Tuesday, May 29, 2007

Wall Street moves on red tape as IPO exodus continues

TyraTech, a maker of environmentally friendly pesticides, became the latest American company to float in London yesterday as growing concerns about the IPO drain from New York to the City prompted the formation of a heavyweight Wall Street panel.

The panel is being set up by Eliot Spitzer, the former attorney-general of New York who is now governor of the state. Mr Spitzer, who has given the panel until June next year to propose legislative changes, said yesterday that “the financial world has changed and we must change with it to retain our leadership position”. TyraTech, a Florida compan that raised £25 million from floating on the Alternative Investment Market (AIM) in London, said that the cost and inconvenience of strict American listing requirements, introduced after the collapse of Enron, were key to its decision to float overseas.

Douglas Armstrong, the chief executive, said: “The Sarbanes-Oxley regulations undoubtedly played a part in our decision to list in London because they place a heavy burden on small-cap companies in terms of time and cost.”

The flotation of TyraTech takes the number of US firms on AIM to about 70.

Wall Street moves on red tape as IPO exodus continues

Labels: cost of regulation, ipo, sarbanes oxley

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Directors must rise to challenge

The statistics are compelling, ranging from low savings and productivity to weak engagement with the world economy through poor growth in exports and outward direct investment.

As a nation of four million people, we lack the domestic scale to build and sustain future levels of prosperity in line with the developed world. At its simplest, New Zealand needs to earn more and it needs to do this in a competitive and global marketplace by providing more goods and services that meet the needs and wants of discerning consumers worldwide.

Effective corporate governance can play two roles in this endeavour. First, corporate governance deals with how companies are managed and led (and how capital is applied within them and by them) and is therefore highly relevant because increased New Zealand engagement with the world economy must be characterised by more world-class New Zealand companies.

Directors must rise to challenge

Labels: new zealand, tone at the top

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Directors, managers set company's ethical tone

Contrary to a popular saying, ignorance is not bliss.

The business scandals of the 1990s and early 2000s revealed ignorance by business leaders and employees about ethical and legal behavior.

Congress responded by passing the Sarbanes-Oxley Act of 2002, which all but mandates corporate codes of conduct for the top managers of publicly traded corporations. The New York Stock Exchange and Nasdaq require those same corporations to create corporate codes applicable to all employees.

To encourage compliance and ethics training, Congress amended Section 8B2.1(B)(4) of the federal sentencing guidelines.

All organizations are to take reasonable steps periodically to communicate their standards and procedures to employees, high-level personnel and members of the governing body.

Compliance with the guidelines is valuable to organizations. Effective compliance and ethics programs impact employee behavior and often prevent illegal and unethical actions. If wrongdoing occurs, compliance with the guidelines can lessen penalties by 95 percent.

Directors, managers set company's ethical tone


(thanks to Dan Swanson for sharing reference to this article)

Labels: code of ethics, compliance, Federal Sentencing Guidelines, tone at the top

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10 Threats to SOX Compliance for Smaller Public Companies

Lord & Benoit, a leading Sarbanes-Oxley research and consulting firm, is applauding the efficiencies and affordability of this week's PCAOB and SEC actions requiring smaller public companies to comply with Sarbanes-Oxley this year. To help CFOs to navigate wisely through the process, Lord & Benoit just published a study, 10 Threats to SOX Compliance for Smaller Public Companies.

In summarizing the results, Lord & Benoit suggests this list should be used by CFOs as a starting point for a macro-level risk assessment at smaller public companies. Identifying potential concerns, developing action plans to remediate these risks, and taking quick action can minimize the likelihood of an adverse Section 404 report at the end of the first year of compliance.

10 Threats to SOX Compliance for Smaller Public Companies

Labels: as5, pcaob, sec, small business

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Wednesday, May 23, 2007

Getting SOX Right

Recent talk of overhauling accounting regulations has the potential to turn the business world upside down.

Last week, Federal Reserve Chairman Ben Bernanke argued in favor of the U.S. developing a U.K.-style, principles-based, risk-focused approach in its financial market regulation. This comes only a few weeks after the chairman of the Securities and Exchange Commission, Christopher Cox, said the U.S. and Europe should be able to achieve a single accounting standard by 2009. But perhaps more urgent, on Wednesday the SEC is expected to release its final guidance to management for implementing Section 404 of the Sarbanes-Oxley Act of 2002.

The SEC is certainly keeping busy, but is it taking the right approach?

Getting SOX Right

Labels: sec, sox

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Saturday, May 19, 2007

PwC: Internal Auditors May Be Missing Risks

The major accounting scandals earlier this decade and the Sarbanes-Oxley Act placed a renewed focus on risk management at publicly traded companies. But assessing risk is one task that has fallen by the wayside at some companies. According to a PricewaterhouseCoopers report, 18 percent of companies do not conduct an annual risk assessment.

That could be worrisome for investor advocates who have trusted Sarbox to encourage regular risk assessments from auditors and management — particularly in the wake of recent direction from regulators that Sarbox-mandated reviews should focus on high-risk areas. "If they aren't adequately looking into risks in the areas of finance, compliance, fraud, and technology, how can they be sure their financial statements are fairly presented?" asks Mark Grothe, research analyst at shareholder-advisory firm Glass Lewis. "More broadly, I think these lapses probably indicate poor management teams and ineffectively run companies."

PwC: Internal Auditors May Be Missing Risks

Labels: internal audit, PricewaterhouseCoopers, risk assessment

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Segregation of Duties - Part II

From Free IT Solutions, a few links to conflicts of interest as described for SAP (but useful in their generic sense regardless of underlying system):

• List One of Activity Conflicts
• List Two of Activity Conflicts
• List Three of Activity Conflicts

If you have lists you would like to share that are helpful for evaluating segregation of duties, please send to my attention and I'll be sure to post for public access. (I would particularly interested in matrices that map job titles and duties on the vertical and horizontal to plot incompatible duties).

Best,
Toby Lucich
toby.lucich@insidesarbanesoxley.com
Publisher

Labels: segregation of duties

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Explaining Segregation of Duties

As a controls professional, I'm sensitive to any employee that has too much on their plate, and have to consider if proper Segregation of Duties are in place. They get burned out. They get tired. They feel rushed. They risk simply going through the motions.

But worst of all, they are at risk for creating justifications for less-than-professional performance. I'm not thinking about just fraud (though this attitude is very much at the heart of embezzlement and other acts of personal gain at the expense of the company), but about the impact to professional levels of service delivery.

When feeling overwhelmed, "what is best or important" gets put aside for addressing "what is urgent." Just looking to one's own personal life provides a rich series of examples where important is sacraficed for urgent - poor eating habits, less/no exercise, lack of sleep - all given up for things that feel urgent at the time, but have limited long-term value. We sometimes get sloppy and lose our focus. Not malicious, just a simple error.

Explaining Segregation of Duties

Labels: segregation of duties

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Fraud too pervasive to roll back SarbOx

Teamwork counts, especially when it comes to committing crimes at a corporation.

In a new examination of 374 companies accused of securities fraud between 1997 and 2002, an average of seven people were implicated in each case, including CEOs, chief financial officers, chief operating officers, general counsels, board directors and auditors.

"Far from being a solitary act, securities fraud necessarily requires complicity," said William Black of the Kansas City, Mo.-based Institute for Fraud Prevention, which sponsored the study.

The institute is a coalition of universities funded by the Association of Certified Fraud Examiners, the American Institute of Certified Public Accountants, accounting firm Grant Thornton LLP and D-Quest Inc., a risk-management firm.

Fraud too pervasive to roll back SarbOx

Labels: fraud, sarbox, sox

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FEI Blog: Trust... But Verify

Trust... But Verify (Thoughts on Paulsons Capital Markets Initiative)

Treasury Secretary Henry M. Paulson presented his Capital Markets Action Plan yesterday (May 17) to the masses via an OpEd in the Financial Times. Further details were outlined in Treasury’s press release, and in this speech by Under Secretary Robert K. Steel. (See our summary of key points from all the above in our blog post yesterday.)

Not only was Paulson’s selected venue to present his message of interest (the U.K. based, global newspaper Financial Times) - as noted by CFO.com Editorial Director Tim Reason in CFO.com’s blog - but I find the fact that Paulson emphasized “trust” in the title of his OpEd, “The Key Test of Accurate Financial Reporting is Trust,” to be of keen interest. In fact, with the focus of Treasury’s initial steps being the audit profession, I couldn’t help but think of “Trust.. But Verify” – one of the sayings of former President Ronald Reagan, as cited in wikipedia.

FEI Blog: Trust... But Verify

Labels: CApital Markets Action Plan, FEI, Paulson

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Just Days Away: The Fate of 404

For many corporate critics of the Sarbanes-Oxley Act, the 2002 law has become synonymous with added cost and work. But when they've voiced their frustration with regulators and congressmen, asking them to amend or repeal the law, they're usually talking about just one of its provisions: Section 404.

After nearly five years of hearing concerns about uncertainty regarding management's responsibilities under 404 and complaints about burdensome audits under its companion auditing standard, the Securities and Exchange Commission may formally make the first change to the provision before Memorial Day weekend. In back-to-back meetings, the SEC will vote on its proposed management guidance for complying with the internal-control rule on May 23, and the Public Company Accounting Oversight Board will decide whether to adopt its new companion auditing standard on May 24.

Just Days Away: The Fate of 404

Labels: as5, pcaob, sec

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PCAOB to vote on Final Audit Standards

On May 24, the Public Company Accounting Oversight Board (PCAOB) will vote on a final standard on auditing internal control over financial reporting, as well as a related independence rule and conforming amendments to the board's auditing standards.

If adopted, the new standard would supersede the board's existing auditing standard, Auditing Standard No. 2, "An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements."

PCAOB to vote on final audit standards

Labels: AS2, as5, pcaob

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Wednesday, May 16, 2007

Where do You find Talent? New Inside Sarbanes Oxley Job Board

One of the things that I've not been quite satisfied with has been our jobs board these last few, uh, years. Originally new jobs were posted via the discussion board, and many folks had a hard time navigatintg the security to get jobs loaded up. A true discussion killer.

We've now rebuilt the Inside Sarbanes Oxley Jobs Board page using some very new tools and are offering an introductory rate on your job postings of $29 for 30 days - less than a dollar a day to get your jobs posted. (Short of going into full car-salesman mode, suffice it to say that I hope this fills a niche in your recruiting strategy).

I hope this is a value added feature for professionals seeking talent, and welcome feedback on this tool and the quality of the candidates you see through this jobs board.

Best,

Toby Lucich
Publisher, Inside Sarbanes Oxley

Labels: job board, publisher message

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Kerpen: Dems Owe Voters Some Sarbox Reform

Before the midterm congressional elections last year, analysts were predicting that the outcome would determine how far Sarbanes-Oxley reform would progress. Shortly after the elections, a Washington Times columnist pondered whether the Democrats who won their posts with promises of a “slimmer” Sarbox would follow through, and if so, how long it would take them.

The debate continues today. Writing in National Review Online, Americans for Prosperity policy director Phil Kerpen is taking House Speaker Nancy Pelosi (D-Calif.) and her colleagues to task for failing to walk the talk that won them their seats.

When they were campaigning, Kerpen says, they agreed that Sarbox — especially the 404 audit requirements — was too stiff. Even if they didn’t favor an all out repeal, they agreed that a change was necessary.

Kerpen: Dems Owe Voters Some Sarbox Reform

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SEC Faces Some Crucial Questions

In the coming weeks, the Securities and Exchange Commission must decide a series of critical issues worth billions of dollars to the business community: from how far to cut back accounting rules to whether it should side with investment banks or shareholders in a Supreme Court case.

The nation's premiere markets watchdog is operating in the wake of complaints that government clamped down too tightly on business practices after financial scandals from Wall Street to Main Street. Several crucial decisions the SEC is about to make will determine the course of financial regulation in the coming year -- and will offer indications about whether the agency will respond to the concerns of either investors or industry.

SEC Faces Some Crucial Questions

Labels: regulation, sec

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FEI Survey: Management Drives Sarbanes-Oxley Compliance Costs Down by 23%, But Auditor Fees Virtually Unchanged

Financial Executives International (FEI) announced today the results of its sixth Sarbanes-Oxley compliance survey, which found that Section 404 compliance cost Corporate America less in year three of adoption than in each of the first two years. FEI polled 200 companies to gauge experiences in complying with Section 404. Responding companies have average revenues of $6.8 billion.

According to the FEI survey, which included 172 "accelerated filers" -- companies with market capitalizations above $75 million -- total average cost for Section 404 compliance was $2.9 million during fiscal year 2006, which represents a 23 percent decrease from 2005 totals. The data also shows reductions in internal and external costs of compliance, with internal staff time decreasing by 10 percent. The lower costs can be attributed to companies' increased efficiencies in complying with Section 404.

FEI Survey: Management Drives Sarbanes-Oxley Compliance Costs Down by 23%, But Auditor Fees Virtually Unchanged

Labels: compliance costs, FEI, survey

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Tuesday, May 08, 2007

SARBANES-OXLEY ADVICE FOR SMALLER PUBLIC COMPANIES

Up to now, smaller public companies -- usually those with just less than $75 million in public equity -- have not been required to comply with Section 404 of the Sarbanes-Oxley Act. That section requires that a public company's management file a report on its assessment of the company's internal control over financial reporting -- including the financial work that passes through IT. It also requires the company's auditors attest to the quality of the company's internal control over financial reporting in the auditor's annual report.

The Securities and Exchange Commission (SEC) itself has recognized the challenges for smaller companies: smaller companies typically don't have full-time financial controllers; managers in smaller companies have a broad span of control, and this could lead to management override of financial controls; and smaller companies are more dynamic and don't have well-documented processes. Your company may have a lot of work to do to produce a report that makes investors feel confident about your numbers -- even if you are the most honest company.

SARBANES-OXLEY ADVICE FOR SMALLER PUBLIC COMPANIES

Labels: Champy, sec, small business

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PCAOB Concludes First International Auditor Regulatory Institute

Representatives from auditor regulators and government agencies from more than 40 countries convened on Wed., May 2, in Washington, D.C., to learn more about the PCAOB's programs and how it carries out its mandate under the Sarbanes-Oxley Act of 2002.

The institute took place over two and a half days, with one full day devoted to discussions about the PCAOB's inspections program. The institute also covered other activities of the PCAOB, including standard-setting, the enforcement process and international cooperation.

The Sarbanes Oxley Act directs the PCAOB to oversee and periodically inspect all accounting firms that regularly audit U.S. public companies. More than 780 audit firms currently registered with the PCAOB are located outside of the United States, spanning 80 countries.

PCAOB Concludes First International Auditor Regulatory Institute

Labels: pcaob

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PCAOB Soliciting Nominations for Standing Advisory Group

The Public Company Accounting Oversight Board is soliciting nominations and re-nominations for members of its Standing Advisory Group.

Created in 2003, the 31-member SAG assists the audit firm overseer in carrying out its standards-setting responsibilities.

The PCAOB is currently seeking nominations and re-nominations annually to fill 15 positions. Appointments are for two-year terms. Nomination forms are available on the PCAOB Web site, www.pcaobus.org. The deadline for submissions is June 15, 2007.

PCAOB Soliciting Nominations for Standing Advisory Group

Labels: advisory group, pcaob

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Accountants face day of reckoning on fees

The audit fee bonanza enjoyed by the Big Four accountants over the past four years has continued into the current annual reporting season but there are signs the boom may be dramatically slowing.

The Evening Standard can reveal that amid top-level calls for the major accountancy firms to reveal the profits they are making from auditing, the 10 most lucrative listed company audit contracts in the UK yielded a record £196m in fees last year, nearly 9% higher than in the previous year.

Accountants face day of reckoning on fees

Labels: audit, Big Four, fees

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