Wednesday, November 28, 2007

Center for Audit Quality Survey Finds Majority of Nation's Investors Support Sarbanes Oxley Act

In a telephone survey conducted July 17-23, 2007, the Glover Park Group asked a series of
questions related to investing, the capital markets and Sarbanes-Oxley. A summary of the
findings representing 1,001 investors nationally are included below.

With a sample of this size, one can say with 95% certainty that the results have a sampling
error of +/- 3 percentage points of what they would be if the entire population of investors had
been polled with complete accuracy.

Confidence in capital markets:
• A large majority (84%) of investors express confidence in the US capital markets, with 39%
saying they have quite a bit or a great deal of confidence. (Q6)
• In contrast, 65% of investors have confidence in the capital markets outside of the US, with
only 22% indicating quite a bit or a great deal of confidence in those markets. (Q7)

Review the entire survey at CAQ.

Labels: CAQ, survey

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Tuesday, November 27, 2007

Europe Wins Another

From high fashion to high tech, businesses continue to find America's public securities markets to be a very expensive place to do business. This week brings news that Tommy Hilfiger Corp., which left the New York Stock Exchange to go private in 2006, may go public again, this time on the Amsterdam exchange. Since both exchanges are now part of the combined NYSE Euronext, you might say this is a vindication of new Merrill CEO John Thain's strategy when he led the NYSE. But it's also another warning about the competition facing American capital markets.

Kate Mitchell of Scale Venture Partners says that even start-up companies are spending up to $3 million per year to comply with Sarbanes-Oxley in preparation for going public. "We're at the point of overkill," she notes, adding that regulation has changed the message her companies hear from investment banks. "When we get pitches for IPOs, they always bring into the mix European exchanges, Asian exchanges, even the Canadian exchanges . . . Five or 10 years ago, we never heard that."

Europe Wins Another

Labels: EU

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Monday, November 26, 2007

The 8th EU Directive - No SOX for Europe

The Shaping of Controls Lies in Companies' Own Hands

The opportunity to discuss this and other topics relating to internal auditing attracted more than 700 participants to the German Institute of Internal Auditing (IIR) congress recently held in Cologne at which celebrity speakers such as Jürgen Tiedje of the EU Commission shared their views and some straight-talking answers.

"It's not as if the 8th EU Directive were a European variant of the Sarbanes Oxley Act (SOX). Europe is not going to experience a 'EURO-SOX' or any kind of 'SOX light'." This was one such straight-talking answer from Jürgen Tiedje. And he should know, since he is Head of Unit Auditing at the European Commission in Brussels, the source of the 8th EU Directive. "On the contrary, companies have full organisational liberty to arrange for appropriate internal controls and especially for vigorous internal auditing." This is a clear answer on the part of the Brussels commission to the central question predominating the corporate governance debate regarding the details of impending auditing legislation for companies resident in the European member states. In his talk addressed to Germany's internal auditors at their trade congress, Tiedje explained that the EU will not be emulating the United States model of the Sarbanes Oxley Act, particularly in order to avoid what is viewed by the Brussels authorities as an excessive bureaucratic upheaval, but also in view of the diversity of corporate and business cultures that exist.

The 8th EU Directive - No SOX for Europe

Labels: 8th EU Directive, European Basel Accords

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Corporate America Making Strides on Sarbanes-Oxley Compliance, According to Compliance Week Benchmarking Report

Compliance Week, a magazine and newsletter on corporate governance and compliance, today announced the results of a study of financial reporting and corporate risk areas across a wide range of industries. The results show that Corporate America is making marked improvements in regulatory compliance despite persistent problems.

The “2007 Financial Reporting & Internal Control Benchmarking Reports” are available to members of the press on a limited basis.

The same issues that dogged companies when The Sarbanes-Oxley Act first came into effect three years ago—poor documentation of accounting procedures, insufficiently trained accounting and finance staffs, and difficulty closing the books at year-end—still flummox companies as they try to comply with SOX today. But the total number of such “material weaknesses,” which must be disclosed under Section 404 of the law, has plunged from 537 such disclosures in “Year One” to only 173 in “Year Three.”

“The data clearly show that after three years, corporations are doing a much better job identifying and remediating problems,” said Matt Kelly, managing editor of Compliance Week, who spearheaded the research.

“Executives might not like Sarbanes-Oxley,” added Kelly, “but they’re certainly getting better at addressing its challenges. The benchmark reports’ data will prove useful to these companies as they look to uncover hidden risks that are common in their industry.”

Corporate America Making Strides on Sarbanes-Oxley Compliance, According to Compliance Week Benchmarking Report

Labels: benchmark, material weakness

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Saturday, November 24, 2007

New guidance paper “Managing the Business Risk of Fraud: A Practical Guide” released for comments

The ACFE, AICPA, and IIA have released an exposure draft of a joint project regarding guidance to organizations on establishing an approach to managing the risk of fraud. The paper will be open for comment through December 21, 2007 with a final version of the paper due out in January 2008. Comments on the draft paper can be sent to fraudguidance@theiia.org. Click here to read the exposure draft.

New guidance paper “Managing the Business Risk of Fraud: A Practical Guide” released for comments

Labels: acfe, AICPA, fraud, fraud assessment, iia

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Thursday, November 22, 2007

Sarbanes-Oxley turns 5 amid mixed results

Five years after shepherding passage of a landmark bill to fight corporate corruption - the Sarbanes-Oxley Act -- now retired Congressman Michael Oxley has mixed feelings about the impact of what was the most sweeping markets regulation since 1934.

"I still hear a lot of complaint and blame, mixed in with a good deal of praise for the law," said Oxley, the Ohio Republican, now a non-executive vice chairman of Nasdaq Stock Market Inc. and a counsel with law firm Baker Hostetler.

The Securities and Exchange Commission is currently looking to placate critics of the law, known simply as SOX, with a set of new ideas on how to adapt to it. And the accounting industry is preparing this fall for lighter, cheaper and more focused audits to avoid the criticism that the law was too exacting on companies.

Sarbanes-Oxley turns 5 amid mixed results

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Monday, November 19, 2007

GAO Flunks SEC's Internal Controls

The Government Accountability Office said Monday that the Securities and Exchange Commission had a material weakness in the internal controls over its financial reporting.

The GAO's report said that data related to accounts receivable balances is processed manually at the SEC in a manner that is prone to error and could result in inaccurate financial reporting by the agency. The news is a blow to the SEC, which was criticized by the GAO in 2006 for the same manual processes, but narrowly avoided a material weakness by putting in place extra controls to compensate for them. The GAO said those controls were not effective in 2007.

GAO Flunks SEC's Internal Controls

Labels: gao, sec

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PCAOB - Board Approves 2008 Budget

The Public Company Accounting Oversight Board today approved a budget for calendar year 2008. The budget is based on the Board’s Strategic Plan for 2007-2012, which was created to guide the organization’s programs and operations in the coming years.

The budget, as approved, contemplates approximately $144.6 million in outlays for 2008, compared to $136.4 million for 2007.

“I believe this budget will allow the Board to fulfill its statutory mandate under the Sarbanes-Oxley Act of 2002 to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports,” said Mark W. Olson, PCAOB Chairman.


The PCAOB’s Strategic Plan is available online at http://www.pcaobus.org/About_the_PCAOB/Strategic_Plan.pdf

Labels: pcaob

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Tuesday, November 13, 2007

Get Ready for the Shareholder Curveball

The year-end is rapidly approaching for many companies, which means the year-end accounting crunch, the regular discussions with external auditors, and (sometimes) endless rounds of Q and A with senior managers preparing analytics for performance evaluation.

PwC has published a fantastic tool to get you started on the questions that should be considered, call "Questions that May be Asked at 2007 Shareholders' Meetings." Though last updated in March of 2007, the master list of considerations gives an excellent starting point for analytical discussions, and should help organizations round out there list of considerations before stepping up to the podium.

Labels: management analysis, Q and A, shareholder

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