public companies

Audit firms "forget" to register

Tue, 18 Sep 2007 06:59:59 -0400

This news seems almost fit for The Onion: Nearly 70 accounting firms and partners, which are charged with carrying out Sarbanes Oxley ethics reforms, have "forgotten" to register with the board that supervises the industry. "Oh yeah. That was, uh, a top priority," says one partner who was censured. "But let's face it, some summer interns just seem less diligent than others. Overall, we still see ourselves as detail oriented and a stickler for rules." The SEC is not laughing. But it settled the cases without fining any of the offenders. These firms aren't exactly moonshine outfits or unregulated betting parlors. Still, while unregistered, they conducted 53 audits for public companies. Some of them had previously agreed to return fees to clients. None of the big four firms forgot to register.

For more:
- here's an AP article via the New York Times

Related article:
- Accountants and firms charged with Sarbanes Oxley violations
- Sarbanes Oxley Act of 2002
-What's going on at the SEC?

Ethics Tips

Tue, 28 Aug 2007 06:59:58 -0400

We've spoken a bit about the need for creating an ethical culture within in your organization. The Federal Sentencing Guidelines actually require that public companies "promote an organizational culture that encourages ethical conduct." That's easier said than done. But Stephen Harrison, chairman of Lee Hecht Harrison, has one word of advice: decency. He says that if you set a tone of simple human decency, good things follow across the organization. But that doesn't come easy to harried executives. Some advice: be nice to your receptionist, volunteer first for all the ethics training, walk the halls and chat with people. The ROI on this of course is hard to measure. But it's one intangible way of creating a "bubble wrap of good deeds" that will set the right tone. Another tip: you may want to create or boost the role of your chief ethics officer.

For more:
- here's an article from Knowledge at Wharton

Will the SEC's new rules help small companies?

Mon, 18 Dec 2006 19:01:39 -0500

If you run compliance or finance at a small-company, the SEC's latest Sarbox proposals give you a lot to ponder. On one hand, many will likely see the proposals as a disappointment. Smaller public companies will be granted an exemption from Section 404, which is what the venture industry really wanted. And compliance deadlines remain the same (the end of 2007 or 2008). But that doesn't mean there was no relief. A lot of the measures proposed will have a huge impact on small companies. In particular, managerial knowledge of the company can be used as a basis of compliance, which might allow some to shave costs of outside consulting. The big issue comes down to whether the Sarbox rules are truly scalable. The short answer seems to be "yes." How much this will reduce the $1 to $3 million in compliance costs that the average VC portfolio company pays is still unknown.

For more:
- read this Red Herring article

ALSO NOTED: COSO relevant to small companies;A look at security software delivered as a service;

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

> Venture capitalists want meaningful reform of Sarbox from a small company perspective. Article

> Similarly, the council of institutional investors would have liked more shareholder rights recommendations. Article

> We brought you news last week that some think prosecutors have been too zealous. Apparently, an ex-Justice Department official agrees. Article

> In many ways, COSO is struggling to remain relevant. Perhaps COSO for small public companies is one way. Article

> Security software delivered as a service is a growing market thanks in part to Sarbox. I could say that about a number of products, but it would be worth understanding your software as a service options. Here's an article on Symantec's push.

> SEC approves PCAOB budget for 2007. Article

And finally...Here's a funny quote from the outspoken CEO of Seagate Bill Watkins: "CEOs who whine about Sarbanes-Oxley don't belong in their jobs. Come on guys, get over it." Article

Activist presses for Sarbox costs disclosure

Mon, 20 Nov 2006 19:01:39 -0500

Steven Milloy, who co-manages the conservative-oriented Free Enterprise Action Fund, is pressing top Wall Street investment banks to report the costs of Sarbanes Oxley. Specifically, he has asked firms to sponsor resolutions that will require them to disclose the costs and the impact on investment banking business.

If the action was politically motivated, he's preaching to the choir. Is there anyone left who is not concerned with the costs? But truth be told, this strikes me as a decent idea for all firms. It may be true that for many the costs still outweigh the benefits. But others may have finally refined their processes to the point that the costs are worth the effort. In any case, it wouldn't be a bad thing for public companies to discuss this. Of course, you would have to do the same for other laws, and it could all get a bit messy--fast. No word yet on how Wall Street firms will handle the request.

For more on this:
- read this MarketWatch article

Has Sarbox delivered higher quality financial statements?

Mon, 16 Oct 2006 20:01:39 -0400

Some recent stats suggest that big-name accounting firms are making lots of progress. By one measure, in 2005, the restatements filed by public companies was up 72 percent from the previous year. In the first half of 2006, restatements were up 14 percent. But much of the refiling is being done by clients of smaller accounting firms. Among clients of the top eight firms, restatements are down 31 percent from a year ago. That's with the recent options scandals. You have to credit the fact that the PCAOB exists. Recall that there was no official watchdog before Sarbanes-Oxley was passed in 2002. There may be problems, but the PCAOB is real. Even smaller accounting firms can expect to be audited; one would expect their numbers will improve over time.

For more on this:
- Here's an article in the International Herald Tribune

From the perspective of board headhunters...

Mon, 04 Sep 2006 20:01:39 -0400

Spencer Stuart, the well-known headhunter, conducts around 60 percent of all director searches for big public companies. Which puts them in a good position to monitor trends and such. Julie Daum, who heads the practice at the firm, has some interesting observations in a recent Q&A with the New York Times. She thinks that Sarbox has lit fires in many boardrooms but wonders if it will lead to an unduly risk-averse approach. She also discerns that more boards are reaching out to shareholders, via the lead director or someone else. On Sarbox issues, no one would be surprised if the audit committee head were in direct contact with top stockholders or even the media. Five years ago, that would have been unthinkable.

For more on Sarbox through the eyes of a headhunter:
- Here's the Q&A from the New York Times

How to deal with whistleblowers

Mon, 28 Aug 2006 20:01:39 -0400

There seem to be more cases these days of whistleblowers seeking Sarbox protection. Public companies are now burdened with institutionalizing the process of dealing with such complaints. Specifically, Sarbanes-Oxley requires that audit committees must deliver processes to deal with financial reporting complaints, guaranteeing confidentiality and anonymity. The problem: The act doesn't say how to do all this. The issues are tricky. Some complaints may not be financial in nature. Some may impact other areas of the organization. It pays to deal with them systematically. Grant Thornton's just released guide presents a step-by-step approach for grappling with complaints via a hotline.

> Check out the report

SEC may delay internal controls from small and foreign companies

Mon, 14 Aug 2006 20:01:39 -0400

Some Sarbox relief may be on the way for some companies. The SEC has proposed delaying some crucial deadlines. Small U.S. companies wouldn't have to start management checks of internal controls over financial reporting until fiscal years ending after Dec. 15, 2007. That's a reprieve of six months. Also, these companies would only have to conduct a management review of financial controls in the first year, an auditor check wouldn't be required until the next year. Foreign companies would be given similar relief. This could be the start of more tinkering by the SEC and PCAOB. Newly public companies were also granted relief.

> Here's the article.
> Some overseas companies yawn at the news. Article
> U.S. groups seem pleased, notably the biotech industry. Release

Spreadsheet use a hindrance to compliance?

Mon, 24 Jul 2006 20:01:39 -0400

A recent survey by IDC and RevenueRecognition.com (which is sponsored by Softtrax) has found that revenue recognition and reporting activities at most companies are not automated by ERP systems' finance modules. The conclusion drawn by the survey authors, anyway, is that because more than 90 percent of public companies rely on spreadsheets to power revenue-reporting processes--more than half of all companies are using spreadsheets to create their accounting entries for revenue, for example--errors are more likely. This is a definite Sarbox issue, and executives would be wise to at least ponder the strength of their revenue numbers. It could come back to haunt in the form of a restatement or the like.

> Here's the release.