small companies

SEC's stance on restatements raises brows

Jim Kim — Thu, 28 Aug 2008 21:04:27 -0400

The conventional wisdom seems to be that restatements stemming from material weaknesses have declined. That seems to be most true when it comes to big companies. You would have to think that Sarbanes-Oxley had something to do with that. Six years in, most companies have a better grip on their financials, but the law isn't the only factor. Financial Week reports that some critics say the SEC has taken a more lax view toward restatements. Chief accountant Wayne Carnall--who joined the SEC in 2007 after a stint in PricewaterhouseCoopers' national office--may bring more of an auditor's sympathies to the process. More companies seem to be asking advice and being told that they do not need to restate. It will be interesting to see how small companies are affected. You would expect a rise on restatements as the law takes hold. We'll see if that bump materializes.

For more:
- here's the article

Another 404(b) extension for small companies

Jim Kim — Sat, 28 Jun 2008 13:31:52 -0400

The SEC has approved another gift for non-accelerated filers: another one-year reprieve on Section 404(b) compliance. Even as investor advocates howl, the news came as a relief to many companies. For those betting on another delay, congratulations! You bet correctly. This will give you more time to get everything straight. Of course, 404(a) compliance processes are well underway (or should be). That requirement is not affected. There are some companies that had moved down the 404(b) path, which has been watered down significantly. That work was not in vain, as those companies now are ahead of the curve. If you really want to push it, you could always comply voluntarily. Investors will appreciate that, but the costs have to be weighed.

For more:
- here's the article
- Politicians praise the extension. Article

An unusual approach to Sarbox compliance

Tue, 22 Apr 2008 06:59:59 -0400

If you're a small public company, you've got some big compliance issues to deal with. Many are likely behind the curve--even with the latest delay from the SEC. Companies that take a proactive approach will reap the benefits later, obviously. Which brings us to Winner Medical Group, a bulletin board company based in China. It has taken the unusual step of issuing a press release to tout its Sarbanes-Oxley Compliance Project, which started up in January. The release lists the main steps it intends to take toward compliance; a promise of sorts. This is a bold idea, one designed to assure shareholders that the company takes this seriously. I doubt it will start a trend, but it does make quite a statement, provided it's more than mere PR.

For more:
- here's the release

Related Article:
Time to think about identity management

Search the web for: Winner Medical Group

The pain of smaller company compliance

Tue, 22 Apr 2008 06:59:59 -0400

Let's take a moment to appreciate what small- and medium-sized companies are up against. The big firms can throw resources at their compliance issues; many have been forced. Some already had ERP-type tools that might have given them a starting point. Almost all had some people resources they could expend. Not so for the smaller companies. Sarbanes-Oxley is only one of many regulations in play. For small banks, credit unions, hospitals and retailers, the law can get overwhelming fast. Sometimes it can seem fruitless. Ecommerce Times notes cases where a company installs a system to record activity by users of a computer system. But no one knows what to do with those logs. Most still get by with spreadsheets. In any case, you need to get a grip on these issues sooner rather than later.

For more:
- here an article from Ecommerce Times

Related Article:
Small company compliance timeline issues heat up

ALSO NOTED: Prosecutors: Skilling does not deserve new trial; A Sarbox for home lending?;

Tue, 20 Nov 2007 06:59:58 -0500

> Prosecutors: Skilling does not deserve new trial. Article
> Dems nominate two for SEC commissioner openings. Article
> A Sarbox for home lending? Article
> Standard marketing: New security survey. Release
> Director compensation still going up. Survey
> CEO of Deloitte Financial Advisory Services on worldwide fraud. Q&A
> Israeli companies not daunted by Sarbox. Article
> Sarbox effect: In-house counsel manages outside lawyer more closely. Article
> SEC makes life easier on small companies. Article

IT Watch:
> Companies struggle with quick ID management roll-outs. Article

And Finally... Accountants are gloomy these days. Article

Private companies struggling with Sarbox-lite

Tue, 13 Nov 2007 06:59:59 -0500

A year ago, the AICPA passed new rules governing the audits of private companies. The deadline for compliance is December. So you've got a lot of companies in full audit mode, a "mad rush," according to one expert. The AICPA rules are not nearly as onerous as Sarbanes Oxley rules. For example, they do not ask for conclusions about controls; they only ask that they be tested. And the rules are not mandatory. But they are seen as GAAP by many firms, according to cfo.com. The result has been that auditors of privately held companies and non-profits are taking 10 to 25 percent longer to finish their audits. Sound familiar?

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

Related article:
- The top 10 material weaknesses for small companies

PCAOB issues small-company advice

Tue, 23 Oct 2007 06:59:59 -0400

Small-companies are gearing up to comply with Sarbanes Oxley, and it could prove painful for those who are not prepared. Hoping to ease the transition, the Public Company Accounting Oversight Board has issued staff guidance on auditing controls for smaller companies. The list of issues covered includes the usual suspects: entity-level controls, management override, segregation of duties, use of others' work and the like. The PCAOB has noted that management override may be a topic of particular interest given that many small companies are dominated by individuals, perhaps a founder, that has a hands-on role in many areas. The document is available here. Auditors can use it now. The public can comment until Dec. 17, 2007, after which it will be considered final.

For more:
- here's an article from WebCPA
- Sarbox remains the top priority for PCAOB. Article

Related articles:
- More on small accounting companies and Sarbox
- Small company compliance timeline issues heat up
- Top 10 material weaknesses for small companies

Read more on: PCAOB

Paulson will take a look at audit industry

Tue, 09 Oct 2007 06:59:59 -0400

Blue ribbon-type committees are usually formed in the wake of some perceived crisis, like the nation's financial competitiveness. Sarbanes Oxley has been one reason for the spate of committees that we've seen recently. And now there is one more. This one will take a look at the accounting industry. Henry Paulson, Treasury Secretary, has been concerned that the system places perhaps too-heavy a burden on accounting firms to sniff out problems. That has led to the cover-your-butt approach that AS5 is trying to undo. In light of AS5, it will be interesting to see what more specific steps the Treasury committee can come up with. For what it's worth, Arthur Levitt and Paul Volcker are on the committee.

For more:
- here's an article from the AP

Related articles:
- More AS5 tips for small companies
- Will AS5 finally ease the tense standoff?
- Will AS5 really make compliance easier?

Small-company fraud prevention

Tue, 09 Oct 2007 06:59:58 -0400

This big companies can perhaps afford to throw a lot of resources toward fraud prevention. But what about small companies? The need is just as dire, but a less expensive approach is often required. One lawyer suggests breaking the potential instances of fraud into smaller pieces: (1) the work environment, (2) control systems, and (3) fraud-specific procedures. Of course each one of these could result in a whole year's worth of IT and other re-engineering. But it can also be viewed as a way of isolating the areas within a company where the vulnerabilities are greatest. Article

Does Sarbanes Oxley really inhibit small companies?

Tue, 02 Oct 2007 06:59:59 -0400

Sarbanes Oxley gets tossed around a lot as the reason for small-company woes. Anytime there's a delisting, you can bet "the additional costs of Sarbanes Oxley" gets ritualistically trotted out. But Silicon Valley and much the tech industry is thriving all over again. Investment bankers have certainly taken notice. These companies of course are not going public in the volume they did in the dot.com era, but I think we can agree that's a good thing. These days, if you are going to go public these days, you have to have your ship in top shape. Earnings certainly helps. Perhaps that's how it should be. In the end, investors just might appreciate it. I haven't seen any rigorous analyses of aftermarket performance since Sarbox became law. But it would be interesting to see, though isolating the effects of the law may be difficult.

For more:
- here's an article from EDN

Related articles:
- More on small accounting companies and Sarbox
- Small company compliance timeline issue heat up
- More AS5 tips for small companies