Friday, June 30, 2006

Conglomerate Blog: Scrushy Convicted--But Not of Fraud

The fact that Scrushy was convicted this time of course may suggest that the defense took the tactics too far. But, by possibly discrediting the nullification theory, this conviction also sheds a different light on the first acquittal. Indeed, it leads me to wonder (a) if the first acquittal does in fact have implications for Sarbanes-Oxley since the case was the very first attempt to try a CEO under Sarbanes-Oxley (and prosecutors appear to have had better success with laws already on the books) or (b) if the first acquittal reflected the jury’s refusal to imply Scrushy's knowledge of fraud. Such a refusal seems inconsistent with other cases where jurors seem to have rejected the "I don't know" defense, but arguably more consistent with the standard of intent in criminal cases.

Conglomerate Blog: Scrushy Convicted--But Not of Fraud

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Sinovac Biotech Delays Annual Filing

Chinese vaccine maker Sinovac Biotech Ltd. said Friday it won't file its 2005 annual report on time, in order to review possible problems with personal loans to two former corporate officers.

Sarbanes-Oxley regulations prevent issuers from extending or maintaining personal loans to directors or executive officers, subject to certain exceptions.

Sinovac Biotech Delays Annual Filing

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Options scams put heat on auditors

The steady stream of stories detailing stock-option abuses in Silicon Valley is placing an uncomfortable spotlight on auditors, the firms companies hire to examine financial records.

Each new revelation adds to worries that it was common for companies across the country to manipulate option prices during the 1990s, and that the practice might have continued even after the Sarbanes-Oxley Act's reforms in 2002. The scandal also raises fears that the "Big Four" audit firms -- which scrutinize the financial statements for most of the nation's biggest corporations -- either misinterpreted the rules, overlooked the warning signs or approved the practices that allowed companies to supercharge options.

"This appears to be a fairly significant failure of the audit firms," said Damon Silvers, associate general counsel for the AFL-CIO, which invests pension savings for union members. "The question is, 'What test did you use?' If the answer is, 'We had no test,' then it's a question of diligence."

Options scams put heat on auditors

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Auditors toast lucrative new rules

The strong growth in accountancy income is a turnaround from just three years ago, when the top 60 firms were reporting flat fee income. Accountancy editor Chris Quick attributed the rise to the increased workload created by the US Sarbanes-Oxley Act and the International Financial Reporting Standards (IFRS) in Europe.

"Partners of accountancy firms will be toasting a mixed bag for their success," Mr Quick said. "Messrs Sarbanes and Oxley for their lucrative legislation, Brussels bureaucrats for introducing IFRS, and of course former Enron chiefs Jeffrey Skilling and Ken Lay for starting the crisis that led to such a regulatory backlash."

The growth in firm income is trickling down to partners, whose earnings were up 13pc in 2005. Average fees per partner has now reached £839,000.

Auditors toast lucrative new rules

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The environmental impact of compliance

The costs and disruption associated with complying with new legislation and regulation will be familiar to a lot of IT professionals. For many companies, adhering to the likes of Sarbanes-Oxley, Basel II and MiFID often means a fundamental reorganisation of the way IT systems are run.

It may be heartening to know, then, that the compliance burden can be as big a headache to those public-sector organisations tasked with introducing new legislation as it is to those on the sharp end of new laws.

The Environment Agency is a non-departmental public body that is responsible for enforcing government policy around conservation and the regulation of the effects of heavy industry on the environment. When the Government introduced its pollution prevention and control regulation in 2002 — designed to ensure companies have sufficient waste production and disposal procedures in place — the agency was forced to consider whether its IT systems were up to the job of enforcing the regulation.

The environmental impact of compliancensight

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Court Hears PCAOB Lawsuit

A lawsuit aimed at disbanding the federal audit regulator created by the Sarbanes-Oxley Act was heard in court Thursday, but no ruling was made.

U.S. District Court Judge James Robertson heard arguments from the Public Company Accounting Oversight Board that the lawsuit should be dismissed, saying the plaintiffs should take their case to the Securities and Exchange Commission, which oversees the PCAOB.

The auditing regulators are being sued by conservative activist group the Free Enterprise Fund and a small Nevada accountancy.

Court Hears PCAOB Lawsuit

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Thursday, June 29, 2006

Ill-feeling over Sarbox simmers

Nearly one-fifth of European companies listed in the US are contemplating an exit from the country's stock markets to escape the strictures of the Sarbanes-Oxley Act, new research has found.

The findings of a survey by Mazars, an accountancy firm, underline how Sarbanes-Oxley continues to inspire ill-feeling almost four years after it came into force in the US.

Ill-feeling over Sarbox simmers

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ProfessorBainbridge.com: Call for Sarbanes-Oxley 408 Anecdotes

In connection with my forthcoming book on Sarbanes-Oxley, I'd be interested in collecting anecdotes about the SEC review of corporate disclosure documents pursuant to the mandate in Section 408 that such reviews be conducted at least once every three years. What did the review entail? Did the staff review a single document or all documents filed within a given time period? What extrinsic sources of information did the staff use to evaluate the disclosures, if any, or did the staff stay within the four corners of the document? And so on. If you're a lawyer or an executive with a war story to share, email me. I promise complete confidentiality.

ProfessorBainbridge.com: Call for Sarbanes-Oxley 408 Anecdotes

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Former SEC Chairman Arthur Levitt Sheds Light on Compliance, Sarbanes-Oxley and the Importance of an Investigative Infrastructure

Guidance Software, Inc., the world leader in computer investigations, brought New York's top financial minds together on Wednesday night to discuss compliance, Sarbanes-Oxley and how corporations can navigate the sea of regulations governing today's market. The executive dinner, hosted at the Waldorf Astoria, showcased best practices and tools for cutting-edge reporting, information management and network-wide auditing capabilities.

Featured experts included: Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission and a pioneer in the area of corporate accountability; Kathleen O'Neil, Guidance Software board member, risk management advisor and former executive at the Federal Reserve Bank of New York; and Brian Karney, director of product management at Guidance Software.

Speakers discussed how companies can manage risk associated with compliance and how, in the current climate, it is more important than ever for corporations to have a firm grasp on what the federal government expects of them. Best practices and tools showcased at the event included the EnCase® Enterprise investigative infrastructure and how it maps to the requirements of current and future regulations to reduce risk. Often, after the passage of a new regulation, corporations are left to decipher what a new regulation is and how it will impact them. Ultimately, application and adherence to that regulation will require the ability to analyze and preserve large amounts of data in a court-accepted manner.

"This event provided a rare opportunity for some of the industries largest financial institutions to hear from respected experts on the state of the current regulatory environment and how it will impact them in the long and short term," said John Colbert, Guidance Software CEO. "There is no question that the regulatory environment will continue to evolve towards greater transparency and corporate responsibility, and the only way corporations are going to be able to manage risk and compliance in a changing regulatory environment is to invest in technologies and best practices that streamline their processes of identifying and remediating risk."

Former SEC Chairman Arthur Levitt Sheds Light on Compliance, Sarbanes-Oxley and the Importance of an Investigative Infrastructure

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ValueClick Selects OpenPages FCM for Sarbanes-Oxley Compliance

OpenPages, the leading provider of enterprise governance, risk and compliance management (GRCM) solutions, today announced that ValueClick, Inc. has selected OpenPages FCM for its Sarbanes-Oxley compliance initiative. OpenPages FCM will allow the company to automate its ongoing testing and review of its internal controls documentation and processes to reduce the time and resource costs associated with Sarbanes-Oxley Section 404 and 302 compliance.

ValueClick, Inc. is one of the world's largest integrated online marketing companies, offering comprehensive and scalable solutions to deliver cost-effective customer acquisition for advertisers and significant revenue for publishers. Through its individual brands, ValueClick's performance-based solutions allow advertisers and publishers to reach their potential through all online marketing channels, including display advertising, affiliate marketing, lead generation, search, e-mail, and comparison shopping. ValueClick brands include Commission Junction, HiSpeed Media, Mediaplex, PriceRunner, ValueClick Media, and Webclients.

"We selected OpenPages because of the company's commitment to product quality, as well as its strong domain expertise in the area of corporate governance," said Scott Ray, chief financial officer, ValueClick, Inc. "With OpenPages FCM we can automate our ongoing assessment and monitoring of internal controls and develop reports quickly and easily, which ultimately gives us better decision support."

OpenPages FCM is an enterprise financial controls management solution that reduces the time and resource costs associated with ongoing compliance with financial reporting regulations. Available in six languages, OpenPages FCM combines powerful document management, business process management and flexible reporting capabilities in an extremely easy-to-use environment that enables an organization to document financial controls and automate the ongoing test and review process. Completely web-based, OpenPages FCM maximizes end-user participation with little training. Its dashboards can be used by project managers, documentation team members, internal auditors and external auditors to plan, document and test the internal controls framework of the company, and to attest to the financial statements.

ValueClick Selects OpenPages FCM for Sarbanes-Oxley Compliance

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IT Control Objectives for Sarbanes-Oxley, Second Edition (PDF)

In April 2004, the IT Governance Institute issued IT Control Objectives for Sarbanes-Oxley to help companies assess and enhance their internal control systems. Since that time, the publication has been used by companies around the world as a tool for evaluating information technology controls in support of Sarbanes-Oxley compliance.

Many lessons have been learned with respect to financial reporting and IT controls since the publication was issued—most significantly, the need to take a top-down, risk-based approach in Sarbanes-Oxley compliance programs to help ensure that sufficient and appropriate attention is given to areas of highest risk.

As a result, ITGI has revised the publication to provide additional IT guidance on areas of greater importance to internal control over financial reporting, as well as to share lessons learned regarding IT compliance with Sarbanes-Oxley.

IT Control Objectives for Sarbanes-Oxley, Second Edition (PDF)

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Sarbanes-Oxley impact extends far beyond public companies

When the Sarbanes-Oxley Act was enacted into law in 2002, the focus primarily was on oversight of publicly traded companies and accounting. The legislation, while it did have some application to not-for-profits, was seen essentially as a way to clean up corporate America.

It is now apparent, however, that Sarbanes-Oxley's impact has been far broader than its supporters intended or envisioned. Not-for-profits and private companies quickly began to feel SOX' impact and now some are calling for similar regulation at the state and local government level.

Sarbanes-Oxley impact extends far beyond public companies

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SOX Institute: SOX Workshops

Join the SOX Institute July 27-28 in New York for the latest SOX Workshop. The comprehensive Sarbanes-Oxley (SOX) Training Program is an opportunity for you to experience virtually every important element of SOX and how it applies to your job, your career, your company and your industry. This is the most thorough SOX training program and, through a series of simulation workshop exercises, it is designed to address the unique needs of finance, accounting, operations, IT, legal and audit.


SOX Institute: SOX Workshops

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Big4Guy: Sarbanes Oxley Audit Scope Limitations 404

Over the past few months, I have been trying to throw more light on the overall Sarbanes Oxley compliance process. Today, I am talking from the point of view of the auditor attesting a company's financial statements. What protocal should the auditor follow in case of a scope limitation in a sarbanes oxley engagement. Due to circumstances, an auditor may face restictions in scope, in which case he has the following options...

Big4Guy: Sarbanes Oxley Audit Scope Limitations 404

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Oversight: Real-Time Transaction Inspection takes Continuous Controls Monitoring to the next level

More companies are using "continuous auditing" techniques, which are designed to use technology to accelerate the internal audit cycle and improve risk and control assurance, according to a new study from PricewaterhouseCoopers.

Oversight: Real-Time Transaction Inspection takes Continuous Controls Monitoring to the next level

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ERP for Project-based Companies Addresses Sarbanes-Oxley Compliance

Software such as the VISIBILITY.net ERP system, as a business tool, provides substantial controls used to address compliance requirements of Sarbanes-Oxley. These built-in capabilities provide specific automation that when applied with procedural controls greatly assist in achieving optimal results towards compliance. Individual business processes including management controls are subject to Sarbanes-Oxley compliance audit. When it comes to Sarbanes-Oxley, software is a tool which when effectively combined with the appropriate procedures specific to an organization can deliver the necessary controls.

Most of these requirements are met solely by the business definition and enforcement of its own standard operating procedures and the managed control of responsibility. In some cases, as stated above, the business application software (VISIBILITY.net) can play a major role in facilitating the execution of this compliance requirement. It in combination with the facilities in the database (in both ORACLE and SQL Server) software and business procedures that an organization chooses to deploy make for a powerful solution to Sarbanes-Oxley compliance.

ERP for Project-based Companies Addresses Sarbanes-Oxley Compliance

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Wednesday, June 28, 2006

FreedomWorks: Heritage Panel Discusses SOX Reform

Yesterday, Rep. Tom Feeney (R-FL), along with Alex Pollack of AEI and David John of Heritage, spoke at the Heritage Foundation on reforming the Sarbanes-Oxley Act (SOX). Passed in the wake of the Enron and WorldCom scandals, the goal of SOX is to tighten corporate governance and remedy the problem of moral hazard in corporations. While most of SOX has proven useful and effective, Feeney identifies Section 404 as the problem. In 404, companies are required to conduct separate comprehensive internal and external audits yearly. Additionally, the outside auditors have interpreted their role as being able to make suggestions about 404 compliance but not being able to explicity tell a company whether or not they comply.

FreedomWorks: Heritage Panel Discusses SOX Reform

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Jacob H. Zamansky: Two Rights Equal One Wrong

Specter clearly is not afraid to play in the Senate Banking Committee's sandbox, and that's fortunate, because its members, led by Sen. Richard Shelby, R-Ala., are too influenced by Wall Street to enact any meaningful law that benefits the individual investor. For proof, just watch what happens to the Sarbanes-Oxley Act as Wall Street lobbies to eliminate or water down the law.

Finally, someone in Congress is realizing that hedge funds are too powerful to ignore, and their activities affect our day-to-day lives. It's not just that these speculative funds are marketed to smaller investors; hedge funds are highly active in the commodities market, which is responsible for a heck of a lot of oil and gas speculation. Hedge funds are using leverage to drive public companies into tail spins, then making money on short positions.

Jacob H. Zamansky: Two Rights Equal One Wrong

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Protiviti Partners with Oracle

Protiviti Inc., a leading international provider of independent risk consulting and internal audit services, announced it is working with Oracle to provide companies with an integrated compliance solution that leverages its consulting experience with Oracle® applications and technology.

Protiviti's deep understanding of regulations such as Sarbanes-Oxley, FDICIA, FDA, Basel II and HIPAA coupled with Oracle's product offerings will help customers of both companies to succeed in today's complex compliance environment.

"Addressing the many complexities of these regulations continues to be a significant challenge for companies," said Michael O'Donnell, Protiviti managing director and global leader of the firm's Technology Risk Services. "We're confident that our extensive consulting capabilities and expertise in compliance processes can help drive down the cost of these initiatives and deliver sustainable controls to Protiviti and Oracle customers worldwide."

Protiviti, a Certified Partner in the Oracle PartnerNetwork, is assisting companies with compliance and controls effectiveness through implementing Oracle applications and technologies including Oracle Internal Controls Manager, Oracle's PeopleSoft Enterprise applications, Oracle Identity Management and Oracle Database Vault. This effort is aligned with Oracle's overall Global Compliance Initiative, which provides executives with the ability to monitor and control how information is being used, shared, duplicated or disseminated across dynamic information environments.

"Organizations increasingly face complex regulatory requirements that significantly impact business processes and IT infrastructure," said Robert Shimp, vice president, Global Technology Business Unit, Oracle. "By working together with Protiviti, we are helping customers address these challenges by integrating compliance, security and risk solutions into business processes. Key technologies such as Oracle Database Vault, which helps protect against insider threat, together with Protiviti's proven expertise in compliance processes allow us to deliver cost-effective, sustainable solutions to our joint customers."

Protiviti Partners with Oracle

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Cardinal Refuses to Reinstate CFO

In a widely watched whistleblower case, Cardinal Bankshares yesterday decided once again to refuse a Department of Labor judge's recommended order to reinstate the bank's former CFO, David Welch, the company's outside attorney Laura Effel told CFO.com. Instead, the bank holding company plans to wait and see whether the DoL or Welch brings an action against the company in U.S. District Court, she noted.

Welch was fired from Cardinal in October 2002 for refusing to speak with the bank's audit committee without his personal attorney present. Welch's lawyer, Bruce Shine, said the finance chief believed that the bank was preparing to fire him for disclosing improper accounting practices during internal meetings. Thus, Welch refused to meet with the audit committee without legal representation, Shine added.

Welch is said to be the first person to go to trial under the whistleblower protection provision of the Sarbanes-Oxley Act of 2002.

Cardinal Refuses to Reinstate CFO

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Sarbanes-Oxley attack excessive

The effort to roll back the protections of the Sarbanes-Oxley Act is under way, and the attack on regulation may be greater than could have been imagined four years ago, when the law was passed by overwhelming majorities.

Those seeking change say regulations are running up costs and driving down stock prices, while forcing companies to leave American markets. The only beneficiaries, to hear them tell it, are accounting firms.

"External audits are totally redundant," said Rep. Tom Feeney, who has taken the lead in efforts to role back Sarbanes-Oxley, speaking at a congressional hearing this week. Since corporate officials now certify the reports, he says, additional validation wastes money.

Sarbanes-Oxley attack excessive

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Tuesday, June 27, 2006

Sarbanes-Oxley: IT pros may not like it but they still need to comply

IT professionals have the grim responsibility of coming to grips with Sarbanes-Oxley and other government regulations and then determining how their IT infrastructure needs to adapt to meet these requirements.

This chapter from AIIM's Information Nation Warrior: Information Management Compliance Boot Camp shows why compliance is so important and provides examples of what good compliance looks like, as well as examples of organizations that didn't comply and the consequences they faced. This chapter also provides a quotient for responsiveness and a quotient for demonstrating good faith.

As the opening of this chapter states, "When the courts or regulators come knocking, failing to comply is not an option. When the law changes, adapting to the changes is not voluntary — no matter how unclear or onerous the change may seem. Unlike best practices, where organizations can comply as they choose, laws and regulations cannot be ignored."

Sarbanes-Oxley: IT pros may not like it but they still need to comply

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AltEnergy Investor: Sarbanes-Oxley driving US Alt. Energy Firms to list on London's AIM

The Sarbanes Oxley Act has driven yet another US company in to the arms of London's AIM. According to a newspaper report, Viceroy Acquisition Corp, will list in London next month, eyeing a $200 million fund-raising as it tries to buy its way into the fast-growing U.S. biodiesel market.

AltEnergy Investor: Sarbanes-Oxley driving US Alt. Energy Firms to list on London's AIM

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Phil Kerpen on Sarbanes-Oxley and the Public Company Accounting Oversight Board on NRO Financial

U.S. Federal Reserve Board governor Mark Olson was appointed last week to the highest-paid job in the U.S. government: chairman of the Public Company Accounting Oversight Board (PCAOB). The PCAOB, created by the Sarbanes-Oxley Act of 2002, has the power to set its own budget and salaries, and does not rely on the congressional appropriations process for its budget since it can levy fees on all public companies. The position of the PCAOB chairman, which comes with a hefty salary of $615,000, carries enormous influence over not only the accounting industry, but all publicly traded companies.

Surely an appointment to such a position merits careful consideration by the U.S. Senate, as it offers the president advice and consent. But for some reason the news stories about the Olson appointment did not say he was nominated by the president. Nor did they say that the Senate will hold hearings. No, reports said that he was named PCAOB chair by the Securities and Exchange Commission.

There’s something wrong with this picture.

Phil Kerpen on Sarbanes-Oxley and the Public Company Accounting Oversight Board on NRO Financial

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SharePoint Cafe: Sarbanes Oxley and Microsoft Office SharePoint Server 2007

We have just published a new white paper on Sarbanes Oxley compliance using Microsoft Office SharePoint Server 2007. The title of the paper is The Role of Microsoft Office SharePoint Server 2007 in Supporting Compliance with the Sarbanes Oxley Act of 2002. The paper is written by Mark Schneider, PMP and Project Server expert.

In this paper, we will discuss a summary of SOX and the help you understand how the Microsoft Office SharePoint Server 2007 (MOSS 2007) features map to the SOX requirements and how you can use MOSS 2007 to support SOX compliance efforts in your business.

SharePoint Cafe: Sarbanes Oxley and Microsoft Office SharePoint Server 2007

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Microsoft Most Valuable Professional : Sarbanes-Oxley - General Recommendations on how to achieve SOX compliancy

Below is an updated list of recommendations, shared in the Sarbanes-Oxley forums ... To me, the cornerstones for success include: Planning, Training, and Commitment ... Wishing all those companies who must adapt these standards, the upmost success

Microsoft Most Valuable Professional : Sarbanes-Oxley - General Recommendations on how to achieve SOX compliancy

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Democrats accuse president of power grab

The most controversial use of a signing statement came this year after the Senate voted to pass a prohibition on certain kinds of interrogation procedures. After lengthy negotiations with Senator John McCain agreeing the terms of an amendment, the administration "issued a signing statement which appeared to undercut what had been negotiated", said Mr Specter.

Mr Leahy also offered the example of how Mr Bush had used a signing statement to narrow a provision protecting corporate whistle-blowers in the Sarbanes-Oxley law. That effort, however, was later overturned after congressional pressure.

Democrats accuse president of power grab

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File under 'Wishful Thinking': Nasdaq CEO sees Sarbanes-Oxley changes in 2007

Nasdaq Stock Market Inc. Chief Executive Robert Greifeld said on Tuesday he expects changes to the Sarbanes-Oxley corporate reform law in 2007.

"I make the prediction that in 2007 we will see refinement of the Sarbanes-Oxley Act whether it comes directly from the legislature or Congress getting involved with the (U.S. Securities and Exchange Commission)," said Greifeld, speaking at Stanford University's Directors' College forum.

"When we look at what's wrong with Sarbanes-Oxley, we know we have to have a risk-based approach to the rule in general that will apply to the 404 section," he said, addressing an audience of corporate directors at publicly traded companies.

File under 'Wishful Thinking': Nasdaq CEO sees Sarbanes-Oxley changes in 2007

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Roche Chooses BWise for Internal Control for Financial Reporting

BWise, a leading provider of compliance and enterprise risk management software, today announced that Roche Corporate Finance & Accounting, one of the world's leading research-based healthcare companies, has chosen BWise to support its Internal Control for Financial Reporting (ICFR) project. The BWise solution will be implemented at the corporate level as well as among various local levels.

Roche is a leading healthcare company with a uniquely broad spectrum of innovative solutions. For more than 100 years, Roche has been actively involved in the discovery, development, manufacturing and marketing of novel healthcare solutions. Roche’s uniquely designed products and services address the prevention, diagnosis and treatment of diseases, thus enhancing well-being and quality of life. The BWise compliance software will assist Roche in meeting and tracking ICFR compliance and process improvement requirements across its corporate enterprise and various businesses.

"BWise is pleased to have the opportunity to support Roche and meet its internal control for financial reporting objectives," said Robert Pijselman, Chief Executive Officer of BWise. "With BWise, Roche can establish an easy-to-use and scalable system for streamlining governance efficiencies across its expansive network of utilities and related businesses."

"Roche was looking for a solution not only to facilitate our ICFR objectives, but also to enable us to realize important process improvements," stated Philippe Muller, ICFR Project Manager of Roche. "With the BWise solution, we are able to meet the specified requirements more efficiently on all levels."

Roche Chooses BWise for Internal Control for Financial Reporting

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Monday, June 26, 2006

Society of Corporate Compliance & Ethics Institute

The Society of Corporate Compliance and Ethics (SCCE) announced today that the world's corporate compliance, governance and ethics leaders will assemble in Chicago for the 5th Annual Compliance & Ethics Institute, September 11-13, 2006 at the Chicago Downtown Marriott. For this landmark conference, the SCCE has assembled an international panel of experts to address a myriad of national and global compliance and ethics concerns.

Society of Corporate Compliance & Ethics Institute

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SEC OIG Recommends Continous Surveillance of Large Companies

Although the SEC may be seen as having suffered a setback in its surveillance activities by virtue of the recent court decision regarding hedge funds, less press has been devoted to a recent recommendation of the SEC's Office of Inspector General (OIG) in its report posted on the SEC website Thursday recommending the SEC's Division of Corporation Finance (Corp Fin) engage in continuous surveillance of large public companies, in a manner similar to that used by the SEC's Office of Compliance Inspection and Examination. The report concerned the SEC OIG's audit of Corp Fin's "preliminary review program" - i.e. preliminary reviews of corporate filings, which can trigger a "full review."

SEC OIG Recommends Continous Surveillance of Large Companies

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Earl Powers: Sarbanes Oxley Act Sox And Not The Ones On Your Feet!

With the increase of regulatory norms, more and more companies are coming under the scrutiny of Federal government. Those companies that specially obtain lists and store personal information come under special scrutiny of Sarbanes Oxley Act. Lately, there had been review stating that Sarbanes Oxley Act has been too stringent on the companies. The most talked about section of the Sarbanes Oxley Act is the Section 404 which seeks to enhance reliability of internals controls over financial reporting. These tightened internal control implemented as a result of Sarbanes Oxley Act has lead strains on companies as well as the accounting firms.

A proper regulatory framework with more stringent rules and a company with proper internal regulatory body delivers the most accurate and transparent financial reporting. This law is administered by Securities and Exchange Commission. This body sets rules and deadlines for the compliance and published rules on the requirements.

Earl Powers: Sarbanes Oxley Act Sox And Not The Ones On Your Feet!

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Unitrin Selects OpenPages FCM for Sarbanes-Oxley Compliance

OpenPages, the leading provider of enterprise governance, risk and compliance management (GRCM) solutions, today announced that Unitrin, Inc. (NYSE: UTR) has selected OpenPages FCM for its Sarbanes-Oxley cost reduction initiatives. OpenPages FCM will allow the company to further automate its ongoing testing and review of internal controls to reduce the time and resource costs associated with Section 404 and 302 compliance.

Unitrin is a $3 billion financial services company focused on creating shareholder value by providing a diverse array of insurance and consumer finance products and services for individuals, families and small businesses.

Among the brands in Unitrin's Property and Casualty Insurance business are Unitrin Kemper Auto & Home, Unitrin Specialty and Unitrin Business Insurance, which sell personal and commercial insurance through networks of independent agents, and Unitrin Direct, which sells auto insurance directly to consumers. Unitrin's Life and Health Insurance businesses bring a high-level of personalized service to their customers. Unitrin's consumer finance subsidiary, Fireside Bank, specializes in automobile loans for the purchase of pre-owned vehicles. Additional information about Unitrin is available by visiting its website (www.unitrin.com).

"We selected OpenPages because of its functionality and flexibility," said Lou Horvat, director enterprise risk management, Unitrin, Inc. "Working with OpenPages, we expect to reduce the time and resource costs associated with ongoing compliance."

OpenPages FCM is an enterprise financial controls management solution that reduces the time and resource costs associated with ongoing compliance with financial reporting regulations. Available in six languages, OpenPages FCM combines powerful document management, business process management and flexible reporting capabilities in an extremely easy-to-use environment that enables an organization to document financial controls and automate the ongoing test and review process. Completely web-based, OpenPages FCM maximizes end-user participation with little training. Its dashboards can be used by project managers, documentation team members, internal auditors and external auditors to plan, document and test the internal controls framework of the company, and to attest to the financial statements.

Unitrin Selects OpenPages FCM for Sarbanes-Oxley Compliance

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The Big Picture: Read it here first: The Cost of Sarbanes-Oxley

It is a rather annoying tendency of politicians -- and their empty-headed acolytes -- to use and abuse of data and charts. One of the more egregious recent offenders was the laughable assertion put forth by an accounting professor Ivy Zhang that Sarbanes-Oxley cost more than $1.4 trillion dollars.

Zhang proves that understanding how to do mathematics does not mean one actually understands what the numerals being added together actually represent. Her incompetent analysis calculated the drop in stock market capitilization during July 2002 -- the period just before the legislation was passed, and concluded that was the cost of the legislation.

The only explanation for that kind of reasoniong is blunt head trauma.

The Big Picture: Read it here first: The Cost of Sarbanes-Oxley

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Sarbanes-Oxley $10 Billion Word?

Instead, as a reaction, we enacted the Sarbanes-Oxley (SarbOx) Act in 2002. Section 404 of SarbOx is only 168 words long; but its impact has been dramatic. It makes executives responsible for maintaining an "adequate internal control structure and procedures for financial reporting." This is in addition to the checks and balances to company management that we have auditors and the SEC for in the first place. SarbOx has escalated compliance to top priority in every boardroom. It dwarfs previous industry-specific compliance requirements such as FDA Validation in pharmaceuticals and HIPAA in health care. Three years ago, very few companies outside of banking had senior IT-compliance managers. Now just about every company has one, it seems.

Several technology vendors and systems-integration firms (and, of course, audit firms) have enjoyed a bonanza from this focus on compliance. Companies are investing in storage and content-management software to handle more stringent document security and retention policies. They are investing in systems-management tools and business-intelligence software to catch non-conforming system events and suspicious trends. SAP recently announced its large Governance, Risk and Compliance initiative after it bought a compliance software vendor, Virsa. Global service providers are re-positioning their quality and process-improvement practices to help in compliance initiatives.

Sarbanes-Oxley $10 Billion Word?

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Saturday, June 24, 2006

Fed Reserve Delivers Another PCAOB Head

The Federal Reserve has emerged as the breeding ground for oversight of the accounting profession as Federal Reserve Board Governor Mark W. Olson is taking over as the new chairman of the Public Company Accounting Oversight Board (PCAOB). He becomes the PCAOB’s second permanent chairman, following in the footsteps of the first long-term-chairman William McDonough, who had previously been president of the New York Federal Reserve Bank.

In appointing Olson, the Securities and Exchange Commission (SEC) passed over Bill Gradison, a former longtime U.S. Congressman from Ohio, who had been acting chairman since McDonough announced his resignation late last year. Gradison, who had reportedly been interviewed for taking on the top slot permanently, will remain a member of the board.

SEC Chairman Christopher Cox said that Olson's broad array of securities, banking and accounting experience make him the ideal candidate for the job.

Fed Reserve Delivers Another PCAOB Head

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Sarbanes-Oxley spurs risky talk, little action

"With Sarbanes-Oxley, we’ve seen a big shift away from the finance-oriented CFO and back toward the accountant CFO, but this survey shows that your CFO can’t just be a bean counter. Your CFO must also understand risk management," Hermanson said in the report.

The report also stressed that risk management is working its way into Sarbanes-Oxley compliance. Nearly one-third (30 percent) of financial executives surveyed said their internal controls audits employed more of a risk-based approach to evaluating control effectiveness.

Sarbanes-Oxley spurs risky talk, little action

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Friday, June 23, 2006

Aloys Hosman: Sharp critisism on SOX from former SEC boss

Regular readers have noticed my fear of having SOX dominate the European landscape as well. I have also noted, that SOX is a rather costly affair to companies and investors alike, while it promotes risk aversion.

Now, Mr. Pitt, former chairman of the SEC (2001 - 2003) has expressed similar doubts.

Aloys Hosman: Sharp critisism on SOX from former SEC boss

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tompeters!: Whither the Blame

We got a Comment on my Sarbanes Oxley Post decrying the effect the Legislation is having on innovation-in-America. Here was my response...

tompeters!: Whither the Blame

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AAO Weblog: A SarbOx Echo?

The FASB and the AICPA announced a joint project: figuring out if standard-setting is meeting the needs of the multitude of private companies.

They've issued an "invitation to comment" on improvements to the standard-setting process as it currently exists.

Broad goal of the project: get more involvement from the private companies in the standard setting process, to make sure their interests are represented. Steps to achieve "more involvement" include recruiting more FASB staff with private company experience, and formation of a joint FASB/AICPA committee to promote constituent input into the FASB standard-setting process.

AAO Weblog: A SarbOx Echo?

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Toast of the town

Larry Soldinger was the toast of AIM last December when, as chairman of Cosentino Signature Wines, he brought the US company to the London Alternative Market.

And he is quite clear why he rejected the US markets in favour of a listing across the pond.

"As a certified public accountant, I deal with a number of public companies in the US and I am well aware of Sarbanes-Oxley and how cost-prohibitive it is for a small company to go public in the US," Soldinger explains.

Toast of the town

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Theodore F. di Stefano: Setting Directors' Fees After Sarbanes-Oxley

Sarbanes-Oxley (SOX) has certainly made quite an impact on corporate governance since its enactment in 2002. Most of us remember the corporate debacles that brought about SOX. In fact, one of them, the Enron failure, is still very much in the news today.

Consider some of the ways that SOX has affected corporate governance: choosing auditing firms, assessing a company's internal controls, strict prohibitions of conflicts of interest, etc. Not surprisingly, it has also affected compensation of board members. Additionally, many prospective board members think twice before they accept a board appointment.

A recent article that I wrote for the E-Commerce Times, Corporate Governance: Panic in the Boardroom, goes into detail about the many ramifications of SOX, as well as how one could still proudly serve on a board without being overly concerned with personal liability.

Theodore F. di Stefano: Setting Directors' Fees After Sarbanes-Oxley

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Big4Guy: Sarbanes Oxley Controls Testing Project Management

Sometime back in Januray this year, I had written about how the Project Management Maturity model could be applied to a Sarbanes Oxley 404 implementation. Once the risk and control matrices (commonly known as RCM's) are ready, companies can go in for testing the controls. Usually, sarbanes oxley controls testing is a time bound plan where resources i.e. testers are identified, testing locations are notified, and a time plan is made. I have seen many SOX directors in companies taking up SOX testing as a project. Usually they apply the same skills they would apply to any important project. SOX Directors need to ensure that the following areas are taken into account in the testing project.

Big4Guy: Sarbanes Oxley Controls Testing Project Management

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New U.S. Accounting Chief May Be 'Tougher,' Deloitte CEO Says

Mark Olson, new head of the Public Company Accounting Oversight Board, may take a tough line with auditors because of his accounting background, Deloitte Touche Tohmatsu Chief Executive Officer William Parrett said.

Olson was this week named to run the board, created by the 2002 Sarbanes-Oxley Act to set the standards for audits of U.S. public companies. A Federal Reserve governor, Olson worked for more than a decade at Ernst & Young LLP until 1999.

"The experience we've had with professionals leaving the profession and becoming regulators is they generally become tougher on us," Parrett, 60, said in an interview in Singapore yesterday. He compared it to feedback from his six children, who "always say, 'Dad, you're tougher on us than on others.'"

New U.S. Accounting Chief May Be 'Tougher,' Deloitte CEO Says

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Thursday, June 22, 2006

Business Controls Caddy: The Joy of SOX

Let's face it. In the current business environment, SOX sells. No, not the Boston Red Sox winning the World Series, but the Sarbanes-Oxley Act of 1992. Yet people find little joy on the whole process, and when I show people the Hugh Taylor's new book called The Joy of SOX: Why Sarbanes-Oxley and Service-Oriented Architecture May Be the Best Thing That Ever Happened to You (2006, J Wiley and Sons, 312 pages, ISBN 0471772747), they roll their eyes and say "What Joy?". What they do not realize with this first impression is that Taylor does something I have not seen in a book on Sarbanes-Oxley. He presents the content as a unified case study from start to finish. In doing so, the author makes available a reference of real world examples addressing SOX, COSO, COBIT, and the use of service-oriented architectures to facilitate what he calls "agile compliance".

Taylor introduces the reader to a rather small cast of characters by design. There is the overly ambitious, new CIO who totally wants to reinvent the company without any consideration for the SOX activities that are on-going. There is his trusty, military trained deputy. Then there is the CFO and the CIO, who do not get along at all. This should sound familiar to people from many organizations. The mission is to reinvent the company into an agile organization, without losing any of their compliance gains to date.

Business Controls Caddy: The Joy of SOX

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New Book Helps Employers Avoid Whistleblower Retaliation Claims

Practising Law Institute (PLI), the nation's leading provider of continuing legal education, has announced the release of "Corporate Whistleblowing in the Sarbanes-Oxley Era" -- the first comprehensive guide to whistleblower protections and rights under the Sarbanes-Oxley Act (SOX), federal and state whistleblower statutes and common law.

Featuring numerous case law citations with commentary, "Corporate Whistleblowing in the Sarbanes-Oxley Era" provides employers and their attorneys with essential information on how to examine and adjudicate whistleblower retaliation complaints at the administrative law level and in the federal courts.

Corporate Whistleblowing in the Sarbanes-Oxley Era explains how a retaliation complaint proceeds, including the four principal elements an employee must show to establish a prima facie case. It goes on to explain what constitutes the "clear and convincing" evidence that an employer can present to demonstrate that it had a legitimate purpose or motive for its adverse action against an employee.

"Corporate Whistleblowing in the Sarbanes-Oxley Era" also details the practical steps employers can take to avoid retaliation complaints, including how to train managers and officers on how to deal with whistleblowers and with sensitive situations that give rise to whistleblower lawsuits.

Included in "Corporate Whistleblowing in the Sarbanes-Oxley Era" are the text of Section 806 of SOX, a comprehensive chart of state whistleblower statutes, federal whistleblower statutes and excerpts from the OSHA Whistleblower Investigations Manual.

Written and edited by attorneys of Orrick, Herrington & Sutcliffe LLP, New York City, one of the nation's leading employment law firms, "Corporate Whistleblowing in the Sarbanes- Oxley Era" is $195 and is available for a 30-day trial examination.

New Book Helps Employers Avoid Whistleblower Retaliation Claims

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Floyd Norris: An assault unleashed on Sarbanes-Oxley

The effort to roll back the protections of the U.S. Sarbanes-Oxley Act is under way, and the attack on regulation may be greater than could have been imagined four years ago, when the law was passed by overwhelming majorities.

Those seeking change say regulations are running up costs and driving down stock prices while forcing companies to leave American markets. The only beneficiaries, to hear them tell it, are accounting firms.

"External audits are totally redundant," Representative Tom Feeney, a Florida Republican, who is leading efforts to roll back Sarbanes-Oxley, said at a congressional hearing this week. As corporate executives now certify the reports, he figures, external validation wastes money. The threat of an audit would be more than enough, he said, noting that he had never been audited by the Internal Revenue Service but knew an audit was possible and did not cheat on his taxes. He suggested that a few companies could be chosen each year to face audits, with the rest avoiding the needless expense.

Floyd Norris: An assault unleashed on Sarbanes-Oxley

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Complying With Compliance: Managed Service Providers Help SMBs Handle New Regulations

Today’s regulatory landscape can be confusing for any company. For smaller companies, there simply may be too many details to master and manage. While business long has co-existed with vigorous regulatory agendas, recent rule changes and additions are making the burden truly onerous.

In 1996, Congress passed the Health Insurance Portability and Accountability Act (HIPAA) to ensure health care portability for employees. Three years later, the Gramm-Leach-Bliley Act (GLBA) arrived, providing protections against the sale of data from private financial transactions. Sarbanes-Oxley came next, adding a slew of new regulations to boost accountability for publicly traded companies. And now, many SMBs must comply with the Payment Card Industry Data Security Standard (PCI-DSS), which establishes a set of unified procedures to secure the storage, transmission and processing of credit card data. Data security and integrity, in fact, are essential for any SMB that wishes to follow each of these regulations properly.

In this environment, the regulatory burden can play a huge role in fundamental business decisions. It may be a factor in key determinations regarding how the company grows, what its personnel policies are, or whether the company considers going public. Operationally, regulatory adherence dramatically can increase administrative and legal costs, while distracting a company from its core business.

Complying With Compliance: Managed Service Providers Help SMBs Handle New Regulations

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Conglomerate Blog: Merging the World's Exchanges

On the regulatory side, Sarbanes-Oxley is the big gorilla everyone is trying to keep behind the closet door. The UK’s Financial Services Authority has received comfort from the SEC that a NASDAQ-LSE merger would not by itself trigger an attempt by the SEC to apply SOX or other US regulation to LSE-listed firms. SEC commissioner Anne Nazareth has been publicly commenting to similar effect.

This is of course no small concern. In 2000, ninety percent of the world’s IPO dollars were raised in the US; in 2005, ninety percent of the world’s IPO dollars were raised outside the US. SOX has largely been blamed for this IPO flight from the US. FSA chair Callum McCarthy did note, however, the possibility that the merged NASDAQ-LSE entity itself might seek to rationalize its regulatory structure by consolidating its operations within one jurisdiction in order to subject itself to only one regulatory regime. He went so far as to suggest the possibility that some day the LSE might not be subject to UK regulation.

Conglomerate Blog: Merging the World's Exchanges

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Sarbanes-Oxley testing cuts could mean cost cuts

A technology-based process for reducing the range or "scope" of Sarbanes-Oxley controls could help businesses cut the cost of compliance, which is expected to total $6 billion this year according to AMR Research Inc.

This approach would offer some relief to smaller public companies that were disappointed by last week's Securities and Exchange Commission (SEC) decision to reject a proposal to exempt them from complying with the audit rules of the Sarbanes-Oxley Act (SOX) of 2002.

John Hagerty, vice president of Boston-based AMR Research, said many companies initially took the costly approach of testing and documenting internal controls for everything to protect themselves from violating Sarbanes-Oxley.

Sarbanes-Oxley testing cuts could mean cost cuts

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Sarb-Ox critics have short-term memories

To Enron's investors, employees and customers the verdicts were little consolation. It's been nearly five years since thousands of jobs were lost, retirement accounts were wiped out, and our naiveté exposed.

It's also been long enough that the type of people who created the cancerous environment that fostered Enron now feel free to come out from under their rocks and begin tearing away at post-Enron reforms. Their No. 1 target is Sarbanes-Oxley, the 2002 law that required greater accountability from CEOs, independence and expertise on corporate boards and deeper levels of disclosure from public companies.

Backed by the usual suspects, the anti-SarbOx movement is gaining momentum. The U.S. Chamber of Commerce, the Securities Industry Association and now the heads of the two major U.S. stock exchanges are criticizing Sarbanes-Oxley.

They say the law is too cumbersome, too expensive -- especially for small companies -- it's too restrictive and it puts U.S. corporations at a disadvantage to foreign competitors who aren't burdened with having painful and needless requirements such as "internal controls."

Sarb-Ox critics have short-term memories

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Wednesday, June 21, 2006

Computer Associates blames Sarbanes-Oxley for filing delays

Separately, CA, has requested more time from the SEC to file its end-of-year financial report. Ironically, CA, which is busy touting its software as a solution for customers managing the complexities of the Sarbanes Oxley Act, has cited Sarbanes Oxley as the reason for delay.

"CA will request the extension because it does not expect to complete the preparation of its consolidated financial statements and management's assessment of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002 by the initial filing deadline of June 14, 2006," the company said in a statement.

Computer Associates blames Sarbanes-Oxley for filing delays

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Sarbanes-Oxley is an unhealthy export

Sarbanes-Oxley, overwhelmingly adopted by Congress in 2002, demonstrates the point. All the misconduct at Enron, WorldCom and their like was already illegal under existing laws. Indeed, every successful criminal prosecution of corporate officers to date has been based on pre-Sox laws and rules. The one prosecution based on Sox - involving Richard Scrushy of HealthSouth - failed. Nonetheless, US leaders needed to signal unambiguously that this conduct would not be tolerated. Sox was hastily and badly drafted, but it promotes several useful ideas. Not least of these are the creation of the Public Company Accounting Oversight Board, the need for companies to maintain and evaluate their internal controls and a two-business-day reporting requirement that would have limited much of the current scandal involving stock option grant backdating.

The problems with Sox, however, are far more serious than reflected by Congress's overwhelming enactment. Its "one-size-fits-all" approach to regulation stifles innovation, creativity, risk-taking and competitiveness. Worse, Congress's exportation of Sox's standards has created huge difficulties for multinational companies and produced scorn for US standards. This embodiment of American geocentrism has resulted in a loss of foreign listings on US exchanges and diversion of initial public offerings to non-US locales.

Sarbanes-Oxley is an unhealthy export

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Big4Guy: Using the Work of Others in Sarbanes Oxley Compliance

Under Sarbanes Oxley an auditor must test the operating effectiveness of internal controls over financial reporting to form an opinion on financial statements. Primarily the auditor should use the results of his own testing in forming such opinion. This means that the tests of operational effectiveness conducted by the auditor will form the basis of the auditor's opinion. However, SOX allows auditors to use the work of others to alter the nature, timing and extent of procedures performed independently.

So what does "Work of Others" mean here? For SOX purposes, work of others means work perfomed by company's internal auditors, consultants, other company personnel, and third parties working under the direction of the management or audit committees. In using the work of others, auditors must take into consideration the following...

Big4Guy: Using the Work of Others in Sarbanes Oxley Compliance

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SOX aversion

The burden of Sarbanes-Oxley compliance is pushing some companies to consider going private, a new study reports.

And it's not just a few malcontents, according to law firm Foley & Lardner's fourth annual SOX study, released last week. One out of every five respondents (21%) to the firm's survey said they would consider a going-private transaction.

SOX aversion

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Ex-CEO Pleads to Sarbox 302 Violation

Federal prosecutors have finally secured a guilty plea under Section 302 of Sarbanes-Oxley, which requires CEOs and CFOs to certify their company's financial results, according to the Associated Press.

The AP reported that Joseph Micatrotto, former chief executive officer of restaurant chain Buca Inc., pleaded guilty to wire fraud for receiving a $65,000 payment from a vendor, High Wire Networks, so he could pay off a personal debt. High Wire then inflated one of its bills to Buca, according to the report.

Ex-CEO Pleads to Sarbox 302 Violation

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ProfessorBainbridge.com: Remembering Global Crossing

I'm spending the summer writing a book on Sarbanes-Oxley. Today, I've been working on the section detailing the history of business failures that led up to SOX. In doing so, I ran across an item about which I had completely forgotten...

ProfessorBainbridge.com: Remembering Global Crossing

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Sarbanes-Oxley costs drive ClearStory to deregister stock listing

ClearStory Systems Inc., a provider of digital asset management software, announced yesterday that it filed a form with the U.S. Securities and Exchange Commission to voluntarily deregister its common stock to suspend the company’s reporting obligations.

"It's very expensive to remain a public entity when you’re a small company," said company spokeswoman Susan Worthy. "The Sarbanes-Oxley Act makes it costly and resource-prohibitive."

Sarbanes-Oxley costs drive ClearStory to deregister stock listing

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Tuesday, June 20, 2006

Former CEO at Buca pleads guilty to wire fraud

Prosecutors accused Joseph P. Micatrotto, 54, former chief executive officer of restaurant chain Buca Inc., of getting a Buca vendor to pay him $65,000 so he could pay off a debt from a failed restaurant. Authorities have alleged the vendor got the money back by inflating one of its bills to Buca.

Prosecutors charged Micatrotto, 54, with wire fraud because he failed to disclose the $65,000 payment on Buca's 10K filing with the Securities and Exchange Commission.

Sarbanes-Oxley, enacted during a 2002 wave of corporate scandals, stiffened penalties for corporate fraud and required CEOs and chief financial officers to personally certify in writing the accuracy of company financial statements.

"The message we want to send is that financial certification requirements mean what they say, and if you're a CEO or a CFO and you violate that, expect to be prosecuted for that," said Assistant U.S. Attorney Hank Shea.

Former CEO at Buca pleads guilty to wire fraud

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Sarbox Has Widespread Impact on Revenue Recognition Policies

One of the primary goals of Sarbanes-Oxley (Sarbox) is to ensure that companies are reporting accurate revenue numbers. Consequently, revenue recognition policies have been under particular scrutiny. A survey of 400 public and private companies found that more than half (55%) of all public companies, have changed revenue recognition policies as a result of Sarbox and that many of these changes were "Moderate" to "Significant".

Sarbox Has Widespread Impact on Revenue Recognition Policies

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Ex-Buca CEO Pleads Guilty to Wire Fraud

Prosecutors charged Micatrotto, 54, with wire fraud because he failed to disclose the $65,000 payment on Buca's 10K filing with the Securities and Exchange Commission.

Sarbanes-Oxley, enacted during a 2002 wave of corporate scandals, stiffened penalties for corporate fraud and required CEOs and chief financial officers to personally certify in writing the accuracy of company financial statements.

"The message we want to send is that financial certification requirements mean what they say, and if you're a CEO or a CFO and you violate that, expect to be prosecuted for that," said Assistant U.S. Attorney Hank Shea.

Ex-Buca CEO Pleads Guilty to Wire Fraud

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Tim Draper: Are Acquisitions Replacing IPOs?

It's a complicated answer, but I'll give you a few of the data points. I never wanted to sell Skype. It's is a wonderful phenomenon; eBay got a great deal and is going to do great things with it. But does that create a trend; does that mean that there is a tendency for more of these companies to be bought out by Yahoo or eBay or whatever? No. Sarbanes-Oxley has been a disaster for all entrepreneurship. There is no way. We used to be able to take a company public that was profitable at $20 million in sales. But today Sarbanes-Oxley means that you have to pay your accountants and lawyers about $2 million a year to keep the thing going. So that $20 million company is now in a loss position, and it doesn't make any sense to go public.

So companies have to go a lot longer before they're really big enough that I can take them public. But entrepreneurs became impatient. They said, 'There are going to be another four years? I've put six, seven years of my life into this thing, and now it's worth a lot. I can live really well if somebody buys it.' That created a great opportunity for big companies like Google and Yahoo and eBay to pick those things up.

Tim Draper: Are Acquisitions Replacing IPOs?

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Earl Powers: What Comes After Sarbanes Oxley?

The Sarbanes Oxley Act was passed in 2002 to curb accounting abuses that led to the bankruptcy and financial ruin of several major companies, and the loss of billions of dollars to investors who have every right to expect their money to be safe. The Sarbanes Oxley Act is a major auditing nightmare for most companies, though no one is questioning its necessity.

When it was first implemented in 2002, almost every company's finance and accounting related projects were delayed. Why? Tons of new paperwork was generated, and IT projects designed to track everything required by the Sarbanes Oxley Act had to be implemented as quickly as possible.

Earl Powers: What Comes After Sarbanes Oxley?

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Tangential: Simple misspellings can spell unemployment

From accounting to zoology, every profession has its own unique lingo. To position yourself as an expert in your field, it's vital you correctly use industry-specific terms and acronyms in your resume and cover letter. The following finance professional incorrectly referenced the Sarbanes-Oxley Act, an important piece of corporate governance legislation: "ACCOUNTING SKILLS: Trained in Sarbanese & Oxley procedures."

Tangential: Simple misspellings can spell unemployment

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Fed Governor Gets Nod at PCAOB

Federal Reserve Board Governor Mark W. Olson has been appointed the new chairman of the five-member Public Company Accounting Oversight Board for a term running until 2010.

It took the SEC nearly nine months to find a successor to William McDonough, the board's first steady chairman, who announced he would be leaving the position in September. Olson steps in at a politically perilous time for the board -- many business interests are forcefully lobbying for a repeal of Sarbanes-Oxley's internal controls provisions for smaller public companies, and a lawsuit has been filed questioning the PCAOB's own constitutionality.

Fed Governor Gets Nod at PCAOB

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Guiding Rights Blog: Sarbanes-Oxley and IP: Best Practices for Compliance

Given the emerging position that Sarbanes-Oxley imposes obligations with respect to intellectual property, the failure of management to perform an oversight function may constitute bad faith - an extreme breakdown in the exercise of due care. Failure to act in good faith may cause directors and officers to lose the right to indemnification or insurance coverage and may create liability under traditional state law, in addition to potential liability under Sarbanes-Oxley.

Here are actions management should consider to demonstrate due care in the handling of its intellectual property assets.

Guiding Rights Blog: Sarbanes-Oxley and IP: Best Practices for Compliance

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Sox First: Fraud risk

In the post Sarbanes-Oxley era of corporate governance awareness, companies everywhere are beefing up their internal controls.

Trouble is it's not doing anything to make them less vulnerable to fraud, according to the latest Ernst & Young Global Fraud Survey.

Sox First: Fraud risk

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Audit fees for SOX compliance on rise

Despite predictions that audit fees associated with the Sarbanes-Oxley Act would fall, the cost of corporate governance compliance continues to get more expensive for public companies, according to Crain's Chicago Business.

Audit fees for SOX compliance on rise

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Sarbanes-Oxley has whistleblowing CFO reinstated

Powers brought in under Sarbanes-Oxley to protect whistleblowers have seen a former chief financial officer of a small Virginia bank ordered back to work, although the bank itself is trying to prevent this happening.

The bank is now supposed to reinstate Welch to his job on an interim basis, or offer him payment or will be forced to by the federal district court.

Sarbanes-Oxley has whistleblowing CFO reinstated

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Monday, June 19, 2006

Sarbanes-Oxley: Why tech IPOs are moving to Europe

The U.S. tech-IPO market may be the latest victim of overzealous regulation.

Startups around the world used to head to the Nasdaq when they wanted to go public. But since the passage of the Sarbanes-Oxley Act in 2002, which imposes stringent regulations on publicly traded companies in the U.S., the action is moving offshore - and even U.S. companies are listing themselves on foreign stock exchanges.

It's not that startups want to skirt regulations - it's that Sarbanes-Oxley has requirements that are both vague and highly technical, requiring expensive consulting fees and specialized software. For a typical company, the costs of compliance start at $3 million a year and go up over time. Although they were intended to prevent another Enron or WorldCom debacle, the rules have had the effect of discouraging smaller companies from going public.

And there are other sound reasons for U.S. startups to head to Europe seeking capital.

Sarbanes-Oxley: Why tech IPOs are moving to Europe

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SEC to name Fed's Olson to head PCAOB

The Securities and Exchange Commission is expected to name Federal Reserve Board Governor Mark Olson next week to head a U.S. watchdog board that polices corporate auditors, an industry source told Reuters on Friday.

Olson, a former partner with Big Four accounting firm Ernst & Young LLP [ERNY.UL], would replace Bill Gradison, who has been acting chairman of the Public Company Accounting Oversight Board since December.

Olson, 63, would be the second former Fed official to head the board set up under 2002's post-Enron Sarbanes-Oxley laws.

SEC to name Fed's Olson to head PCAOB

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Audit fees for Sarbanes-Oxley compliance keep rising

Despite predictions that audit fees associated with the Sarbanes-Oxley Act would fall, the cost of corporate governance compliance continues to get more expensive for public companies.

Since federal accounting reforms were enacted in 2002, public companies with less than $1 billion in annual revenue have seen audit fees nearly triple in the past four years, according to a recent study by law firm Foley & Lardner. Audit fees were more than $1.2 million for fiscal year 2005 compared to $332,000 before accounting reforms.

In 2004, public companies with less than $1 billion in revenue spent slightly more than $1 million on audit fees, the study showed.

Audit fees for Sarbanes-Oxley compliance keep rising

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SEC ruling drives demand for SOX auditors

Congress passed the Sarbanes-Oxley Act in 2002 to restore confidence after shareholders lost billions of dollars because of accounting fraud at companies such as Enron, WorldCom and Tyco. In reality, SOX was an attempt to legislate quality control regarding how publicly traded companies should be managed on a day-to-day basis. The Securities and Exchange Commission (SEC) requires all firms to document--and an external auditor to confirm--that adequate controls are in place to ensure that financial statements filed with the SEC paint a realistic picture for investors.

From the moment SOX was enacted, there have been heated discussions about providing relief for small to midsize businesses by relaxing requirements or exempting some of the rules. During the last three years, committees were formed, industry opinions were generated, and accounting firms requested a re-evaluation and review of the requirements. Finally, on May 17, SEC Chairman Christopher Cox announced that small companies would not be exempt from a key set of new post-Enron, investor-protection rules.

SEC ruling drives demand for SOX auditors

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Paul Kedrosky's Infectious Greed: It Ain't Easy Being Public, Part XXXIV

Foley & Lardner has a useful new report out showing cost trends for public companies, post-Sarbanes Oxley. While costs declined slightly from 2004 to 2005, it still isn't a pretty (public) picture, as this audit graph shows...

Paul Kedrosky's Infectious Greed: It Ain't Easy Being Public, Part XXXIV

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Suitably Flip: Thinking Outside the SarbOx

This morning I had the opportunity to attend a Wall Street "field hearing" held by the House Government Reform Subcommittee on Regulatory Affairs, examining the effects of the Sarbanes-Oxley Act of 2002, the jerky-kneed, ill-defined legislative reaction to high-profile securities scandals like Enron and WorldCom.

Given the lofty financial burdens and the risk of civil and criminal penalties associated with SarbOx compliance, many growing businesses are finding it no longer makes sense to go public on U.S. stock exchanges. The resulting fall-off in public offerings and migration of such offerings overseas has led some legislators to question whether it may be time to revisit and better define some of the provisions of the well-intentioned, but perhaps overreaching legislation.

Suitably Flip: Thinking Outside the SarbOx

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Tech agenda could face backlash over backdating

Just when Silicon Valley looks to be flexing some serious muscle in Washington, D.C., the stock-options backdating scandal comes along and threatens to blow up the technology industry's lobbying agenda.

One of the first casualties could be much-needed relief for small companies burdened with heavy accounting costs imposed by the Sarbanes-Oxley law. This is the same law enacted four years ago after the highly publicized collapse of Enron, aimed at stopping CEO-enrichment scams.

Other tech issues could get cold-shouldered inside the Beltway should the backdating scandal, which now involves 21 companies in the valley and about 50 nationwide, keep growing.

Tech agenda could face backlash over backdating

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Burden of Sarbanes-Oxley provokes growing disenchantment

While the overall cost of being public in 2005 dropped slightly from the historic levels seen in 2004, the fourth annual study conducted by Foley & Lardner LLP on the costs associated with corporate governance reform found that the predictions that firms would only face one-off increases in costs have not been born out.

But since the enactment of the Sarbanes-Oxley Act, the study calculates that the average cost of compliance for companies with under $1 billion in annual revenue has increased more than $1.8 million to approximately $2.9 million, a 174 per cent overall increase. Unsurprisingly, the survey also revealed growing disenchantment with the regulatory regime.

But since the enactment of the Sarbanes-Oxley Act, the study calculates that the average cost of compliance for companies with under $1 billion in annual revenue has increased more than $1.8 million to approximately $2.9 million, a 174 per cent overall increase. Unsurprisingly, the survey also revealed growing disenchantment with the regulatory regime.

Burden of Sarbanes-Oxley provokes growing disenchantment

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Sunday, June 18, 2006

Sarbanes-Oxley compliance continues to provide a fees bonanza for accountants

Since the enactment of the Sarbanes-Oxley Act, the study reported that the average cost of compliance for companies with under $1 billion in annual revenue has increased more than $1.8 million to approximately $2.9 million, a 174 percent overall increase.

"There is no question that fees associated with Section 404 have driven up costs for companies of all sizes," said Hartman. "However, based on our data, large public companies are more readily able to absorb these costs while smaller companies are hit with larger percentage increases. These increases have leveled somewhat, but there is no indication that average audit fees are decreasing, particularly for smaller public companies."

Sarbanes-Oxley compliance continues to provide a fees bonanza for accountants

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Formtek Blog: Sarbanes-Oxley Compliance and ECM

It’s been only four years since the Sarbanes-Oxley Act (SOX) was passed. But in many ways this one piece of legislation has already had a profound impact on the entire business community. The goal of SOX is to achieve greater transparency and accountability in financial reporting, and in doing so, provide a way to more closely scrutinize public coporations from the outside. Stiff fines, penalties and the threat of litigation have been strong motivators to get companies to comply. But many or maybe even most companies still have a long way to go.

Part of the reluctance or difficulty with SOX is just coming to grips with what it all means. SOX does not clearly spell out in black and white the steps for achieving compliance. It was intended to provide overall guidance, but it is very broad and lengthy, consisting of 11 parts and 66 sections. The language in SOX was written in very general terms to spell out requirements that apply to all public companies, and the interpretation and the methods by which SOX compliance are achieved is still evolving.

Formtek Blog: Sarbanes-Oxley Compliance and ECM

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FSA chief: Sarbanes Oxley 'unlikely' to apply in UK

The Financial Services Authority (FSA) has claimed that, even if US-based Nasdaq does buy the LSE it, it does not mean that America's tougher Sarbanes Oxley (SOX) regulations will automatically becoming governing business law in Britain.

However, it admitted that in the long-term if a foreign firm chose to buy the LSE then it could fall into the jurisdiction of a different regulator should the purchaser so wish.

FSA chairman Callum McCarthy explained: "Neither the FSA nor the Securities and Exchange Commission consider that US ownership of the LSE, in and of itself, would result in US regulations, including Sarbanes-Oxley, applying to companies listed or quoted on its markets or member firms of the LSE."

FSA chief: Sarbanes Oxley 'unlikely' to apply in UK

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Friday, June 16, 2006

PCAOB auditor outlines Sarbox 'efficiencies'

Thomas Ray, the Public Company Accounting Oversight Board's top auditor, has told a financial reporting conference that major opportunities for increased efficiency exist in the implementation of Sarbanes-Oxley.

PCAOB auditor outlines Sarbox 'efficiencies'

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Sarbanes-Oxley: Legislating in Haste, Repenting in Leisure by Stephen Bainbridge

This essay was prepared for presentation as a lecture to the Hoover Institution. In it, I focus on three areas in which the Public Company Accounting Reform and Investor Protection Act, popularly known as the Sarbanes-Oxley Act (SOX), has proven especially problematic. First, the legal ethics rules added to the Act at the last minute have proven incapable of dealing with the incentives that condition lawyers to turn a blind eye to client misconduct. Second, the structure Congress chose for the Public Company Accounting Oversight Board (PCAOB), the accounting oversight board created by SOX, turns out to have serious constitutional defects.

Sarbanes-Oxley: Legislating in Haste, Repenting in Leisure by Stephen Bainbridge

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Sarbanes-Oxley Jobs: Sr. Project Manager (SOX) PMO, Oakland

This position is accountable for the coordination, compilation and distribution of financial data and/or coordination of control structure evaluation, compliance testing and remediation of control deficiencies for Sarbanes-Oxley. Provides financial or business process analyses as needed in the areas of controllership and compliance. Participate in planning and development of budgets and in monitoring of expenses.

Recommends modifications to established practices and procedures and successfully handles a full range of complex assignments, projects, and system functionality. Prepares financial reports and provides analyses in an accurate, comprehensive and timely manner to management. Assists in the planning and development of budgets, and managing projects for senior staff. Participates in the most complex projects as assigned. Provides guidance to junior staff.

Sarbanes-Oxley Jobs: Sr. Project Manager (SOX) PMO, Oakland

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Sarbanes-Oxley Compliance Costs Drop Less Than Expected

The cost for publicly held companies to comply with Sarbanes-Oxley (SOX) legislation dropped in 2005, but the decline was less than many expected.

That was one of the main conclusions of a report issued Thursday by the Foley & Lardner law firm on SOX, which was passed by Congress in 2002 in response to major corporate and accounting scandals involving prominent U.S. companies.

According to the study, the cost of being public for companies with under $1 billion in annual revenue dropped by 16 percent. For companies with more than $1 billion in annual revenue, the costs dropped 6 percent.

"Contrary to many predictions made in 2005 and anecdotal stories reported this year, average audit fees did not drop in the second quarter after Section 404 requirements phased in for U.S. companies with $75 million of more in market capitalization," the report said.

Sarbanes-Oxley Compliance Costs Drop Less Than Expected

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A scandal's impact

The recent conviction of two former top Enron executives, combined with the unfolding stock-options scandal, provide shining examples of why Congress should think long and hard before it weakens any part of the Sarbanes-Oxley Act.

Investors didn't learn of his sales until it was too late. Before Sarbanes-Oxley, insiders didn't have to report stock trades until 10 days after the end of the month in which they took place. Certain transactions, such as options grants and sales of stock back to the company, didn't have to be reported until the year after they took place.

A scandal's impact

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Big4Guy: What is Sustainable Sarbanes Oxley SOX Compliance?

Most companies in year three of their SOX compliance efforts are moving towards sustainable compliance. So what comprises sustainable compliance. In recent conferences and seminars I have attended the word "Sustainable SOX Compliance" is the buzzword. Lets not get into technical jargon maze. I have been asking people mainly, SOX directors, SOX project managers, SOX testers, and SOX IT auditors what according to them is sustainable Sarbanes Oxley Compliance. Here is a summary of the responses that I received.

Big4Guy: What is Sustainable Sarbanes Oxley SOX Compliance?

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Study: Sarbanes-Oxley forcing some companies to consider going private

Fed up with the Sarbanes-Oxley burden, 21% of companies that responded to law firm Foley & Lardner's latest study said they are considering going private. Other options respondents are considering include selling the company (10%) and merging with another company (8%).

Meanwhile, costs associated with corporate governance reform dropped 16% for companies with less than $1 billion in annual revenue and 6% for companies with greater than $1 billion in annual revenue, reports Foley & Lardner in its fourth annual Sarbanes-Oxley study, released Thursday.

Study: Sarbanes-Oxley forcing some companies to consider going private

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NYSE head says Sarbanes-Oxley won't come to Europe

"As far as the Sarbanes-Oxley law which worries Europe is concerned, I'm the first not to hope for its extension," he said. "It applies to companies listed in the United States. Nothing allows one to envisage that it could apply to companies not listed in the United States," he said.

The Sarbanes-Oxley Act, introduced after a series of U.S. corporate and accounting scandals, imposes tough compliance rules on listed companies that many have complained are burdensome and restrictive.

Thain insisted that neither the U.S. Congress nor the U.S. Securities and Exchange Commission would have the authority to impose U.S. regulation on foreign-listed companies, even if the merged NYSE/Euronext were based in the United States.

"I repeat, the authority of the SEC and American laws can only be applied to companies listed in the United States. The founding agreement between regulators will guarantee this."

NYSE head says Sarbanes-Oxley won't come to Europe

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Thursday, June 15, 2006

Blackstone boss bashes Sarbanes-Oxley Act

"It's a terrible thing for the U.S.," Schwarzman said, speaking at a mergers and acquisitions conference on Thursday hosted by media group The Deal and the International Bar Association. Schwarzman acknowledged his firm and industry benefit from Sarbanes-Oxley.

Schwarzman called Sarbanes-Oxley, named after the politicians who sponsored it, a well intentioned response to corporate excess.

But certain elements of the law, particularly Section 404 that requires companies and outside auditors to confirm effectiveness of internal accounting controls, cause enormous burdens and prompt companies to be "fearful," Schwarzman said.

Blackstone boss bashes Sarbanes-Oxley Act

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IFRS Readiness - Thank You Sarbanes Oxley

Business is all about risks. Taking them, minimising them and overcoming them. But whereas businessmen traditionally focused their energies on taking calculated risks, today regulatory developments mean it’s mostly about avoiding them.

Reporting in accordance with the new set of globally accepted accounting standards, IFRS is throwing up a new set of risks for companies unfamiliar with the new accounting rules.

IFRS update summer 2006 - run the risk

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Wednesday, June 14, 2006

FSA: Sarbanes-Oxley could come to London

Sarbanes-Oxley could be coming over here after all. It was widely thought that the architects of any transatlantic merger of stock exchanges would find a way of keeping the regulatory systems separate. That could be made to work, says the senior City watchdog, the Financial Services Authority. But don't bet on it lasting forever.

Sarbox is the bane of every multinational business with a presence in the US. The Sarbannes, you might say. The corporate governance rules being adopted in the US under this moniker are well meant, no doubt. But they add a layer of complexity and bureaucracy that is making plenty of US firms wonder if they are really worthwhile.

The absence of Sarbox has been a key part in the success of London exchanges in attracting business from non-US companies. If, as the FSA suggests, Sarbox could come here it is likely to make it harder for Nasdaq and LSE to stitch a deal together. It would be an awful burden on British business as well.

FSA: Sarbanes-Oxley could come to London

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SAG Gets Stats on Sarbanes-Oxley 404, Restatements

There was some concern with the fact that adverse opinions under Section 404 seemed to be a lagging indicator, following announced restatements, as noted previously by Moody's.

Baldwin noted restatements are up dramatically since the Sarbanes-Oxley Act, and stated he believes Section 404 is working, that PCAOB and SEC should "stay the course," and warned of a "perfect storm" when small companies will have to begin 404 reporting, given their current level of restatements and more limited resources.

Cheffers noted that although adverse Section 404 opinions/material weaknesses are down from about 16% in 2005 to about 7% so far in 2006 (which he predicts will rise to about 10% after restatements), the level of financial statement restatements is still very high.

SAG Gets Stats on Sarbanes-Oxley 404, Restatements

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Tuesday, June 13, 2006

Smash the Sarbanes-Oxley law

The most significant NYSE-Euronext asset may be helping companies shift more easily among national exchanges to escape regulations that impose more costs than benefits on investors.

Consider the Sarbanes-Oxley Act of 2002. Enacted in the wake of the Enron-era accounting scandals, it requires new, tougher controls for virtually every activity affecting a publicly traded company's financial statements.

While improvements in the reliability of financial statements and transparency were welcome, some Sarbanes-Oxley requirements are too burdensome. For example, compelling businesses to undertake both internal and external audits of financial controls, and requiring auditors to focus on virtually every transaction and asset, instead of just the ones that truly affect the bottom line, are too expensive for small and medium-sized firms.

Requiring chief executive and chief financial officers of large, complex enterprises to sign off on all the details of audits and financial statements, coupled with stiff fines and 20-year prison terms, is onerous and an invitation to simple tyranny. The recent convictions of Enron executives Ken Lay and Jeffrey Skilling demonstrate that the laws in place before Sarbanes-Oxley were adequate to bring wrongdoers to justice.

It should surprise few that this law is causing capital flight. More U.S. companies are staying or going private to avoid the law, and capital markets are becoming bifurcated and less democratic. The private market is open to the big, rich institutions that may evaluate companies without the benefit of Securities and Exchange Commission disclosure, while small investors are essentially shut out of shares of businesses that would be publicly traded if not for Sarbanes-Oxley.

Smash the Sarbanes-Oxley law

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Thursday, June 08, 2006

Open Compliance and Ethics Group (OCEG) Announces Internal Audit Guide

The Open Compliance and Ethics Group (OCEG), a non-profit organization with a mission to help organizations align their governance, risk and compliance (GRC)management activities to drive business performance and promote integrity, announced today the release of an internal audit guide (The Guide) exposure draft.

The Guide is designed primarily for the internal auditor, and it also will help directors, executives and other senior managers charged with governance responsibilities to better understand the issues and processes involved in an internal audit of a compliance and ethics program. An internal audit of a compliance and ethics program will assist in improving the governance practices of an organization.

The Guide describes: the knowledge needed to plan and complete the audit, leading practice information regarding compliance and ethics programs, and other useful resources that will support both efforts.

The Guide's development was overseen by OCEG's senior management and Leadership Council, and was written principally by Dan Swanson, President and CEO of Dan Swanson & Associates, Former Director of Professional Practices for the Institute of Internal Auditors (IIA), and a member of the OCEG Steering Committee. Mr. Swanson's Internal Audit Guide Advisory Group consisted of approximately 50 members with vast experience in audit, compliance, ethics, finance, forensics and legal matters. Already, the Guide is creating "buzz" in the internal audit community.

The Guide can be accessed at www.oceg.org. OCEG encourages interested parties to read and comment on the exposure draft and to direct their comments to iag@oceg.org. The comment period ends July 31, 2006 and final guidance is expected by the fourth quarter of 2006.

Organizations are exposed to governance, compliance and ethical risks daily. Coupled with the current economic, regulatory and social climate, these risks have propelled corporate governance, compliance management and integrity to a top business priority. More than ever, the business community perceives the need not only to articulate the principles of good governance, compliance, risk management, and ethics -- but also to integrate these concepts into the fabric of day-to-day business -- and use them to drive better performance.

About the Open Compliance and Ethics Group (OCEG)
OCEG is a nonprofit organization that provides a framework (the OCEG Framework) for integrating governance, compliance, risk management, and integrity into the tangible practice of everyday business; drives adoption of the Framework through a multi-industry, multi-disciplinary coalition; and provides a community of practice for the exchange of information, tools, benchmarking and feedback for continual improvement of the Framework. For more information on OCEG and the OCEG Framework, visit: www.oceg.org

Open Compliance and Ethics Group (OCEG) Announces Internal Audit Guide

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Wednesday, June 07, 2006

Survey Finds Companies Vulnerable to Network, Host, and Storage Security Breaches by Insurance Networking News

Aside from keeping customers happy and data safe, those who are exploring storage security measures cited best practices and regulatory requirements as the key drivers. Public companies need to comply with security regulations such as the Sarbanes-Oxley Act (SOX), Gramm-Leach-Bliley Act (GLBA) and Health Insurance Portability and Accountability Act (HIPAA).

SOX, for example, calls for fines or even jail time for executives at public companies who fail to properly secure financial records. The growing concern of data loss and theft has also led many private firms to voluntarily comply with such regulations to bolster their reputations and win the confidence of customers and partners.

"Clearly, organizations have been placing emphasis on securing their networks and access to data within the company for several years," says Robinson. "However, while most organizations send sensitive data outside the company, it's only recently become a major area of concern for them."

Survey Finds Companies Vulnerable to Network, Host, and Storage Security Breaches by Insurance Networking News

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SOX: No One-Size-Fits-All Solution to Dishonest Accounting

Congress passed the Sarbanes-Oxley Act in 2002 in the wake of notorious corporate failures, but its auditing and reporting requirements -- effective since 2004 for larger and midsize corporations and yet to take hold for the smallest companies -- have triggered complaints about its costs and questions about its effectiveness.

Exaggerated earnings reports, enabled by sloppy or dishonest accounting by overly friendly contractors, artificially inflated stock prices and led to collapses at Enron, WorldCom and other publicly traded corporations. Sarbanes-Oxley's stated goal was "to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws." But its requirements for accounting oversight and independence, and its checks on conflicts of interest and fraud, have resulted in a mixed verdict on its effectiveness so far, according to experts at the W. P. Carey School of Business.

Accommodating Sarbanes-Oxley, which has come to be known as SOX, has involved millions in costs for corporations, as thousands of executives and employees undergo special training in how to comply with provisions aimed at effecting accounting reform and investor protection. The task of interpreting and enforcing the 66-page SOX law falls to the Securities and Exchange Commission (SEC), which has been delaying small-firm compliance while the bigger companies blaze the compliance trail.

SOX: No One-Size-Fits-All Solution to Dishonest Accounting

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Judge to soon hear motion to dismiss PCAOB, Sarbanes-Oxley suit

A federal judge will hear arguments on June 29 on whether to dismiss a lawsuit filed by a conservative think tank that seeks to declare unconstitutional a U.S. audit watchdog agency, a lawyer in the case said on Wednesday.

The Public Company Accounting Oversight Board (PCAOB) was created in 2002 to police the formerly self-regulated audit business dominated by the Big Four accounting firms. The post-Enron Sarbanes-Oxley laws that created the PCAOB also require U.S.-traded companies to disclose more about their internal controls and how they keep their books in order.

Michael Carvin, an attorney for the think tank, the Free Enterprise Fund, said he does not believe the Bush administration's recent statement of support for dismissal of the lawsuit will have bearing on the case.

The U.S. Department of Justice filed a "statement of interest" last week, saying the lawsuit was filed "at the wrong time, in the wrong court" and should be dismissed. It said a challenge to the constitutionality of PCAOB must first be reviewed by the U.S. Securities and Exchange Commission.

"They're weighing in on arcane jurisdiction questions where they have no expertise," Carvin said. "We're using the procedure that everyone arguing about constitutional violations uses."

Judge to soon hear motion to dismiss PCAOB, Sarbanes-Oxley suit

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Tuesday, June 06, 2006

Governance: Triple Threats

Mention the word "compliance" in a roomful of executives these days, and you're likely to hear a chorus of groans and sighs.

In addition to Sarbanes-Oxley--the law attacking corporate fraud that Congress passed in 2002--organizations are grappling with the Payment Card Industry (PCI) security requirements for credit card data; the Health Insurance Portability and Accountability Act (HIPAA) requirements for private and secure health-care data; requirements from the Food and Drug Administration to keep terrorists from tampering with supply chains for food and pharmaceuticals; and numerous other federal, state and international regulations, many passed after the Sept. 11 attacks.

Governance: Triple Threats

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Ideoblog: SOX and private equity

I've often noted here (see my Sarbanes-Oxley archive) the SOX archive), and discussed in my book with Henry Butler, The Sarbanes-Oxley Debacle. SOX's role in driving firms from the US public markets -- not just small and foreign firms, but now big firms. Whatever the benefits to the firms from escaping these regulatory costs, corporate executives must see some advantages of removing themselves as potential targets of plaintiffs' lawyers, federal regulators and prosecutors.

Ideoblog: SOX and private equity

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First Movers Step Up The Pace of Governance

Improvements in corporate governance may soon become the corporate equivalent of keeping up with the Joneses.

In January, Intel's board amended the company's bylaws to replace a plurality vote standard with a majority vote standard for the election of directors -- a change applauded by governance experts for raising directors' level of accountability to stockholders. Security-software vendor Symantec is in the process of creating a global risk council, a cross-functional management group that will regularly report on compliance and risk issues to the audit committee of the board of directors. And startup tax-software company Sabrix complies with much of Section 404 of the Sarbanes-Oxley Act even though it is exempt from the law because it's a private company.

First Movers Step Up The Pace of Governance

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Compliance comes calling

There are many industry-specific compliance requirements that can affect smaller, privately held SMBs, including the Personal Information Protection and Electronic Documents Act (PIPEDA). The Sarbanes-Oxley Act (SOX) is particularly far-reaching. It requires, for example, that a business's relevant financial reports be certified by both the CEO and CFO. While SOX definitely affects publicly held firms, "it can also indirectly affect SMBs that are privately-owned and aspire to go public or be acquired. In many cases, SOX can affect private SMBs that simply want to do business with public companies governed by SOX," says Luft.

"If they're not public corporations then obviously Bill 198 (SOX) may not apply. It becomes an issue of best practices. If they're not public, then it's not that it's of less importance, it's just that it's not a regulatory requirement in terms of corporate governance," says Daniel Paul, partner and lawyer at Ogilvy Renault's Montreal office, who specializes primarily in information technology (IT) law.

Compliance comes calling

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U.S. Corporations Becoming Too Relaxed in Their Forecasting

The disconnect between analyst expectations and corporate earnings performance was especially striking in the high tech, materials and energy, industrial and financial sectors in 2005. High tech had the largest percentage of companies exceeding market EPS estimates with the materials and energy sectors a close second. At the other end of the spectrum, the industrial and financial sectors had the largest percentage of companies that underperformed compared to market EPS estimates.

Since the passage of the federal Sarbanes-Oxley Act on financial disclosure in 2002, the timeframe in which companies must report their quarterly and annual earnings to the SEC has been reduced significantly. This need to report more quickly to the SEC -- while maintaining the necessary level of transparency and accuracy -- has put a tremendous amount of pressure on companies.

"Misses -- be they positive or negative -- impact the integrity of financial reporting," continued Neeley. "It is possible for Wall Street to report more 'hits' and fewer 'misses' during earnings season with a more deliberate approach to data gathering and reporting. And a streamlined reporting system can help significantly."

U.S. Corporations Becoming Too Relaxed in Their Forecasting

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Monday, June 05, 2006

Dr. Peter Morici: Will the NYSE-Euronext merger smash Sarbanes Oxley?

The most significant NYSE-Euronext asset may be to help companies shift more easily among national exchanges to escape regulations that impose more costs than benefits to investors.

Consider the Sarbanes-Oxley Act of 2002 (SOX). Enacted in the wake of the Enron-era accounting scandals, it requires new, tougher controls for virtually every activity affecting a publicly-traded company’s financial statements.

While improvements to the reliability of financial statements and transparency were welcome, some SOX requirements are simply too burdensome.

Dr. Peter Morici: Will the NYSE-Euronext merger smash Sarbanes Oxley?

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Corporate America's next scandal could be backdating stock options

The newest intrigue in corporate America, the apparent backdating of stock options to boost top executives' compensation, is rapidly taking on the dimensions of a major scandal.

The number of public companies under investigation by the Securities and Exchange Commission or federal prosecutors has grown to more than 30 and executives at several companies have been fired.

Optical switch maker Sycamore Networks Inc. disclosed this week that it received a subpoena from federal prosecutors in Massachusetts; high-tech firm Rambus Inc. said it had launched an internal investigation; and Quest Software Inc. and drug company Sepracor Inc. reported SEC inquiries. Antivirus software maker McAfee Inc. fired its general counsel for misconduct involving company stock options.

Subpoenas have been issued by U.S. attorneys' offices in several cities including New York, which led off the wave of criminal investigations.

Corporate America's next scandal could be backdating stock options

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High hurdles for Hank

The second challenge is to reform Sarbanes-Oxley, the tangle of financial and accounting disclosure red tape enacted by Congress in 2002. There were corporate abuses that needed to be dealt with. But the best way to deal with real crimes is to throw the offending chief executive in jail.

In the meantime, "Sarbox" is chasing job-creating capital formation to non-Sarbox-requiring countries; 23 of the 24 largest initial public offerings since 2002 have been conducted offshore, away from the New York Stock Exchange.

It's OK to make fat cats squirm in protest but it's not OK if those fat cats simply wiggle their way overseas, to exchanges in London or Hong Kong.

High hurdles for Hank

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Sunday, June 04, 2006

SOX It to Them

I've come up with a solution for solving world poverty: Every time a representative of an IT vendor uses Sarbanes-Oxley or SOX in relation to their product you make a $1 donation to Oxfam. Better yet, you could set up a SOX-free compliance unit in your office and then fine the vendors when they make irrelevant breaches. Given that most of the IT products or services currently available purport to help with SOX compliance, Oxfam coffers would soon be overflowing.

My gripe isn't with SOX per se, or the need for regulation, but I do object strongly with the way "compliance" is abused by salespeople. Why do they insist on wrapping foreign laws - which for all but the biggest Australian companies have no relevance - around their "offerings"? What relevance has SOX got for the Victorian government, or for that matter 95 percent of Australian businesses?

SOX It to Them

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Saturday, June 03, 2006

Going Private

Kinder Morgan unveiled the largest management-led buyout in history this week, with top executives proposing a $13.5 billion deal that would make the oil-and-gas pipeline company a closely held firm. Let's hope this event isn't lost on Congress, whose regulatory fervor is one reason many companies are fleeing the U.S. public capital markets.

Private equity is booming, and sweeping up U.S. business in the process. Fifteen years ago, a handful of private-equity firms managed a few billion; today, more than 250 firms control some $800 billion in capital.

Going Private

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Friday, June 02, 2006

Huge challenges await new treasury chief

The second challenge is to reform Sarbanes-Oxley, the tangle of financial and accounting disclosure red tape enacted by Congress in 2002. Yes, there were corporate abuses that needed to be dealt with, but the best way to deal with real crimes is to throw the offending chief executive in jail - as is happening in the Enron case -using longstanding rules against fraud and deception.

In the meantime, "Sarbox" is chasing job-creating capital formation to non-Sarbox-requiring countries; 23 of the 24 largest initial public offerings since 2002 have been conducted offshore, away from the New York Stock Exchange. It's okay to make fat cats squirm in protest, but it's not okay if those fat cats simply wiggle their way overseas, to exchanges in London or Hong Kong.

Huge challenges await new treasury chief

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Thursday, June 01, 2006

Is This What Is Meant By 'Investor Protection'?

In response, Congress cobbled together the "Public Company Accounting Reform and Investor Protection Act" of 2002 -- popularly known as the Sarbanes-Oxley Act (SOX for short). As he signed it into law, President Bush praised SOX for making "the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt." Others have been less kind; Yale law professor Roberta Romano, for example, memorably called SOX "quack corporate governance."

Congress hoped SOX would restore investor confidence by curbing various corporate governance excesses, encouraging director independence from management, and especially by toughening up accounting standards so as to enhance capital market transparency and the integrity of disclosures. Whether any of these benefits have been achieved is debatable and, if so, any such benefits have proven almost impossible to quantify.

Is This What Is Meant By 'Investor Protection'?

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Susan Antilla: Will Courts Help Fraudsters Beat Sarbanes-Oxley?

An out-of-work stockbroker is in a fight with Bank of America Corp., using a powerful law passed after all the spectacular corporate accounting frauds of the past five years.

The sacked broker, David Willms, is more than just a whistle-blowing gnat buzzing around Bank of America's brokerage unit. His is exactly the kind of action that Wall Street and Corporate America are dying to exterminate.

Whistleblower suits have never warmed the frosty hearts of corporate managers. But a case like the one Willms filed with the Occupational Safety and Health Administration on March 9, 2006, raises hackles more than most. That's because it threatens to use the weighty consequences (read: potential jail time) of the Sarbanes-Oxley Act in an instance where no accounting fraud was involved.

Susan Antilla: Will Courts Help Fraudsters Beat Sarbanes-Oxley?

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