audit committees

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

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

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

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

Time to consider a virtual forensic auditor

Tue, 18 Mar 2008 07:59:58 -0400

The name is catchy and topical--Virtual forensic auditor. A group of vendors--such as Oversight Systems, ACL Services and Approva--are marketing products that monitor systems and transactions continuously, even the automated transaction, to detect troublespots and help out human auditors. Oversight says that firms that deploy its system realize a return on their investment in less than a year. The idea makes sense. The devil, of course, is in the deployment details and the costs. But audit committees may want to at least take a look.

Audit committees wrestle with new powers

Tue, 05 Feb 2008 06:59:59 -0500

Just how activist should an audit committee be? That's a big question at many companies, even five years after Sarbanes Oxley was passed. At some firms, according to cfo.com, management still seems a bit wary of ceding too much to the committee, especially when it comes to hiring and firing audit firms. Some executives are used to managing the audit firm, and don't want any interference. But these attitudes seem to have given way to a new audit committee mentality that takes the bull by the horns and really owns the audit process. Of course, a committee could go too far. There will need to be some balance among the board, the CFO and the audit firm. It would be worth spending some time looking at this three-way relationship and make sure all parties have similar expectations and goals.

For more:
- here's the article

Silicon Valley boards reshaped by Sarbox

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

Five years after Sarbanes Oxley, companies in Silicon Valley have reshaped their boards, according to the San Jose Mercury News. Nearly all have a director with financial expertise in their audit committees, compared with 11 percent in 2003, a stat that seems shocking in retrospect. Outside directors account for nearly 85 percent of the total, up from 75 percent in 2003. And more than two-thirds have separated the CEO and chairman job. To some extent, this works against the stereotype that Valley companies pack their boards with cronies. There are some questions to be answered. Does all this make the boards more effective? When it comes to compliance and rules, yes. But I'd like to see more companies start strategy committees.

For more:
- here's the article

Related articles:
- Silicon Valley activity on the rise
- Effect of Sarbox in Silicon Valley debated

Has Sarbox really changed attitudes?

Tue, 04 Dec 2007 06:59:59 -0500

So how to evaluate the effect of Sarbanes Oxley? We all know that big-company restatements have declined. We know that more companies, in year three, are getting more comfortable with the processes. We know that audit committees are working harder. But has it changed any attitudes? According to a recent Ethics Resource Center's 2007 survey, 56 percent of employees surveyed had observed violations of ethics standards, policies or the law; 42 percent of those who witness misconduct did not report it. Is this a reflection of the whistleblower problems of Sarbox? Maybe. A lot of people just do not want the hassle that comes with fingering a colleague. Maybe it's time to acknowledge that even with reticent witnesses, the law still makes it easier for serious wrong-doing to be discovered. That's a victory of sorts.

For more:
- here's the survey results

Has your company achieved "rebalancing"?

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

In the third year of Sarbanes Oxley compliance, some internal audit staffs have successfully "rebalanced," according to a Protiviti poll. That basically means that they are resuming more traditional duties as well as Sarbox duties. The idea is that Sarbox compliance was so traumatic that for three years, internal auditors have devoted less time to other areas. This makes sense. A lot of internal audit teams have figured it all out, so to speak. So they can start thinking about IT security, capital issues and other compliance initiatives. It has to be said, however, that at many places, this "rebalancing" has been achieved with more employees and enhanced resources. I don't think anyone will argue that the process cannot be further refined.

For more:
- here's the survey results

Related articles:
- Audit committees evolve, more focus on IT
- IT Watch: Oracle continues to focus on compliance