annual report

Who will audit the auditors?

Jim Kim — Mon, 16 Jun 2008 07:42:40 -0400

The Public Company Accounting Oversight Board (PCAOB) has adopted a new rule--one mandated by Sarbanes-Oxley Section 102 (d)--that will require audit firms to file an annual report providing basic information with a description of audit reports from the past 12 months, disciplinary information and data about client fees. As noted by CFO.com, here's the rub: they, themselves, will not be audited. The rule must first be approved by the Securities and Exchange Commission. The board must strike a fine line between living up to the principles set forth in Sarbanes-Oxley and imposing an overly onerous reporting burden. Still, you have to wonder how it will ensure the integrity of 1,800 reports. I assume that random checks and PCAOB reviews (if not actual audits) will take place. We may get more information as guidance is made available.

For more:
- here's the article

A model of disclosure of subprime risks

Tue, 04 Mar 2008 06:59:59 -0500

Floyd Norris of the New York Times wonders: Wasn't Sarbanes-Oxley supposed to do something about the hidden, off-balance sheet risks? He writes: "The rules require that companies make some disclosures about vehicles off their balance sheets, even if they do not put them on their financial statements. But those disclosures have often not been made, or have been made in such a general way as to be meaningless." The stream of banks facing SIV risks is indeed long. But Norris also notes a solution. He says the 2007 annual report of State Street is a fine example of disclosure done right. It lays out why it has not consolidated its conduits held by off balance sheet entities. More important, it discusses what circumstances would lead the bank to place the assets on its balance sheet.

For more:
- here's the column

Related Articles:
SIVs continue to creak. Article
Bank showdown with auditors looming. Article
Big banks move to clean up balance sheets. Article

Victim of Sarbox: Annual reports?

Tue, 12 Feb 2008 06:59:59 -0500

There was day when companies took pride in their annual reports. Pre-Internet, it was a major vehicle for communicating with shareholders. And it showed. They were well-produced documents. These days, annual reports tend to be mere shells, some are derisively called 10-k wrap, notes an article in The American. To what extent is this the fault of Sarbanes-Oxley? In one view, the law has encouraged a take-no-chances mindset when it comes to reporting. Why not just repackage what has already been filed with the SEC and been deemed compliant? On the other hand, companies truly interested in providing insightful information these days would likely do it on the Internet. And why not? So while the state of the annual report is dismal, it reflects a lot of things--including reality.

For more:
- here's the article in The American

Putting HR info in your annual report

Mon, 04 Dec 2006 19:01:38 -0500

Truth be told, human resources has never quite gotten the respect it deserves in most organizations. There are those who argue that most companies do not have enough human capital--related in their annual reports--and that is a missed PR and IR opportunity. Why so little information? In the Sarbox era, most companies are comfortable providing only information they are required to report. But coming reform may loosen things up. As more companies employ greater data mining software, the kind of info nuggets right for the annual report may come into view. More companies, led by Wells Fargo, are moving in this direction. It makes sense to at least start thinking about this. Article

SEC and bondholder deadlines debated

Mon, 09 Oct 2006 20:01:39 -0400

Is the deadline to supply financial statements to the SEC and the deadline to supply them to bondholders one and the same? The issue is on the front burner these days because so many companies have missed their SEC deadlines, often due to Sarbox-related issues. A recent state Supreme Court decision in New York ruled that BearingPoint is in default to bondholders because it failed to supply timely financial statements. BearingPoint has delayed filing its annual report due to accounting problems. It argued that it isn't required to supply financial reports to the bondholders' trustee until 15 days after filing SEC reports. This can be seen as good news for hedge funds and other bondholders, but in the end, it will likely result in more litigation. The best solution is a negotiated one between bondholders' trustees and the company. There are reports, however, that some hedge funds have asked for cash to grant an extension.

For more on the ruling:
- Here's an AP article

Also: One hedge fund wants immediate bond redemption. Article

How to keep your ethics code SOX-compliant

Mon, 05 Jun 2006 20:01:37 -0400

SOX Section 406 is easily overlooked, no matter how large the company. The section requires management to include their code of ethics as an exhibit in its annual report or Web site and provide free copies on request. If a company does not have an ethics code, it must publicly explain why. Any senior-executive exemptions must also be disclosed. However, SOX also provided for seven requirements for codes of ethics that just might constitute mitigating circumstances for companies that run into legal problems. It makes sense to pay attention to these requirements.

> Here's an article.