Sunday, November 26, 2006

Drumbeat to Ease SOX Grows

VCs and politicians want to loosen Sarbanes-Oxley rules to make U.S. exchanges more competitive.

The effort to repeal or alter Sarbanes-Oxley guidelines for publicly traded companies has been growing steadily in recent months, and multiple forces are at work that—if successful—may finally wreak changes in the 2002 law enacted in the wake of the Enron scandal.

Now that Congress has gone to the Democrats, a number of high-profile Dems have hinted they would favor a change to the law—not the least of which is Speaker-elect Rep. Nancy Pelosi, whose San Francisco constituency includes many in the venture capital community.

When asked what Ms. Pelosi’s perspective was on the SOX issue, Drew Hammill, Ms. Pelosi’s spokesman, said she was aware of the issue, but would defer to the U.S. Securities & Exchange Commission and the Public Company Accounting Oversight Board, which are both reviewing the rules.

Drumbeat to Ease SOX Grows

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Corporate governance report cards prove tricky

A wave of business scandals in the past few years has focused much more attention on how companies are run, but even many investor watchdogs don't exactly agree on how to assess corporate governance.

Firms such as high-profile proxy adviser Institutional Shareholder Services publish corporate governance report cards, on issues including executive pay and board independence.

But since each uses its own methodology, the ratings can be all over the map. Some investors do not look too closely at governance to start with, and even those who do say the lack of scoring consistency makes it hard to put much stock in them.

Corporate governance report cards prove tricky

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Stopping the Rot

Not since the 1980s, when the United States was in a spin about the coming of the Japanese, has there been such anxiety over foreign competition.

The familiar concern that China is going to steal the country's remaining manufacturing jobs has been compounded by a newer fear: that Wall Street is losing its grip on the world's money.

Bankers and politicians worry that business will drain away from U.S. capital markets to financial centres overseas, particularly London and Hong Kong.

Several committees are sweating away on reports, the most important of which is to be published next week, on how to stop the rot.

Stopping the Rot

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Tuesday, November 21, 2006

Sarbanes-Oxley: A Cross-Industry Email Compliance Challenge

The bulk of financial information in many companies is created, stored and transmitted electronically, maintained by IT and controlled via information integrity procedures and practices. For these reasons, compliance with federal requirements such as the Sarbanes-Oxley Act (SOX) is heavily dependent on IT. Companies that must comply with SOX are U.S. public companies, foreign filers in U.S. markets and privately held companies with public debt. Ultimately, the corporate CEO and CFO are accountable for SOX compliance, and they will depend on company finance operations and IT to provide critical support when as they report on the effectiveness of internal control over financial reporting.

Sound practices include corporate-wide information security policies and enforced implementation of those policies for employees at all levels. Information security policies should govern network security, access controls, authentication, encryption, logging, monitoring and alerting, pre-planned coordinated incident response, and forensics. These components allow for information integrity and data retention, while enabling IT audits and business continuity.

Sarbanes-Oxley: A Cross-Industry Email Compliance Challenge

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Tuesday, November 14, 2006

Another run at rolling back corporate regulation

Just when you thought those big-time crooks from corporate business were getting a taste of their own medicine, a full frontal attack on the Sarbanes-Oxley Act is being planned.

That landmark post-Enron legislation placed major auditing and governance requirements on companies, and also put some teeth into the interpretation of malfeasance by the Securities and Exchange Commission (SEC).

Now crybaby business and its godfathers in the Bush administration want to us to forget Enron, Tyco, Global Crossing, et al, and the fabulous philanderers who brought the whirlwind down on their massive corruption. Lets review. Ex-WorldCom chief exec Bernard Ebbers got 25 years in March 2005 for his role in orchestrating the biggest corporate fraud in the nation's history.

Another run at rolling back corporate regulation

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Sleazy CEOs have even more options tricks

It is never really a shock to find executives enriching themselves at shareholders' expense. It can sometimes be surprising, though, just how clear the evidence is, and how long it takes us to notice.

Take the options-backdating scandal that has claimed such CEO scalps as that of Comverse's (Charts) Kobi Alexander (currently fighting extradition from Namibia), UnitedHealth's (Charts) William McGuire (ousted after 14 years of spectacular success) or KB Home's (Charts) Bruce Karatz (who voluntarily stepped down and agreed to pay the difference for incorrectly priced grants).

Sleazy CEOs have even more options tricks

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Monday, November 13, 2006

Pelosi, Kleiner Perkins Push for Overhaul of Sarbanes-Oxley Law

For Silicon Valley venture capitalists eager to weaken the Sarbanes-Oxley corporate- governance law, it may pay to have friends in high places. The speaker's rostrum of the U.S. House of Representatives, for instance.

Nancy Pelosi, the leader of newly empowered House Democrats, received more campaign money this year from partners at Kleiner Perkins Caufield & Byers, the venture capital firm that helped launch Google Inc. and Amazon.com Inc., than she got from Democrats' traditional friend, the AFL-CIO labor federation. She in turn has already identified revising the 2002 Sarbanes-Oxley law as a top priority when she becomes House speaker in January.

Venture-capital firms have been lobbying the White House, Washington lawmakers and regulators for months to water down the law, arguing that higher auditing and legal fees are driving companies to take initial public offerings overseas.

Pelosi, Kleiner Perkins Push for Overhaul of Sarbanes-Oxley Law

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Lights Dimming On The Sarbanes Oxley Act?

The Sarbanes Oxley Act of 2002 (SOX) has helped many solution providers develop healthy compliance businesses. But with recent rumblings from Washington that SOX may have gone too far and could eventually be scaled back, some VARs are wondering how much longer SOX solutions and services will continue to yield a reliable revenue stream.

Some solution providers told CRN they believe any softening of SOX could have a domino effect in which companies would rethink their compliance priorities. "The prospect of a SOX rollback is definitely of concern, certainly when it pertains to opportunities driven by compliance regulations," said Pat Edwards, vice president of sales at Alliance Technology Group, a Hanover, Md.-based solution provider.

Lights Dimming on The Sarbanes Oxley Act?

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Business "Wins" Sarbanes-Oxley "Battle," WSJ Says

The front page of Friday, Nov. 10th's Wall Street Journal reports "Business Wins Its Battle to Ease A Costly Sarbanes-Oxley Rule".

The article cites a number of studies, including FEI's March, 2006 survey of Sarbanes-Oxley Section 404 costs - which showed that the costs did not come down nearly as much as anticipated in year two of implementation, in spite of additional guidance issued by SEC and PCAOB in 2005, which some viewed as not going far enough.

Business "Wins" Sarbanes-Oxley "Battle," WSJ Says

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SEC, PCAOB Chairman Met Sunday To Iron Out Sarbanes-Oxley Differences

Carrie Johnson of the Washington Post first reported Saturday that the Chairmen of the SEC and PCAOB were set to meet on Sunday Nov. 12 to iron out differences regarding the PCAOB's planned revisions to its Auditing Standard No. 2 (AS2), particularly with respect to making it "scalable" for smaller companies, as reported Saturday in "SEC, Accounting Board To Weigh Sarbanes-Oxley Update."

Johnson reported that the PCAOB board met in private for 90 minutes Friday to discuss a letter which SEC Chairman Cox sent to SEC Chairman Olson and the PCAOB board. Although the letter had not been released to the press, Johnson noted, "concern has persisted over the wording of the changes [to AS2], and what they mean in practice, which can be difficult to grasp for anyone who is not an accountant." Several of Cox' suggestions, say Johnson, stem from recomendations of the SEC Advisory Committee on Smaller Public Companies.

SEC, PCAOB Chairman Met Sunday To Iron Out Sarbanes-Oxley Differences

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Friday, November 10, 2006

Who Cares about Fraud, Anyway?

A listserv I subscribe to recently sent this question across my email:

Who cares about fraud anyway if the shrinkage is still reported in the financial statements?

I recently had an external auditor tell me that management has a custodial duty to shareholders to protect both their assets and interests, and that he viewed his work as not only the assurance of financial accuracy, but confirmation of management's appropriate custodial duties in action.

After 10+ years in industry, working across finance and IT functions alike, I never dreamed of the weak and illogical practices occurring in the next cubicle.

Who Cares about Fraud, Anyway?

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Wednesday, November 08, 2006

SOX Life Blog: Election Fallout

Whew.

I've been digging about a bit for details on teh implications for SOX now that the Dems have the House, and maybe even the Senate (some are repeats from past weeks, but I resubmit them collectively).

My favorite read has been not only the article, but the rants from readers at The New Republic. Clay Risen really stirred it up in this Oct 17 article, looking forward to possible implications of the election. I'm sure more will be said in the coming weeks as spectators and wonks alike start guestimating on the implications from a change in congressional composition.

SOX Life Blog: Election Fallout

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The Campaign to Gut Sarbanes-Oxley

October 17, 2006

Slowly but surely, the tide of corporate reform is turning. The new Treasury secretary, Henry Paulson, has blessed a committee of financial bigwigs set to conclude that parts of the 2002 Sarbanes-Oxley reform were too aggressive. There is strong speculation that, in the next few weeks, the Securities and Exchange Commission (SEC) will allow companies to limit proxy access to board elections. And the SEC has recently decided not to enforce a rule requiring greater independence from mutual fund directors--according to former Chair William Donaldson, "the capstone of our series of fund governance reforms."

The irony is that the guy everyone thought would be leading the charge against reforms is, in fact, standing in its way. When he was nominated a little over a year ago, SEC Chair Chris Cox was hailed as a "Reagan revolutionary" who would replace the reform-minded Donaldson with a sweeping regulatory rollback. But, while Cox is hardly an investor activist, he has disappointed anti-reformers by failing to move quickly enough on--and in some cases even defending--his predecessor's agenda.

The Campaign to Gut Sarbanes-Oxley

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Democrat Leader Dismisses Sox Fears

Fears of the tough Sarbanes-Oxley compliance laws moving beyond the US have been dismissed by the top Democratic politician widely expected to take charge of the powerful House financial services committee.

Barney Frank, a Massachusetts congressman, said the idea that “Sox” could be more widely applied abroad was “not going to happen” because it was being watered down in the US.

He also cast doubt on the ability of US and UK regulators to settle differences that might arise over cross-border regulation, suggesting consideration of a supra-national regulator should be considered.

Democrat Leader Dismisses Sox Fears

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Interview: Democrat Says Sarbanes-Oxley Already Being Thinned

The most controversial section of 2002's post-Enron Sarbanes-Oxley law—under fire in the run-up to Tuesday's elections—is already being thinned down by regulators under orders from the U.S. Congress, a senior Democrat told Reuters Wednesday.

Amid complaints by Republicans and Democrats alike about the burdens Sarbanes-Oxley places on business, Rep. Barney Frank told Reuters the regulators are working on it.

"We're dealing with that. I think Sarbanes-Oxley, as administered, has become too burdensome," Frank said. "It's possible to reduce the burden without undercutting the principle. We've asked them to do that and I think they will."

Interview: Democrat Says Sarbanes-Oxley Already Being Thinned

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Ideo Blog: SOX: a Democratic Opportunity

October 27, 2006

Last March I said "the Republicans deserve much of the blame for SOX," noting their cowardice under fire that led to the enactment of this misbegotten legislation, and their failure to do anything about it even after the costs became obvious. I then noted the House Democrats' "innovation agenda" which would explicitly "require specifically-tailored guidelines for small public companies to ensure Sarbanes-Oxley requirements are not overly burdensome."

SOX: a Democratic Opportunity

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FEI Blog SOX 404: Six Largest Global Audit Firms Propose New Reporting Model, Reduce Liability, More Forensic Audits

Nov 8, 2006

The CEO's of the six largest global audit firms issued a joint proposal today calling for changes to the business reporting model, reduced liability for auditors, and increased forensic procedures on at least a rotational basis to stem fraud. The proposal, “Global Capital Markets and the Global Economy: A Vision from the CEOs of the International Audit Networks,” was issued jointly by the CEOs of the six largest international audit firms: BDO International, Deloitte, Ernst & Young, Grant Thornton International, KPMG, and PricewaterhouseCoopers

Six Largest Global Audit Firms Propose New Reporting Model, Reduce Liability, More Forensic Audits

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Tuesday, November 07, 2006

404 Institute Webcast Set on Reducing the Sarbanes-Oxley Section 404 Compliance Burden

The 404 Institute, an open forum for the exchange of ideas and research development related to Section 404 of the Sarbanes-Oxley Act of 2002, plans a Webcast on Tuesday, Nov. 14, from 2 p.m. to 3 p.m. EST, featuring Barbara Valentine, senior director, SOX, for Pfizer Inc. She will discuss Pfizer's success in addressing Sarbanes-Oxley-related issues and will relate how her organization achieved a 40 percent reduction in S-O 404-related costs, evolved its approach to testing of IT general controls, and rationalized key controls. Lawrence Raff, National Partner in Charge of KPMG LLP's 404 Institute, will offer views on using business process owner testing and embedded self-assessments and will discuss the results of the recently completed 404 Institute Benchmark Survey.

Anyone with an interest in the Sarbanes-Oxley Section 404 compliance process can register for the Webcast at www.404institute.com. Upon registering, participants will receive instructions for logging on to the Webcast.

404 Institute Webcast Set on Reducing the Sarbanes-Oxley Section 404 Compliance Burden

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Monday, November 06, 2006

What you need to know about the "Perp Walk"

For those still engaged in inappropriate activities, buy yourself the designer suit you've been putting off.

And for subordinates where management is operating in the deep, dark gray, this might be a timely notice to share as we close in on year-end.

How to Avoid Letting a 'Perp Walk' Turn Into a Parade

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Friday, November 03, 2006

Ex-Leader of Computer Associates Gets 12-Year Sentence and Fine

The former chief executive of Computer Associates International, Sanjay Kumar, was sentenced yesterday to 12 years in prison for orchestrating a $2.2 billion accounting fraud at the software company. He was also fined $8 million.

The four-year investigation of Computer Associates, now CA, centered on backdated contracts that artificially inflated profits. Computer Associates, based in Islandia, N.Y., entered into a deferred prosecution agreement to avoid indictment in 2004; in it, the company agreed to pay $225 million to a shareholder restitution fund and agreed to government monitoring for two years.

Seven other Computer Associates executives have pleaded guilty to fraud charges. Stephen Richards, the company’s former top salesman, pleaded guilty in April alongside Mr. Kumar; he is to be sentenced on Nov. 14.

Ex-Leader of Computer Associates Gets 12-Year Sentence and Fine

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Thursday, November 02, 2006

Look who's making sense on Sarbanes-Oxley

Interesting op-ed this morning in the Wall Street Journal (subs. req.) by Sen. Schumer and NYC Mayor Michael Bloomberg. They are worried about the diminishing prominence of the City and the U.S. in capital formation. Most intriguing parts: the realization that Sarbanes-Oxley over-regulation and class-action lawsuits in the securities areas are making our markets less attractive for business and investors.

Look who's making sense on Sarbanes-Oxley

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Wednesday, November 01, 2006

PCAOB Release - Adjusted Timing for Rule 3523: Tax Services for Persons in Financial Reporting Oversight Roles

Released today, the implementation schedule for Rule 3523 is being adjusted, as the board evaluates the nature of the auditor/client relationship prior to a firm becoming the auditor of record. The rule as written will not be effective for tax services provided on or before April 30, 2007 for tax services provided during the audit period.

Adjustment to Implementation Schedule for Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles

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