U.S. stock exchanges to markets outside the United States, experts testified Wednesday at a House capital markets subcommittee hearing.

"U.S. markets are losing the competition for these new listings," warned NYSE Group Inc. Chairman Marshall Carter. He said rising U.S. regulatory costs are partly to blame and urged regulators to lighten up on a provision of the 2002 law requiring public companies to assess their internal controls over financial reports annually, subject to further review by the firm's outside auditor.

NYSE exec urges easing Sarbanes-Oxley's internal controls

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Sarbox drives green US firms to the UK

Fund manager Charlie Thomas, who heads up the new Jupiter Ecology fund together with the Jupiter Global Green Investment Trust, is predicting the onerous demands of the new Sarbanes-Oxley regulations will drive US companies across the Atlantic.

Mr Thomas told Reuters the potential for growth of ethical and environmental businesses was huge, with the UK potentially a major beneficiary of this trend.

'It's Sarbanes-Oxley,' he explained. 'We're seeing a trend. Companies are increasingly moving to London and I think it will continue for the next few years,' he said.

'It's $1 million for a small company to be listed in the US, why would they want to do that?'

Sarbox drives green US firms to the UK

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With Advice in Hand, What Now?

After more than a year, the Securities and Exchange Commission finally received a final report from its Advisory Committee on Smaller Public Companies.

There weren't any surprises left in the 240-page document -- its major recommendations, to exempt an estimated 80 percent of public companies from at least part of the internal controls provisions of the Sarbanes-Oxley Act, and exempt and companies with market values less than $125 million, was first announced in December.

And just as it was certainly no secret that members of the advisory panel largely sided with, and come from the perspective of, smaller public companies, in the past four months the hubbub has largely centered on whether the five-person SEC will do anything at all with the panel's recommendations.

With Advice in Hand, What Now?

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Lay denies misleading Enron investors

Secrest asked Lay about a charge that in October 2001, he had inappropriately characterized a $1 billion loss in certain segments of Enron's business as a "nonrecurring" event.

Lay said the decision had been cleared by Arthur Andersen, Enron's outside accountants. "At least at that point they had no problem with the accounting," he told jurors.

In a conference call with analysts later that month, the government says, Lay misleadingly said that Enron was "not trying to conceal anything. We're not trying to hide anything."

Lay stood by those statements on Wednesday when Secrest asked if he believed they were fair and accurate remarks. "I do. I did then. I do today. Based on what I knew."

Lay denies misleading Enron investors

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Tuesday, April 25, 2006

Cox: "My Goal Is to Make 404 Work"

Securities and Exchange Commission Chairman Christopher Cox said today that section 404 of the Sarbanes-Oxley Act should be made to work for smaller companies without exempting them.

Testifying before the Senate Banking Committee for the first time since he was confirmed as chairman of the SEC, Cox also addressed concerns from several senators that the regulatory environment was driving an increasing number of companies to list on foreign exchanges. The United States, he argued, should not "participate in a race to the bottom" but should continue to set a high standard for securities regulation.

Cox: "My Goal Is to Make 404 Work"

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Monday, April 24, 2006

No Need to Fear XBRL

Companies have been slow to adopt XBRL. One reason may be the distraction and burden of Sarbanes-Oxley compliance. We noted another reason several weeks ago: Some companies are afraid it will be a back door to regulating the structure of corporate charts of accounts into a single model, something that we believe is a very bad idea. Since then we have learned that the SEC, the ultimate arbiter in this case, is opposed to a single chart of accounts structure for U.S. public companies. Gary Booth, CIO of the SEC, recently stated in a speech that the "guiding principle I think the SEC should continue to pursue is to make sure registrants continue to have as much flexibility in the presentation of their financial statements as they currently do under U.S. GAAP accounting."

Booth went on to note that an attempt by the SEC to simplify reporting through a "fill in the blanks" approach failed because "the universe of SEC registrants is extremely diverse, and we need to account for that." In remarks to an XBRL conference this January, SEC Chairman Christopher Cox, who views XBRL as a cornerstone of his agenda, echoed the same tone. Far from encouraging a single accounting structure, the SEC sees XBRL as a means of maintaining flexible accounting standards in increasingly global financial markets. Properly structured, XBRL would enable users of filings to view results in U.S. Generally Accepted Accounting Principles (GAAP), European International Financial Reporting Standards (IFRS), or both. Another reason adoption has been slow is that development of the taxonomies underlying XBRL has not received much support. Although the concepts underlying a universal taxonomy for financial statements are clear, the devil is in the details. Broad categories of assets and liabilities may be easy to caption. However, establishing the structure of how specific items roll up into "Other Liabilities" or "Property, Plant and Equipment" is a painstaking process, precisely because companies in different industries with different business models report their results in different ways. Moreover, XBRL must be able to accommodate individual companies' reporting preferences.

No Need to Fear XBRL

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Loosening reporting chains on business

An advisory panel to the Securities and Exchange Commission (SEC) has formally recommended that thousands of smaller publicly traded companies be exempted from the strict accounting and reporting requirements imposed by the 2002 Sarbanes-Oxley law, passed in the wake of the collapse of Enron. "The benefits that are derived by investors are really not worth the costs," said Robert Robotti, president of Robotti & Co., LLC and a member of the advisory panel.

Although most of the SEC commissioners, including commission chairman and former Newport Beach Congressman Chris Cox, have expressed skepticism about such an exemption, Herbert Wander, chairman of the Advisory Committee on Smaller Public Companies, has expressed confidence that they will approach his committee's recommendations with an open mind. The commission will start meeting on the issue May 10.

Loosening reporting chains on business

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Sarbanes-Oxley Has Been an Accountant's Bonanza

Let us start with the most obvious unintended results. Sarbanes-Oxley implementation activities, particularly the Section 404 certifications which have become notorious, have created a tremendously expensive amount of paperwork and bureaucracy. The explicit costs alone are extremely high and disproportionately high for smaller companies. The implicit costs of employee and management time and effort are high. In addition, there are the opportunity costs of diversion of management focus from playing offense to playing defense.

The total costs far outweigh the benefits which are likely to arise from them, especially for smaller companies.

This is especially true because the testimony of history is quite clear on the reliable regularity with which frauds and scandals accompany investment booms and bubbles. In my opinion, the detailed rules, bureaucratic overhead, and mechanical requirements which characterize Sarbanes-Oxley implementation will not prevent fraud and scandal during the next boom when it comes.

In a typical view of its Sarbanes-Oxley experience, frankly expressed, one smaller company's letter to the SEC describes the following: "concentration on minutia . . . redundant and inefficient . . . adversarial relationship with audit firm . . . form over function . . . unrealistic requirements on small and developing companies." It further points out that the cost of all this, which far exceeded the estimates, is of course money taken away from its shareholders.

Sarbanes-Oxley Has Been an Accountant's Bonanza

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Sarbanes-Oxley Section 404 Costs and Implementation Issues: Spring 2006 Survey Update (PDF)

Deloitte & Touche LLP, Ernst & Young LLP, KPMG LLP, and PricewaterhouseCoopers LLP asked CRA International Inc. in March 2005 to facilitate a survey and to review data related to the cost of implementing Section 404 of the Sarbanes-Oxley Act of 2002 for a sample of the firms’ Fortune 1000 clients with market capitalization over $700 million. As a follow up to that report, the Accounting Firms subsequently asked CRA to survey second-year implementation costs both for the Larger Companies included in the Spring 2005 Survey and for a separate group of smaller public companies with market capitalization between $75 million and $700 million. That later survey was released in December 2005.

This current survey updates the previous surveys with data for year-two Section 404 costs and cost drivers, and the number of material weaknesses and significant deficiencies identified. The Spring 2006 Survey includes an analysis of total Section 404 issuer costs and audit fee information derived from proxy materials.

Sarbanes-Oxley Section 404 Costs and Implementation Issues: Spring 2006 Survey Update (PDF)

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Sarbanes-Oxley Costs Coming Down

A new study reveals that Sarbanes-Oxley (SOX) implementation costs fell by some 44 percent in 2005, even with Section 404 requirements. Bloomberg reports costs dropped to an average cost of $4.8 million for the largest publicly traded companies. CRA International predicted the decrease would go to 42 percent.

Smaller companies didn’t see the 44 percent drop off in SOX costs but saw their costs drop 31 percent instead, to an average cost of $860,000, according to Bloomberg. These were companies with market capitalizations ranging from $75 million to $700 million. CRA International predicted that smaller company costs would decrease 39 percent. The larger companies cited in the study had capitalizations greater than $700 million.

Sarbanes-Oxley Costs Coming Down

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Sunday, April 23, 2006

Learning to live with Section 404 of Sarbanes-Oxley

Everyone, it seems, applauds honesty and openness. Provided, of course, it doesn't cost too much money.

For supporters and critics of the landmark Sarbanes-Oxley Act of 2002, the overriding question is how much is too much.

Companies have generally supported the act's intentions--at least publicly--but many complain about the cost of compliance. Specifically, ire has focused on the act's Section 404, the main driver behind a surge in costs related to Sarbanes-Oxley.

A year ago, many companies complained loud and hard when auditing fees related to Section 404 came in much higher than costs from previous years. According to a study by Chicago law firm Foley & Lardner LLP of 708 large and small companies, average audit fees for 2004 were up 61 percent over 2003. For Standard & Poor's 500 companies, the average tab was $7.4 million in audit fees in 2004, up from $4.8 million a year earlier.

Learning to live with Section 404 of Sarbanes-Oxley

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SOX for you but not for me?

Companies in the USA have used their financial muscle to sue the government to have Sarbanes-Oxley stricken and have lobbied lawmakers to have the act watered down. Given the power of money it is hardly surprising that they now have an important committee on their side, but it ought to be surprising when you know where the committee resides. An advisory committee of the all-powerful Securities and Exchange Commission has recommended that 80 per cent of publicly listed companies in the USA should be relieved from the responsibility of identifying and fixing "holes" in the corporate governance and auditing process that could lead to major errors or fraud.

SOX for you but not for me?

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Small Biz Sarbanes-Oxley 404 Report Heads to SEC

On Thursday, the Securities and Exchange Commission’s Advisory Committee on Smaller Public Companies officially approved recommendations intended to ease the task of complying with key provisions of the Sarbanes-Oxley Act for thousands of small public companies. The recommendations will be submitted to the SEC for consideration by the end of this week.

The most significant recommendation would exempt roughly 70 percent of all US companies from complying with Section 404 — which requires that they assess their internal controls over financial reporting. Unlike draft versions of the report, however, the final report emphasizes that exemptions would not necessarily be permanent, but are needed "unless and until" a more suitable framework for small company internal controls is developed.

Small Biz Sarbanes-Oxley 404 Report Heads to SEC

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Saturday, April 22, 2006

Costs of Sarbanes-Oxley decline

The costs of auditing internal controls at corporations in the United States fell sharply in the second year that new rules were in force, according to a study by the four major accounting firms. But some of the savings were eaten up by higher audit fees charged by the firms.

The study, whose findings were published Tuesday, found that the average large company, defined as those with annual revenue of more than $700 million, paid $4.77 million in 2005 to comply with Section 404 of the Sarbanes- Oxley Act of 2002, which requires companies to certify the quality of their internal financial controls and requires auditors to report on the controls.

That was down 44 percent from first-year costs of $8.51 million, said CRA International, which conducted the survey for the accounting firms.

Costs of Sarbanes-Oxley decline

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DRAFT: Final Report of the Advisory Committee on Smaller Public Companies to the U.S. Securities and Exchange Commission (PDF)

The U.S. Securities and Exchange Commission chartered the Advisory Committee on Smaller Public Companies on March 23, 2005. The Charter provided that our objective was to assess the current regulatory system for smaller companies under the securities laws of the United States, and make recommendations for changes. The Charter also directed that we specifically consider the following areas of inquiry, including the impact in each area of the Sarbanes-Oxley Act of 2002. This is their report.

DRAFT: Final Report of the Advisory Committee on Smaller Public Companies to the U.S. Securities and Exchange Commission (PDF)

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Friday, April 21, 2006

SOX Board: Sarbanes Oxley and Basel ii Training in Switzerland, Austria and Italy

Compliance LLC, a leading international provider of Sarbanes Oxley and Basel ii training and consulting, announced the addition of new international partner who will offer Sarbanes Oxley and Basel ii courses to C - Level Executives, IT, Risk and Information Security Directors, Managers and Professionals in Switzerland, Austria and Italy.

ICCE Consulting GmbH is joining a global network of partners that together are training and supporting highly skilled professionals in Sarbanes Oxley, Basel ii and compliance. "Through our growing list of international partners, hundreds of IT, Risk and Information Security professionals are being trained in compliance in more than 26 countries, from the States to London, to Dubai to Singapore" said George Lekatis, General Manager and Chief Compliance Consultant of Compliance LLC. "Our partners are the most important asset we have. Together we produce highly skilled, well-aware, well-educated professionals that meet the demands of today's employers, helping them to meet the requirements of legislation, and avoid legal and personal liability challenges."

SOX Board: Sarbanes Oxley and Basel ii Training in Switzerland, Austria and Italy

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Advisory Panel Votes Overwhelmingly in Favor of Scaled Section 404 Reforms for Small Businesses

The Securities and Exchange Commission's (SEC) Advisory Committee on Smaller Public Companies voted overwhelmingly in favor of scaled reform recommendations for Section 404 (internal controls) of the Sarbanes-Oxley Act of 2002. In a 18-3 vote Thursday, the advisory committee agreed to a final set of recommendations for submission to the SEC.

This final report reflects a majority of BIO's reform recommendations. BIO led industry efforts to reform cost burdens of Section 404 for smaller companies.

"For small public companies, Sarbanes-Oxley can be excruciatingly time-consuming and costly because of its 'one-size-fits-all' approach," said Jim Greenwood, BIO’s president and CEO. "After months of interviewing and meeting with stakeholders representing all industries, it is clear that the advisory panel understands the impact of the unintended consequences of the Sarbanes-Oxley Act.

"Under Section 404, many small biotechnology companies would be forced to choose between funding research and complying with the regulation's demands. These companies work with cutting-edge science that results in products designed to improve and save the lives of our loved ones.

"BIO applauds the advisory panel's final report and recommends that the SEC expeditiously take action to incorporate the recommendations in reforming section 404," Greenwood said.

Advisory Panel Votes Overwhelmingly in Favor of Scaled Section 404 Reforms for Small Businesses

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SEC panel advises easing Sarbanes-Oxley corporate accounting rules

An advisory committee to the Securities and Exchange Commission recommended yesterday that thousands of public companies be exempted from portions of the Sarbanes-Oxley Act, the sweeping law devised to combat corporate fraud.

The panel listed 32 recommendations in its final report. The most crucial is a proposal to exempt about 70 percent of public companies from a requirement that an outside auditor certify that internal controls over financial reporting are adequate to avoid accounting mistakes or fraud.

The proposed relaxing of some Sarbanes-Oxley rules would affect so-called microcap and small-cap companies that have a stock market valuation of up to $787.1 million and limited or no product sales.

Though such companies represent only 6 percent of the money invested in the U.S. stock market, they represent about three-quarters of the total number of U.S. public companies.

SEC panel advises easing Sarbanes-Oxley corporate accounting rules

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Sarbanes-Oxley makes CPAs "trendy" (no, you read that right)

Director of internal controls: In the wake of the Enron and WorldCom debacles came the Sarbanes-Oxley Act of 2002 establishing more stringent internal auditing requirements for publicly traded companies.

From that legislation was borne whole new departments staffed by directors of internal controls, chief compliance officers and Sarbanes-Oxley auditors, all of whom are dedicated to ensuring companies comply with the new law.

Sarbanes-Oxley makes CPAs "trendy" (no, you read that right)

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Audit exemption backed for smaller firms

A Securities and Exchange Commission advisory panel on Thursday adopted a final report that recommends exempting all but the largest 20 percent of U.S. public companies from a Sarbanes-Oxley audit requirement.

Four of the five SEC commissioners, including Chairman Christopher Cox, have said they oppose the idea of an exemption and would prefer to revise the audit requirement to make it less costly for all companies.

Audit exemption backed for smaller firms

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S.E.C. Panel to Urge Auditing Exceptions

An influential advisory committee appointed by the Securities and Exchange Commission is about to formally propose that thousands of smaller companies be exempted from significant parts of the four-year-old law that imposed significant new auditing rules on corporate America.

Emboldened by what they hope is a changing climate in Washington, businesses have embarked on a multifront assault on the Sarbanes-Oxley Act, which was adopted in 2002 after the scandals at Enron, WorldCom and other companies. They have sued the government to have the law stricken, challenged various provisions and lobbied lawmakers and the commission to water down others.

S.E.C. Panel to Urge Auditing Exceptions

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SEC Panel Recommends Sarbanes-Oxley Exemptions

In its final meeting, the advisory committee adopted a report that includes a handful of proposals for easing rules on small companies. The most controversial calls on the agency to override the internal-controls requirement of the Sarbanes-Oxley law, including allowing an estimated 70 percent of public companies to escape from rules requiring that an outside auditor assess internal controls over financial reporting.

"The benefits that are derived by investors are really not worth the costs," said Robert Robotti, the president of Robotti & Company LLC and one of the panelists. All panelists approved the report, although some opposed the internal-controls recommendation.

SEC Panel Recommends Sarbanes-Oxley Exemptions

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Thursday, April 20, 2006

Gossip Floated About SEC Panel Chairman

With an advisory panel poised to formally propose that the Securities and Exchange Commission relax the internal controls provisions of the Sarbanes-Oxley Act for some public companies, the panel's chairman is seeing audit troubles of a company on whose board he serves dragged into the spotlight.

Recent published reports have discussed in detail the trials of Telephone and Data Systems Inc., the parent company of U.S. Cellular. Herbert Wander, the chairman of the SEC's Advisory Committee on Smaller Public Companies, has sat on the company's board for three decades, and also served for a time on the board's four-person audit committee.

Gossip Floated About SEC Panel Chairman

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Small firms would get audit relief under SEC plan

Federal securities regulators should exempt small companies from certain sections of a controversial corporate-governance law, according to a draft of an advisory panel report scheduled to be released Monday.

Members of the Securities and Exchange Commission's Advisory Committee on Smaller Public Companies are recommending that firms with market capitalizations of less than $787 million get breaks on reporting their internal financial controls.

Small companies have complained that the costs of implementing Section 404 of the 2002 Sarbanes-Oxley Act are too high.

Small firms would get audit relief under SEC plan

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FEI: SEC Advisory Committee on Smaller Public Companies Wraps Up (PDF)

On April 20, 2006, the Securities and Exchange Commission (SEC) Advisory Committee on Smaller Public Companies held its final meeting, capping a year of meetings, hearings, and research, resulting in a draft final report approved today. The report contains recommendations to be submitted to the SEC on various regulations affecting small public companies, including but not recommended exemptions from internal control reporting under Sarbanes-Oxley Section 404 and related rules of the SEC and Public Company Accounting Oversight Board (PCAOB). The final report could be formally submitted by co-chairs Herb Wander and Jim Thyen to SEC Chairman Christopher Cox as early as the end of this week or early next week, after finishing touches are put on, including inserting a statement of the co-chairs.

FEI: SEC Advisory Committee on Smaller Public Companies Wraps Up (PDF)

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Sarbanes-Oxley Compliance Journal: An Integrated-Data View of Compliance

Previously, public companies approached regulation as a necessary evil. With the advent of Sarbanes-Oxley, the bar was raised. Enterprises must now address compliance from both strategic and tactical perspectives, adopting a proactive and holistic approach to robust & comprehensive controls-management and reporting. Corporate life at the top is far riskier than ever before. CEOs and CFOs are particularly exposed, because they are now more accountable to watchdogs and interested parties for each decision they make.

The most difficult part of Sarbanes-Oxley is Section 404, which is responsible for the greatest portion of compliance-spend, expected to reach $35 billion for new IT solutions and expertise. A large portion of that investment involves moving from manual processes to technology solutions that automate the compliance processes behind Sections 404 and 409, which stipulates that the board and executives must disclose real-time information "concerning material changes in the financial condition or operations … including trends as the (SEC) determines necessary for the protection of investors and in the public interest."

Sarbanes-Oxley Compliance Journal: An Integrated-Data View of Compliance

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The trial of Sarbanes-Oxley

Down in Houston the Enron trial proceeds apace. But far more significant for business, in America and beyond, than the fate of the energy company's former bosses is the outcome of another "trial" that is now at a crucial stage--that of the legislation introduced by Congress in 2002 in the wake of the Enron scandal.

The act was named after its two main sponsors, Senator Paul Sarbanes and Congressman Mike Oxley. Sarbanes-Oxley, or SOX, as it has become known, was unpopular with business people from the start. In recent years it has been hard to find a chief executive of a public company who does not complain vehemently about the burdens imposed by the dreaded SOX. Indeed, rather than diminish as the initial shock wore off, the complaints have only got louder. The SOX-bashers have been joined by such luminaries as Alan Greenspan, the former head of the Federal Reserve and Bob Greifeld, the boss of the NASDAQ stockmarket. And the critics are not just American. Because of SOX, says Mr Greifeld, "international business clearly perceives a 'problem' with US markets today."

The trial of Sarbanes-Oxley

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Big4Guy: Handling Significant Deficiencies for Sarbanes Oxley Compliance

In the Sarbanes Oxley compliance journey, many companies face the onslot of significant deficiencies. Identifying a significant deficiency is one thing, tacking it is another. My experience shows that even though companies are able to identify significant deficiencies, but when the time comes to remediate them, companies are in a fix. Recently, we helped one of our clients in the automotive industry in setting up an action plan for remediating significant deficiencies. Here are some jottings from the plan for your guys!

Prioritizing the deficiencies - After identifying deficiencies it is important to prioritize them. This can be done based on significance, financial statement impact, magnitude, likelihood. Our client used an decision matrix incorporating the factors above.

Big4Guy: Handling Significant Deficiencies for Sarbanes Oxley Compliance

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Small companies to get Sarbox exemption

Thousands of small companies in the US could be made exempt from auditing rules brought in under the tough Sarbanes-Oxley legislation, introduced only four years ago.

An influential advisory panel appointed by the US Securities and Exchange Commission is set to make the proposal as part of a multi-front assault on the Sarbanes-Oxley Act of 2002, the International Herald Tribune reported.

Small companies to get Sarbox exemption

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Sarbanes-Oxley, China censorship, com se com sa

In contrast to the confusion most Americans experience, Chinese businessmen would often just laugh when I asked whether the government's censorship regime was hard to navigate.

"I'll tell you this, it's not more hard than dealing with Sarbanes and Oxley," said Xin Ye, a founding executive of Sohu.com, one of China's biggest Yahoo-like portals. (He was referring to the American law that requires publicly held companies to report in depth on their finances.)

Another evening I had drinks in a Shanghai jazz bar with Charles Chao, the president of Sina, the country's biggest news site. When I asked him how often he needs to remove postings from the discussion boards on Sina.com, he said, "It's not often."

I asked if that meant once a week, once a month or less often; he demurred. "I don't think I can talk about it," he said. Yet he seemed less annoyed than amused by my line of questioning. "I don't want to call it censorship," he said. "It's like in every country: they have a bias. There are taboos you can't talk about in the U.S., and everyone knows it."

Sarbanes-Oxley, China censorship, com se com sa

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Wednesday, April 19, 2006

SOX compliance fuels software boom

Overreact. That's the American way of doing things - alas. This is even more the case when the US Congress gets involved. This is why, after the various corporate scandals such as the Enron scandal, in 2002 the US Congress passed an insanely complicated bill called the Sarbanes-Oxley act (SOX for short). SOX includes a notorious Section 404 that requires management, under pain of criminal charges, to 'establish and maintain adequate internal controls for financial reporting'. Some estimates are that the average large company is spending 7.8 million dollars and 70,000 man hours trying to comply!

Why should you care?

Well, first off, as a result of Sarbanes-Oxley a six billion dollar industry, roughly two billion dollars of which is being spent on software, has been created almost overnight. (Another 2 billion or so is spent on consultants.)

SOX compliance fuels software boom

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Novell buys e-Security for $72M

During a week in which it was subjected to buyout speculation, Novell Inc. made an acquisition itself, spending $72 million to acquire e-Security Inc.

Software from e-Security is used by organizations like Northrop Grumman Corp. to monitor network security breaches and file reports used to comply with government regulations such as the Sarbanes-Oxley Act. Novell expects e-Security to produce $20 million in revenue over the next 12 months.

Novell buys e-Security for $72M

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After SOX, eh?

When the United States implemented Sarbanes-Oxley Act (SOX) almost four years ago, Canada was presented with a unique opportunity to come up with truly "made in Canada" solutions to repair public trust in the wake of corporate scandals. A wave of co-ordinated announcements by various federal and provincial authorities and by self-regulatory organizations suggested substantive reforms to follow. Much was promised, but sadly, little was delivered.

After SOX, eh?

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Big Four Roll Out Sarbanes-Oxley 404 Costs Report

An independent report, backed by data from Big Four clients, shows that corporate auditing costs for Sarbanes-Oxley 404 compliance dropped significantly in 2005.

The report found that the average costs for 58 Fortune 1000 companies dropped 44 percent last year, to $4.8 million. That was slightly higher than the consulting firm's December prediction of 42 percent.

Meanwhile, the study found that the 66 publicly traded companies surveyed (with market capitalization between $75 million and $700 million) saw a smaller decrease in costs. Compliance costs dropped 31 percent, to $860,000 last year. CRA's December study had expected a drop of 39 percent.

Big Four Roll Out Sarbanes-Oxley 404 Costs Report

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Sarbanes-Oxley: Compliance with governance rules less costly than expected

Large U.S. companies spent less than expected to comply with the Sarbanes-Oxley corporate governance law last year, according to a study commissioned by the four largest accounting firms.

The study released Tuesday by CRA International, an economic consulting firm, found that the average costs for the largest publicly traded companies dropped 44 percent in 2005, to $4.8 million. The consulting firm predicted in December the fall-off would be 42 percent.

The biggest reason for the decline was the "learning curve effect," said Gregory Bell, a group vice president at CRA. "This is the second year with Sarbanes-Oxley, so there were significant efficiencies from doing it the second time."

Sarbanes-Oxley: Compliance with governance rules less costly than expected

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Tuesday, April 18, 2006

Corporate Governance Watch: Public spotlight on boards spurs improvement in corporate governance

Sam writes: Here's an interesting article I came across that underlines the role of media in spurring corporate governance improvements.

A recent paper by a trio of researchers at Arizona State, Penn State and Georgia State finds that companies which were named by Business Week as having the 'worst boards' subsequently went on to make improvements in their boards and corporate governance in general.

Given that it is a small sample study, the results are not dramatic, but are interesting nevertheless.Corporate Governance Watch: Public spotlight on boards spurs improvement in corporate governance

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UK Corporate Accountability Conference 2006

The Fifth Annual "Corporate Accountability" conference directly addresses the high risk, rapidly evolving, new world confronting companies that are affected by changing regulations, new approaches by the key regulators, and current investigations, settlements and litigation.

Prominent government regulators from the FSA, SFO, SEC, PCAOB and EU will lay out the emerging parameters of enforcement, financial reporting and corporate accountability. Leading accountants and lawyers from the private sector will add their experience in advising corporate clients and addressing regulators' concerns.

UK Corporate Accountability Conference 2006

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Small Businesses Among Critics of Sarbanes-Oxley Act

Maryland's retiring senior Sen. Paul Sarbanes recently has found himself defending his landmark corporate responsibility legislation - with some of the strongest arguments against it coming from his own backyard.

A number of Maryland businesses say they are concerned about the effects of the Sarbanes-Oxley Act — which requires publicly-traded companies to hire third-party auditors. Those businesses argue the law should exempt some smaller businesses, who they say can't afford the costs to comply.

Small Businesses Among Critics of Sarbanes-Oxley Act

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Small businesses fight back over SOX

The Sarbanes-Oxley Act of 2002 (SOX) was brought in following several large-scale collapses in shareholder investments following dubious accounting practices in publicly quoted firms. It imposed rigorous requirements for effective controls over financial reporting – Section 404 of the Act. The cost impact of this has been estimated as $3M for each $1 billion in turnover for large companies with audit company fees doubling for small to medium sized companies (SMEs).

The report will be considered by the SEC on May 10th when they will carry out a full review of the second year of the implementation of Section 404.

Small businesses fight back over SOX

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Big Four chief dismisses claims of prejudice

The head of Scotland's biggest audit firm declared himself totally unfazed last week by a new government-commissioned report questioning the market dominance of the Big Four among FTSE quoted companies.

Frank Blin, senior PriceWaterhouseCoopers partner north of the border, also dismissed claims that mid-tier firms face "institutional prejudice" when attempting to break into the market.

Big Four chief dismisses claims of prejudice

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Sarbanes-Oxley affects small businesses wanting to go public

It's the dream of some small-business owners to create such a fast-growing firm that someday it will go public. But that's where the Sarbanes-Oxley law comes in.

While the legislation was meant to clean up accounting abuses at public companies, there's evidence that it is affecting private companies. Only 10 companies backed by venture capital raised $540.8 million through initial public offerings in the first quarter of 2006, according to the National Venture Capital Association. That total of funds raised is down 25 percent from the first quarter of 2005.

Sarbanes-Oxley affects small businesses wanting to go public

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SOX Television: What are the Best Practices Associated with Implementing a Risk Assessment Framework?

RiskCenter and SOX Television is presenting a new broadband service. This twice weekly broadcast will cover every aspect of the Sarbanes-Oxley Act and the related areas of governance, risk and compliance. The following three minute video clip, with a senior manager from Stout Causey Consulting, explains how to tie financial, operational, regulatory and technology risks into corporate goals and objectives. Risk Coverage Maps, which help ensure adequate resources are being assigned to each risk element, are also discussed.

SOX Television: What are the Best Practices Associated with Implementing a Risk Assessment Framework?

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SOX Television: What are the Best Practices Associated with Implementing a Risk Assessment Framework?

RiskCenter and SOX Television is presenting a new broadband service. This twice weekly broadcast will cover every aspect of the Sarbanes-Oxley Act and the related areas of governance, risk and compliance. The following three minute video clip, with a senior manager from Stout Causey Consulting, explains how to tie financial, operational, regulatory and technology risks into corporate goals and objectives. Risk Coverage Maps, which help ensure adequate resources are being assigned to each risk element, are also discussed.

SOX Television: What are the Best Practices Associated with Implementing a Risk Assessment Framework?

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Monday, April 17, 2006

Ideoblog: Is mandatory disclosure necessary?

Larry Ribstein writes...

I've been arguing, e.g., here, that SOX, in addition to its manifest costs, has dubious benefits because of the market's ability to promote the necessary disclosure. That's an easy point to make now, because SOX comes on top of 70 years of disclosure laws. But apparently the argument works even for the original securities laws, according to Mahoney & Pei, Mandatory vs. Contractual Disclosure in Securities Markets: Evidence from the 1930s.

Ideoblog: Is mandatory disclosure necessary?

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Despite Sarbanes-Oxley Complaints, Governance Demand Growing

Investors around the globe are demanding that businesses embrace tougher corporate governance standards, according to a survey from research and consulting firm Institutional Shareholder Services.

The firm will release the full 88-page report -- which is based on a survey of 320 large investors overseeing $10.5 trillion in assets in 19 countries, including the United States, Canada, the United Kingdom, Australia, New Zealand, Japan and China -- later this week. Specifically, the shareholders want companies in their countries to disclose more financial data, to adopt chief executive pay plans that reward only strong performance and to use independent boards with no ties to management.

Despite Sarbanes-Oxley Complaints, Governance Demand Growing

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IT Compliance for Dummies now available from Active Reasoning

Active Reasoning, the first provider of continuous compliance for the IT infrastructure, has announced the availability of IT Compliance for Dummies, written by Clark Scheffy, Randy Brasche and David Greene and published by Wiley Publishing.

The book was written to help companies that have found their first round of Sarbanes-Oxley compliance to be time consuming, confusing and expensive. After identifying common IT audit challenges, IT Compliance for Dummies shows how companies can make the process less painful and more productive in the future. The book's actionable advice includes ten ways to leverage compliance as an opportunity and ten ways to create a sustainable IT compliance program.

"After working with leading companies in industries such as retail, utilities, financial services and biotechnology, we discovered that most are facing the same IT compliance issues," saysDavid Greene, Active Reasoning's vice president of marketing and coauthor of IT Compliance for Dummies. "The recommendations for simplifying IT audits and maximizing their benefits to the organization should prove valuable to anyone facing Sarbanes Oxley 404 audits or other similar compliance regulations."

The book includes standard "For Dummies" editorial guides, including tips, trouble spots, technical stuff and key points to remember. Explanations are in plain English and each chapter includes helpful icons and navigational aids. A complimentary copy of IT Compliance for Dummies is available at the Active Reasoning web site.

IT Compliance for Dummies now available from Active Reasoning

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FEI: SEC Advisory Committee on Sarbanes-Oxley Small Business Approves Amended Report

On April 12, 2006, the Securities and Exchange Commission (SEC) Advisory Committee on Smaller Public Companies (ACSPC or the "committee") met via telephone conference call and voted to accept an amended version of its final report. The amended version of the report, dated April 10, 2006, includes no substantive changes from the February 28 Exposure Draft issued for public comment.

The report continues to include the proposed exemptions for microcaps and smallcap companies from Section 404, but includes additional references to the "unless and until" language used in the recommendations, and repeats that language in the narrative section at the beginning of the report, emphasizing the recommended exemptions specify they are to take effect "unless and until" an appropriately scaled cost-effective standard for management's assessment, and the auditor's attestation, regarding internal control over financial reporting, are developed.

FEI: SEC Advisory Committee on Sarbanes-Oxley Small Business Approves Amended Report

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London absorbs disaffected U.S. executives

The Sarbanes-Oxley financial disclosure rules are driving U.S. executive talent out of the United States, a report finds.

The study by Britain's Economist magazine says London appears to be the most likely recipient of the export of U.S. financial executives who don't want to spend as much as 30 percent of their time completing the forms and documentation necessitated by Sarbanes-Oxley, the Telegraph reported Monday.

London absorbs disaffected U.S. executives

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IPOs or M&As: Deciding which exit ramp to take

While liquidity is returning, young companies are encountering a very different market when it comes to going public. There were 26 fewer IPOs in 2005 compared with 2004's 67, according to VentureOne.

For businesses looking to grow, is it sensible to seek an IPO or look for a merger or acquisition partner?

Because of the changed financial landscape initiated by Sarbanes-Oxley, companies are spending more time assessing what to do, said William Trudeau, president of Trudeau & Trudeau Associates, a Norwell-based investment banking firm.

IPOs or M&As: Deciding which exit ramp to take

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Sarbanes-Oxley Compliance Costs are Dropping

Sarbanes-Oxley Section 404 compliance cost Corporate America less in year two of adoption than in year one, according to a survey released by Financial Executives International (FEI). FEI polled 274 public companies, of which 238 are "accelerated filers" according to SEC definitions and have average revenues of $6 billion, to gauge experiences in complying with Sarbanes-Oxley's Section 404. This is the fourth SOX compliance survey FEI has conducted since 2004.

According to the FEI survey, the accelerated filers' total average cost for Section 404 compliance was $3.8 million during fiscal year 2005, down 16.3 percent from 2004. The data shows that many of these reductions can be attributed to lower staff and consultant time and reduced auditor fees.

Sarbanes-Oxley Compliance Costs are Dropping

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Sunday, April 16, 2006

Big4Guy: Understanding Business Processes for Sarbanes Oxley Compliance

Thus, rather than taking a traditonal approach, I find it better to take a proactive forward looking approach in understanding the business process. The better the understanding of the business process that one has, the better one would be able to point out risk & controls within the process. Identifying key risks and controls is the next logical step after process understanding. It also becomes easy to test the controls once you have an understanding of the process.

Big4Guy: Understanding Business Processes for Sarbanes Oxley Compliance

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Conspiracy against Sarbanes-Oxley 404 Exemptions?

A member of the Securities and Exchange Commission's Advisory Committee on Smaller Public Companies accused former SEC chief accountant Lynn Turner of coordinating a media campaign opposing the committee's proposals to scale down Section 404 of Sarbanes-Oxley for small companies.

"We do know and can factually point out that the former chief accountant of the SEC, who is quoted in virtually every newspaper article I've seen, is organizing this commentary and has requested some of this commentary," stated committee member James 'Drew' Connolly, president of IBA Capital Funding, during the committee's final public conference call Wednesday. Connolly said commentaries opposing the committee's proposals were solicited by Turner and "is not a groundswell of individuals coming together in opposition."

Conspiracy against Sarbanes-Oxley 404 Exemptions?

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Saturday, April 15, 2006

Sarbanes-Oxley from Pitt's point of view

The Sarbanes-Oxley Act is a lot like the weather: Everyone talks about it, but no one does anything about it. That's too bad. The statute was hastily -- and, therefore, badly -- drafted; but it was, and remains, necessary. In particular, it did two important things. It provided a framework for private-sector regulation of the accounting profession in the form of the PCAOB, and it mandated that all public companies (and their outside auditors) annually...

Sarbanes-Oxley from Pitt's point of view

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Campbell Dallas pitches for Sarbox work

Campbell Dallas, the Scottish independent accountancy firm, is making an ambitious pitch for the lucrative, transatlantic "Sarbox" compliance work which has hitherto been a preserve of the biggest firms north of the border.

Partner Fraser Campbell recently completed a training stint at the Houston, Texas office of UHY, the global network which Campbell Dallas joined last December. He sees huge potential for the service.

Campbell Dallas pitches for Sarbox work

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The High Price of Executive Turnover

Increased pressure on C-suite executives is well documented. Sarbanes-Oxley, tougher SEC regulation, increased speculation, and high public distrust are causing well-paid, well-educated men and women to quit once prestigious jobs more quickly than ever before.

According to Gartner, CIO tenure averages three years. What's making titles such as Chief Information Officer and Chief Financial Officer look more like a two year project or consulting contract? Simple, it's no longer a one person job.

Corporations are churning through business cycles faster. Mergers and acquisitions, IPOs, product launches, restructuring deals and R&D are happening with more velocity than ever before. At the same time, regulation and speculation are at all-time highs and there's no room for error.

The High Price of Executive Turnover

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Friday, April 14, 2006

Qualcomm shares Sarbanes-Oxley experience

By compliance standards, Qualcomm is an early adopter. The San Diego chipmaker was among the first public companies to comply with Section 404 of the Sarbanes-Oxley Act - a full year before the close of its 2005 fiscal year and well before the legislation's deadline.

But when it comes to IT products designed to help automate the compliance process, Qualcomm prefers not to be an early adopter.

For its first round of compliance, Qualcomm relied on staff to do the documentation and testing of controls. SOX Section 404 requires companies to attest to the effectiveness of the internal controls put in place to safeguard financial reporting systems and procedures. To do so, companies need to identify their key processes and, within those processes, identify key controls and establish ways to measure the effectiveness of those controls.

Qualcomm shares Sarbanes-Oxley experience

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Skilling on Sarbox: 'We Had It Before'

"It's funny that Sarbanes-Oxley, that's one of the protections to make sure there isn't another Enron, we had it before," maintained former Enron chief executive officer Jeffrey Skilling on his first day of testimony, according to the Houston Chronicle.

In fact, asked by his attorney Daniel Petrocelli whether he would consider himself "a control freak," Skilling reportedly responded, "It's more accurate to call me a controls freak than a control freak."

Maybe we should send Skilling one of the Inside Sarbanes Oxley Control(s) Freak t-shirts?

Skilling on Sarbox: 'We Had It Before'

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Sarbanes-Oxley Act Concerns Venture Capitalists, Survey Finds

Onan said public companies looking to buy a venture-backed firm can deduct millions of dollars from an offer if the venture-financed company is not compliant with the Sarbanes-Oxley Act of 2002, the corporate accounting overhaul passed by Congress in the wake of accounting meltdowns at Enron, WorldCom and others.

"There needs to be some groundwork laid out," Onan said of Sarbanes-Oxley. If not, "A $50 million offer could turn into $45 million." Onan's opinion was confirmed by a nationwide study due to be released today.

Sarbanes-Oxley Act Concerns Venture Capitalists, Survey Finds

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Sarbanes-Oxley effect now wearing off for auditors

When the Sarbanes-Oxley Act first reared its head in the wake of a rash of corporate scandals in the US, including Enron and WorldCom, it left many companies with quite a headache.

Auditors, however, must have been rubbing their hands with glee: more work in ensuring compliance with the new corporate governance laws meant higher fees after all.

Sarbanes-Oxley effect now wearing off for auditors

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Wednesday, April 12, 2006

SEC receptive to Sarbanes-Oxley changes

A U.S. Securities and Exchange Commission adviser on Wednesday disputed a press report that the commission is likely to reject his panel's advice to roll back major pieces of the Sarbanes-Oxley corporate reform law.

"The commissioners have not taken formal positions," said Herbert Wander, chairman of the Advisory Committee on Smaller Public Companies, speaking at a public meeting of the advisory panel.

He added that in his discussions with commissioners, he has found them to be "receptive ... and will make judgments when the report comes in."

The Wall Street Journal reported last week that four of the five commissioners, including Chairman Christopher Cox, had indicated opposition to draft recommendations by the panel.

SEC receptive to Sarbanes-Oxley changes

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Monday, April 10, 2006

The Real Value in Sarbanes-Oxley

Fear can be a powerful generator of upstanding conduct, say Stephen Wagner and Lee Dittmar. But business runs on discovering and creating value. In this month's Harvard Business Review, the co-authors discuss how smart companies are finding unexpected benefits in Sarbanes-Oxley compliance. Wagner, who is the managing partner of the U.S. Center for Corporate Governance at Deloitte & Touche, and Dittmar, who leads the enterprise governance consulting practice at Deloitte Consulting and co-leads its Sarbanes-Oxley practice, talked with Kathleen Melymuka about how your company can use compliance requirements to its advantage.

The Real Value in Sarbanes-Oxley

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Saturday, April 08, 2006

Growth: A capital idea

There’s no question there’s a lot of money out there looking for a private transaction," said Alan Higbee, head of Fowler, White, Boggs and Banker. The Tampa, Fla.-based restaurant law practice often serves as intermediaries between restaurateurs looking for capital and investors eager to share it. "Sarbanes-Oxley has shut down the capital markets for all but the real big guys because it made the cost of maintaining a public company ridiculous."

Higbee said the days of venture capital groups buying a small restaurant concept, growing it and then executing a public offering of $15 million or $20 million are long gone. The several hundred million dollars pulled in on deals like Domino's Pizza and Chipotle Mexican Grill are required to make going public profitable. But that hasn’t reduced the number of investors looking for a restaurant concept through which to grow their money.

Growth: A capital idea

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Paul Sarbanes: SOX Living up to its promise

The Public Company Accounting Reform and Investor Protection Act -- which today is known as Sarbanes-Oxley -- came in direct response to a crisis whose dimensions it is all too easy, in retrospect, to play down.

According to a Wall Street Journal editorial, "The mad rush to pass Sarbox in 2002 was less about keeping business honest than it was about keeping congressmen in office." This is an affront to the hard work and common sense of the members of Congress who voted for the law, as virtually all did.

A lawsuit asserts that the formation and operation of the Public Company Accounting Oversight Board is unconstitutional. The board's structure was reviewed by the American Law Division of the Congressional Research Service of the Library of Congress and several distinguished professors of constitutional law, and all approved of the structure under relevant constitutional provisions. A recent detailed analysis by the American Law Division of the suit's allegations affirms that earlier finding.

Much of the criticism of the statute has been directed to the two short paragraphs that constitute Section 404. One requires all public companies to have a system of internal controls. The other requires that the system of internal controls be attested to. The internal-controls requirement is hardly new to Sarbanes-Oxley. It was established by the 1977 Foreign Corrupt Practices Act, and the language is virtually identical to provisions in the Federal Deposit Insurance Corporation Improvement Act of 1991.

Paul Sarbanes: SOX Living up to its promise

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Friday, April 07, 2006

FEI Survey on Sarbanes-Oxley Section 404 Implementation

For those companies in their second year of compliance with Section 404 of the Sarbanes-Oxley Act of 2002, year-two costs of compliance were somewhat less than the corresponding year-one costs. This was one of the findings of Financial Executives International's (FEI) latest survey of financial executives regarding their experiences in complying with Sarbanes Oxley’s Section 404 ($99).

Among the other key findings, the financial executive respondents:

• suggest that auditor guidance from the Public Company Accounting Oversight Board (PCAOB) still needs clarification;


• agree that compliance with Section 404 has raised investor confidence, but has done so at a price;


• say there was a decline in auditor fees for all accelerated filers (average of 13%), but this was less than anticipated in an earlier (March 2005) survey of FEI members, when auditor fees were expected to drop 26% in the following year.

FEI Survey on Sarbanes-Oxley Section 404 Implementation

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Thursday, April 06, 2006

SOX left at home

By going public overseas, Econergy avoided a slew of federal regulations, including the Sarbanes-Oxley Act of 2002, which came in the wake of accounting scandals at Enron, WorldCom and others.

The law, commonly referred to as SOX, is named after its two congressional sponsors. It set new accountability standards for public company boards and auditors, established a public accounting oversight board under the U.S. Securities and Exchange Commission, and specified civil and criminal penalties for noncompliance.

"It's overbearing," said Stoner of SOX. "The action (for small companies) is in London."

SOX left at home

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Wednesday, April 05, 2006

Percipio: Operationalizing Sarbanes-Oxley: How to Leverage Sarbanes-Oxley to Add Value to Business Operations

Compliance efforts related to the Sarbanes-Oxley Act of 2002 have resulted in a full spectrum of operational opportunities and assets. Assets include the end product deliverables as well as the process and knowledge base created. Culture, process, knowledge capital and technology have all been impacted by Sarbanes-Oxley and will continue to change as the project based effort transitions into an ongoing process based effort.

To take full advantage of the opportunities Sarbanes-Oxley provides for adding value operationally, it will require a paradigm shift in the way Finance, Compliance and Operations view the compliance effort. Sarbanes-Oxley compliance should no longer be viewed as an expense but rather an investment in enterprise improvement.

Download your free copy of this white paper courtesy of Inside Sarbanes Oxley.

Percipio: Operationalizing Sarbanes-Oxley: How to Leverage Sarbanes-Oxley to Add Value to Business Operations

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SOXLite: Impact of the SEC Ruling on Small Companies

Paul Bayne, SOXLite™ Product Director, provides a white paper on the small public company and Sarbanes-Oxley.

The Securities and Exchange Commission (SEC) created an advisory committee on smaller public companies in 2005 to address the disproportionate financial and operational burdens of Sarbanes-Oxley (SOX) on smaller public companies. There has been much confusion, exaggeration, and hyperbole around the Committee's recommendations, especially those surrounding Sarbanes-Oxley Section 404. This white paper will discuss some of the actual recommendations and their implications for publicly traded companies.

SOXLite: Impact of the SEC Ruling on Small Companies

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SAP Buys Virsa, a Risk Management Vendor

Though Virsa addresses security concerns highlighted by Sarbanes-Oxley Act compliance, the product fundamentally span a broader set of ongoing access- and process-monitoring requirements stipulated by Sarbanes-Oxley and other compliance mandates based in process coordination, the AMR said.

SAP Buys Virsa, a Risk Management Vendor

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Small-Company Execs Sound Off on 404

The participant list is still a work in progress. Judging by the comment letters on the Securities and Exchange Commission's website, however, the SEC's upcoming Section 404 roundtable will feature a great deal of heated talk about how hard and costly it is for small companies to comply with the internal-controls provision of the Sarbanes-Oxley Act.

Currently, 21 comment letters concerning companies' second-year experiences in complying with the provision with are posted on the SEC site. Of those, about half specifically call for some type of small-company exemption from Section 404 as a way to ease the high costs if compliance. In one letter, Hamp Haucke, a vice president at Timco Aviation Services, complains that the company spent more on Sarbox compliance in 2005 than it earned in net income. At Timco, which has a market capitalization of under $83 million, "it appears likely that 2006 will be a repeat performance, " he writes.

Small-Company Execs Sound Off on 404

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Compliance Costs: Sarbanes-Oxley Act Has Disproportionate Impact on Small Companies

The Sarbanes-Oxley Act of 2002 (SOX) was intended to provide protections for investors and to boost public confidence in our financial system after repeated corporate scandals at companies such as WorldCom and Enron. SOX Section 404 requires public companies to adopt and maintain internal controls for financial reporting. The costs of such compliance have proved to be high, especially on small cap companies; recent studies have shown average compliance costs for such companies to be as high as 2.5 percent of revenues.

Compliance Costs: Sarbanes-Oxley Act Has Disproportionate Impact on Small Companies

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Tuesday, April 04, 2006

Despite Sarbanes-oxley audit costs drop in US

Audit fees in the US, which rose sharply following the implementation of the 2002 Sarbanes-Oxley Act, have begun to fall, a report published in Compliance Week has revealed.

Large public companies (revenue of more than $5bn) in their second year of Sarbanes-Oxley compliance saw audit fees fall 0.6% in 2005, while overall, fees paid to external auditors fell by 7.4%.

Despite Sarbanes-oxley audit costs drop in US

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Sarbanes-Oxley throws out its proposed 'must be this tall to ride' sign

Securities and Exchange Commission Chairman Christopher Cox said small companies won't get an exemption from Sarbanes-Oxley rules requiring independent auditors to certify they're complying with securities laws.

An SEC advisory panel recommended in December that only the largest 20 percent of public companies be required to have outside accountants certify their systems of protecting assets, reporting financial information and complying with regulations. The panel was set up to address concerns about costs of complying with the rules.

Cox, in his first public comments on the issue, on Monday ruled out a full exemption for small companies from the Sarbanes-Oxley certification rules, known as Section 404. "Our emphasis is on making 404 work and implementing it in a cost-effective and investor-protected way, rather than simply waiving it," Cox told reporters after a speech to a Stanford Law School forum on corporate governance in Washington, D.C.

Sarbanes-Oxley throws out its proposed 'must be this tall to ride' sign

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Monday, April 03, 2006

Sarbanes-Oxley Pain Becomes Politics

Like hundreds of other companies, Manhattan Associates (MANH) restated its earnings last year. Between 1999 and 2004, the supply-chain software maker overstated its net profit by $7 million, or more than $1 million a year, because of how it accounted for a tax credit.

You might think that's another piece of evidence that Sarbanes-Oxley, the corporate compliance and financial transparency act passed nearly four years ago, is doing its job. But Manhattan Associates CEO Pete Sinisgalli says you'd be wrong: The restatement surfaced through internal controls the company had already set up, independent of Sarbanes-Oxley.

Sarbanes-Oxley Pain Becomes Politics

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Sarbanes-Oxley Disclosure Law Targeted by Starr in Factor Suit

His lawsuit is part of a four-year campaign by opponents of the Sarbanes-Oxley law, which they say stifles innovation by saddling companies with burdensome regulation. The U.S. Chamber of Commerce, which lobbies on behalf of three million companies, and some lawmakers are urging SEC Chairman Christopher Cox to relax other accounting requirements in the statute.

The law, called Sarbanes-Oxley for its co-sponsors, "is purely and simply government at its worst," says Factor, the founder of New York merchant-banking firm Mallory Factor Inc.

Factor has assembled a Republican dream team of lawyers including Kenneth Starr, the former independent counsel who investigated President Bill Clinton, to press his case. Their goal is to prompt Congress to scale back the law and reduce compliance costs for companies.

Sarbanes-Oxley Disclosure Law Targeted by Starr in Factor Suit

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An all-star challenge to Sarbanes-Oxley Act

Mallory Factor, who has sued to abolish the U.S. auditing- oversight board, does not hide his litigation's real target: the Sarbanes-Oxley Act.

Sarbanes-Oxley, a 2002 law aimed at preventing accounting frauds like the ones that brought down Enron and WorldCom, "is purely and simply government at its worst," said Factor, the founder of the New York merchant- banking firm Mallory Factor Inc.

Factor has assembled an all-star Republican team of lawyers including Kenneth Starr, the onetime independent counsel who investigated the former president Bill Clinton, to press his case. Their goal is to prompt the U.S. Congress to scale back the law and reduce compliance costs for companies.

"They are formidable and they are very fine lawyers, and I think they and their lawsuit have to be taken seriously," said Harvey Pitt, a former chairman of the U.S. Securities and Exchange Commission.

An all-star challenge to Sarbanes-Oxley Act

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Saturday, April 01, 2006

Inside Sarbanes Oxley will now refer to Sarbanes-Oxley as Oxley-Ox

Given the upcoming retirement of Senator Paul Sarbanes, we have decided to no longer refer to the "Sarbanes-Oxley Act." From now on, we will simply refer to it as Oxley-Ox. This should be a fairly straightforward change for everyone. We've already written our congresspeople. We encourage you to do the same. If you prefer sign the petition to formalize this change, nationwide, simply click below.

Inside Sarbanes Oxley will now refer to Sarbanes-Oxley Act as Oxley-Ox

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