conflicts of interest

Audit conflicts must go!

Tue, 29 Apr 2008 06:59:59 -0400

We recently suggested it would be a good idea for firms to get rid of all potential conflicts of interest in the audit process regarding directors or executives. We noted the case of Feldman Mall Properties, which hired an accounting firm owned by one of the directors. As it turns out, the Public Company Accounting Oversight Board is moving on this issue, according to cfo.com. It seems to favor a rule that would require accounting firms to inform audit committees about any potentially tricky relationship. Anyone in an important financial role that might be able to influence the auditor would be required to disclose the relationship. Only then would a contract be allowed. In many ways, this seems like a no brainer. Audit committees need all the information they can get about these sorts of relationships before making decisions.

For more:
- here's the cfo.com article

ALSO NOTED: Stumped for more ethics training?; Deloitte launches Asia forensics team;

Tue, 11 Dec 2007 06:59:58 -0500

> Conrad Black gets 6 1/2 years. Article
> Survey: Nonprofits embrace Sarbanes Oxley. Article
> Conflicts of interest at exec pay consultants? Article
> Committee on Capital Markets Regulation issues report on competitiveness. Article
> Foreign companies flee U.S. markets. Article
> Stumped for more ethics training? Release
> Scandals ensnare HR execs. Article
> In U.K., Companies Act strikes many as kin to Sarbanes Oxley. Article
> Deloitte launches Asia forensics team. Article
> PCAOB to rely on overseas counterparts for audits? Article
> CFO optimism slumps significantly. Article
> Year-end games with working capital? Video

IT Watch:
> PCI driving better network security? Article

And finally ... CFOs: more employees raid 401(k)s. Article

Consulting work thrives all over again

Tue, 21 Aug 2007 06:59:59 -0400

Business Week Online notes that the accounting industry has embraced consulting all over again. The poster child for this movement is Deloitte & Touche, which resisted the trend a few years ago toward audit firms spinning out their consulting arms. The thought back then was that the conflicts of interest were inherent. Deloitte's choice was a good one from a business perspective. Demand for consulting services has soared. Now, all the big boys are reconstituting their consulting arms. That has raised old issues about the conflicts. The BDO Seidman disaster has featured a few conflict accusations based on the audit-consulting tension. But it seems like there is more than enough non-audit consulting work to go around. Forensic services, private equity related services. Sarbox compliance for firms that aren't tax clients. The list is long. Cross-selling is expected and effective it seems.

For more:
- here's the article from Business Week Online

Lawyers reassert themselves on boards

Tue, 24 Jul 2007 06:59:59 -0400

Did you have some attorneys on your board who resigned after Sarbanes-Oxley passed? If you want him or her back, now might be a good time to ask. The trend seems to be reversing. After the law was passed, a host of attorneys resigned from boards of client companies. The fears were obvious. They certainly did not want to be held liable for any wrongdoing that went undiscovered until too late. Now lawyers are less antsy about serving as directors and more are signing on. You have to wonder if they are making a big mistake. Consider Jack Nusbaum, a director at Topps. Another Topps director has accused Nusbaum of a conflict when Nusbaum supported a takeover of Topps by an investment firm because it would generate fees for his firm. These sorts of "appearances" are inevitable. Indeed, who are you really serving, your firm or the company. Better to steer clear. In general, however, Sarbanes-Oxley has been great for lawyers (Financial Times).

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

To whom should your internal auditor report?

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

We've discussed before the reporting chain that governs internal audit resources, which often ends up with deliverables ordered by the audit committee as well as the CFO. The reporting lines may be a bit fuzzy at some companies. At other companies, audit committees seem intent on having audit executives report to them. For the record, Moody's Investors Service's best practices report says having your chief internal auditor report to the CFO can cause some conflicts of interest and may undermine his or her ability to perform. But rather than report to the CFO, the best bet would be to have the auditor report to the CEO--and of course the audit committee. That sends the right message: That senior management is involved but in a way that minimizes conflicts. Any way you cut it, audit executives have tough jobs. Strong relationships with key directors are paramount. An area worth investing in.

For more on Moody's report:
- Here's an article from CFO.com

Should CFOs be stripped of all stock options?

Mon, 11 Sep 2006 20:01:39 -0400

There's still a lot of anger about the still-unfolding stock options grant date scandals floating around. And where there's anger, there are likely to be scapegoats. In that spirit, consider Internal Revenue Service Commissioner Mark Everson's suggestion that finance chiefs, top counsel and non-executive board chairs should not receive any options, but instead should receive fixed compensation which would be a good way to end possible conflicts of interest. He is not asking for a law but does consider this good governance. The idea does not really get to the guts of the scandals, and I doubt it will prove lasting, even though some legislators have voiced interest. It does, however, capture the mood.

For more on the issue:
- Here's an article from CFO.com

Credit-rating agency reform in the works

Mon, 17 Jul 2006 20:01:39 -0400

A recurring theme in the Sarbanes-Oxley era is that credit-rating agencies are ridden with conflicts of interest that make it difficult for them to see Enron-like warning signs. True or not, that attitude has resulted in a bill passed by the House of Representatives that would open the industry to more competitors and give the SEC industry oversight. The Senate hopes to pass similar legislation soon. Now, if this were to come to pass, and it might, it might work against any Sarbox relief granted by the SEC. You have to wonder if agency analysts will tighten up more voluntarily.

> Take a look at this article from The Washington Post.