Tuesday, February 27, 2007

SOX Life Blog: Going Once, Going Twice...

I really hope you aren't still complaining about the gyrations AS2 causes.

While it has been the law of the Sarbanes Oxley landscape for the last several years, the last two months have given all SOX professionals and managers at publicly traded companies alike the opportunity to review and weigh in on a more effective way to live with this much needed discipline.

With the comment period closed, the considerable task of pondering everyone's feedback falls to the SEC and PCAOB. It is interesting to review some of the feedback provided (i.e. FEI comments), and consider the many aspects of this regulation that must be weighed and balanced.

We've seen considerable changes in the last year, targeting refinement for small business - just in time, as it were. As I personally work with small business clients, I'm struck by the tremendous amount of work that needs to be done in an "offensive" sense, in as much that SOX compliance is about preparing the landscape from a "defensive" perspective. So much of the traditional SOX implementation requires focus on "ensuring that things are done right" that businesses still aren't necessarily reviewing their process to ensure that they are "doing the right thing."

SOX Life Blog: Going Once, Going Twice...

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Kerry, Snowe Urge Sarbanes-Oxley Extension for Small Firms

Today Senators John Kerry (D-Mass.) and Olympia J. Snowe (R-Maine) called for a delayed
implementation of the Sarbanes-Oxley Section 404 requirements for small public firms to ease the burden on complying with the expected new auditing
standards. Section 404 requires firms to establish internal control frameworks and to file internal control reports. The Securities and
Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) proposed rules and guidance late last year addressing this section
and are accepting public comments through Monday, February 26th.

"We can have strong corporate accountability standards while also reducing the burden for small firms who spend more time and money earned
than big companies to comply with Sarbanes-Oxley," said Kerry. "We must do everything possible to appropriately reduce red tape in order for small
firms to grow and become dynamic public companies."

A recent Government Accountability Office (GAO) report requested by Senators Snowe and Mike Enzi (R-Wyo.) found that small public companies
spend considerably more on implementing Sarbanes-Oxley, particularly Section 404. The report found that firms with less than $75 million in
market capitalization were spending 877 percent more than larger counterparts -- $1.14 in audit fees per $100 of revenue, compared to just
$.13 per $100 for firms with greater than $1 billion in market capitalization.

Kerry, Snowe Urge Sarbanes-Oxley Extension for Small Firms

Labels: extension, implementation, sarbanes oxley, small business

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Credit unions next in Sarbanes-Oxley sights

Large credit unions are anticipating expensive changes to accounting requirements like those required of public companies and banks.

"The fact is, a lot of credit unions believe that sooner or later they'll be subject to something like that, so many of those credit unions are taking action to ... comply," says Pat Keefe, a spokesman for the Credit Union National Association.

Some local auditors are telling their credit union clients to brace for stricter internal controls similar to those of the Sarbanes-Oxley accounting rules for public companies passed in 2002.

Credit unions next in Sarbanes-Oxley sights

Labels: credit union, internal control

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Phoning It In

What's the best way for an employee to blow the whistle on fraud or related infractions? The most popular way seems to be via hotlines or similar reporting tools. According to a joint report from the CSO Executive Council, an organization of corporate and government security executives, and The Network (a hotline provider), almost two-thirds of the nearly 200,000 reports it studied were made via hotlines without first alerting anyone in management.

Few of those alerts prove to be false alarms. The study, which tracked incidents at 500 organizations over the past four years, found that 65 percent of the reports were serious enough to warrant investigation, while 46 percent led to some type of action being taken. Corruption and fraud accounted for 10 percent of the incidents, well behind personnel-management situations (51 percent). Company and professional-code violations accounted for 16 percent and employment-law violations 11 percent.

Phoning It In

Labels: fraud, whistleblower

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Monday, February 26, 2007

Senators Press SEC, PCAOB for 404 Delay

With overall corporate spending on Sarbanes-Oxley compliance apparently leveling off, two prominent U.S. Senators are zeroing in on easing Sarbox internal-controls on the smallest public companies.

In a letter to Securities and Exchange Commission Chairman Christopher Cox and Public Company Accounting Oversight Board Chairman Mark Olson dated Friday, Senators John Kerry and Olympia Snowe called for an extension in the deadline for companies of less than $75 million in market capitalization to comply with Sarbox 404 rules.

Senators Press SEC, PCAOB for 404 Delay

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HealthSouth CFO Avoids Prison, Again

Former HealthSouth chief financial officer Malcolm "Tadd" McVay was sentenced Thursday to five years' probation, the same sentence an appeals court threw out last year.

McVay — one of five former CFOs charged in connection with the company's $2.7 billion accounting scandal — served as CFO for only four months. In 2004 he pleaded guilty to conspiracy to commit wire and securities fraud and filing false financial reports. Given his cooperation in the case against former CEO Richard Scrushy, prosecutors reportedly sought a prison term of five years and five months.

HealthSouth CFO Avoids Prison, Again

Labels: criminal charges

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Wednesday, February 21, 2007

UI researches show gains from Sarbanes-Oxley

While corporate executives say their businesses are groaning under the weight of complying with Sarbanes-Oxley regulations, two University of Iowa business professors have found that most investors cheered the law during its early days.

Research by Sonja Rego and Haidan Li in the Tippie College of Business shows that stock market values increased significantly as a result of the reforms imposed by the Sarbanes-Oxley Act in July 2002. The two authors said that while the law may impose burdens on businesses, it has restored investor confidence in a market that was battered by a six-month long string of corporate scandals from Enron to WorldCom.

UI researches show gains from Sarbanes-Oxley

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New standards affect companies missed by Sarbanes Oxley

Think your private company is safe from new, stricter auditing standards because you're not subject to Sarbanes Oxley? Feeling smug because you're not experiencing the hassle and expense of SOX compliance? Thought you'd escaped the pain by taking your public company private?

Not so fast! Your time may have come: Statements of Auditing Standards 104-111 have arrived. These new standards affect every nonpublic company that needs an audit -- whether it's for bankers, insurers or shareholders. And they're effective for financial statements for periods beginning on or after Dec. 15, 2006.

New standards affect companies missed by Sarbanes Oxley

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Tuesday, February 06, 2007

Help Wanted: A Call for Peer Network

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

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

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

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

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

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

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

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

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

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

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To Alter U.S. Regulatory Climate, Mayor Eyes Overseas Methods

In an effort to stop businesses from fleeing New York, Mayor Bloomberg is meeting with international finance regulators about the idea of making the American regulatory system less burdensome.

Mr. Bloomberg yesterday met in London with the chairman of the Financial Services Authority, the umbrella regulatory body for the banking, securities, insurance, and investment industries in Britain.

The meeting came just weeks after Mr. Bloomberg and Senator Schumer released a report warning that New York will be replaced as the financial capital of the world if the federal government does not make changes to the regulatory environment.

To Alter U.S. Regulatory Climate, Mayor Eyes Overseas Methods

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PCAOB’s Chairman On Costs Of Regulation

Last Friday, Mark Olson the PCAOB’s chairman, delivered a speech at the Tax Council Policy Institute’s 8th Annual Tax Policy & Practice Symposium in Washington, D.C. Plenty of information about the birthright of the PCAOB to examine the audits of non-U.S. firms that register their securities in our country and the importance of coordination with other regulators in foreign countries.

What might be more interesting to most people are Mr. Olson’s thoughts on the costs of regulation, however.

PCAOB’s Chairman On Costs Of Regulation

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Anti-corruption initiatives – Regulation = corruption?

After Italian prosecutors found evidence of murky payments used to secure a telecoms contract in the mid-1990s, a web of secret bank accounts and slush funds began to untangle itself, exposing illicit payments as far afield as Nigeria and Russia.

Anti-corruption initiatives – Regulation = corruption?

Labels: corruption, regulation

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