audit committee

Audit Committees in need of IFRS help?

Jim Kim — Sat, 20 Sep 2008 21:31:04 -0400

For audit committees, IFRS stands as a huge challenge. The new standards are a reality. Deal with it. It really is up the committee to get the firm through the transition. But few audit committees really have a lot of expertise in this area. Barry Jay Epstein, partner at Russell Novak & Company, says now is the time for audit committee members to ramp up their knowledge. Now may also be the time for the committee to consider hiring outside accounting experts. "Audit committees have been very slow to awaken to the value of engaging expert counsel of their own, which has to be funded by the companies they serve, if they request this," he says. But IFRS is critical to your company. It may be worth it. Alternatively, if you just don't want to deal with it, you should probably step off the committee now.

Just desserts? Carl Icahn to face Sarbanes-Oxley

Jim Kim — Wed, 30 Jul 2008 08:42:45 -0400

Now that Carl Icahn has agreed to join the board of Yahoo, he just might have to face some Sarbanes-Oxley related issues, which has venture capitalist Alan Patricof chuckling. "He will also be restricted by Sarbanes-Oxley on how he behaves and, if we are really lucky, he will be appointed to the audit committee and have the further burden of being a steward of the company's finances," he writes. Patricof gets a big kick out of envisioning Icahn on the audit committee. "I can't wait until he deals with Section 404 of Sarbanes-Oxley and has to judge Yahoo's internal controls." Icahn, of course, will now have to evaluate mergers from the inside. "Shareholders will be holding you accountable for your actions..." Icahn has to maintain 30 million shares to stay on the board. What do you think? Will Sarbox be enough for him to sell?

For more:
- here's a copy of the Patricof post

Top 10 ERM-GRC myths

Jim Kim — Mon, 28 Jul 2008 12:59:00 -0400

A lot of companies have moved to augment enterprise risk management platforms with dedicated governance, risk and compliance (GRC) solutions. That trend isn't going to disappear anytime soon, but some companies will likely come away disappointed with the results. It's fair to say that automation can seem like anything but in a lot of cases. Newsfactor.com offers a list of 10 ERM-GRC myths. I'll mention a couple here. Myth No. 9: CIOs embrace GRC--while this is literally true, it's also true that many parts of the organization were standardized on a common GRC platform, leaving piecemeal approaches intact. Myth No. 5: Traditional audit planning is good enough--you can't afford to scrutinize everything. "Is it worth tying up valuable stakeholders in management and on the audit committee to assess the risk inherent in the coffee procurement process for a remote sales office?" Fortunately, AS5 sets a good tone on this issue.

For more:
- here's the entire top 10

Cynthia Cooper, still an inspiration

Jim Kim — Fri, 11 Jul 2008 08:18:29 -0400

Cynthia Cooper, still an inspiration. Remember Cynthia Cooper? The soft-spoken former chief audit executive at WorldCom was the one who blew her whistle after uncovering a lot of bad practices at her own firm. Since those days, which made her a minor celebrity, she seems to have done well as a speaker. She even has a book out. Judging from a recent event in San Francisco, covered by the San Francisco Chronicle, she's still something of a hero to internal auditors everywhere. It took courage to go over the head of her CFO boss--who later pleaded guilty to fraud--and present her findings directly to the audit committee. Sarbanes-Oxley represents, in some ways, a political solution to the problem of fraud, but Cooper and others like her make clear just how personal all this can get and how hard it is to do the right thing.

For more:
- here's the San Francisco Chronicle article

Related Article:
Sarbox-style whistleblowing not a lot of fun

Sign of times: Chief Risk Officers in demand

Tue, 06 May 2008 06:59:59 -0400

Not too long ago, we were talking about companies installing more chief compliance officers. Now, more companies are considering adding chief risk officers, especially in financial services, notes Financial Week. Many just follow in the footsteps of UBS and set up risk committees. One issue is whether this movement will work against compliance objectives or for them. You could argue that they are distinct disciplines, but that they also are related in practice. Some audit committees, for example, took on risk responsibility, fairly or not. And the rise of GRC software serves to encourage people to think in terms of integrated solutions. You also could argue that manic focus on Sarbanes-Oxley really made it hard for executives to focus on risks. Still, it remains to be seen whether the risk movement will work out. At some places, it may be board PR.

For more:
- here's an article from Financial Week

ALSO NOTED: Software for "green" auditing?; Ex-CFO of Monster charged in options backdating case;

Tue, 06 May 2008 06:59:58 -0400

> Software for "green" auditing? Article
> Ex-CFO of Monster charged in options backdating case. Article
> More on audit committee independence rules. Article
> Buzzword alert: Data governance. Article
> Corporate governance practices improve. Article
> Interepublic to pay $12 million to settle accounting probe. Article
> BI moves into big suites and into online offerings. Article

And finally ... Learning the real value of a dollar early on. Article

Time commitments for audit committee members?

Tue, 08 Apr 2008 06:59:59 -0400

It's an old and tired issue: Board members serving on so many boards that they can't really be effective. Sarbanes-Oxley made being a director a lot less cushy, so we haven't heard much about it recently. Then came Bear Stearns. Financial Week notes that three directors serve on four other boards. Two of these directors serve on the audit committee, and one actually chairs the audit committee. Two of them also serve on the risk committee. So some are asking what were they doing? Were they so tied up that they took their hands off the wheel during the long run up to the scandalous implosion? We're not privy to the internal discussions, but it's a fair issue.

For more:
- here's the Financial Week article

Related Article:
More on the evolving audit committee. Article
Pay for compensation and audit committees soar. Article

What constitutes a good job by an audit committee?

Tue, 08 Apr 2008 06:59:59 -0400

The audit committee at VeriFone Holdings seems to be taking the bull by the horns. It led an internal investigation into inventory accounting issues that turned up a hornet's nest of problems that will force the company to restate earnings for several periods. Ouch! In response, the committee seems to be doing everything right. It is implementing remedial measures for finance department breakdowns and better controls, it fired the supply-chain controller, and it will devote additional resources to inventory issues, as well as segregate the duties of the financial planning and the accounting/control functions. All fine steps. But you have to wonder, if things were so bad, shouldn't the committee have been on top of this before it got out of hand? Again, it takes a lot to be a real audit committee member.

For more:
- here's an article from cfo.com

Related Articles:
Tough time to serve on an audit committee. Article
Audit committees wrestle with new powers. Article

Is the Sarbox hiring boomlet over?

Tue, 25 Mar 2008 07:59:59 -0400

People jokingly refer to Sarbanes-Oxley as the full employment act for accountants. Clearly, a lot of accountants, as well as finance and IT types, owe their jobs to the law. But the San Francisco Business Times notes that the hiring may be waning--even as the top firms hone their hiring practices to a near science. Controls are placed at many companies, and processes have been streamlined. There may actually be some layoffs in the works in some Big Four offices. The economy may have a lot to do with this. Companies are not going to be in expansion mode. While audits will always be necessary, a lot of related projects, especially on the consulting side, may not get funded. On the client side, you can bet a lot of departments are feeling headcount pressure.

For more:
- here's the San Francisco Business Times article
- here's an article on the art of recruitment from cfo.com

Related Article:
Wasn't Sarbox supposed to prevent this? Article

Tough time to serve on an audit committee

Tue, 18 Mar 2008 07:59:59 -0400

We've noted that serving on an audit committee is not an easy gig right now, especially at a financial services firm. Auditors are feeling a certain amount of pressure to take a hard line on mortgage-related assets. In December, the PCAOB issued an alert to auditors on how to calculate subprime losses. Many think that audit committees will feel the need to go overboard in writing down assets. Investors' Business Daily suggests the advent of FAS 157 may lead more companies to look unfavorably on internal models and suggest draconian writedowns. AIG is an example. Last month, it reported the value of its CDSs fell $4.88 billion in October and November, a figure much larger than its previous forecast; PricewaterhouseCoopers found a "material weakness" in its controls.

For more:
- here's the article via CNNmoney.com

Related Articles:
Audit committees wrestle with new powers. Article
Bank showdown with auditors looming. Article
FAS 157 wreaks havoc with bank earnings. Article