auditing

ALSO NOTED: Banks say no to Sarbox-like set of rules;

Tue, 15 Apr 2008 06:59:58 -0400

> Bank reform and IT issues. Article
> Building a home-grown auditing system with SQL server. Article
> Justice trends away from trials. Article
> Some background on Sarbanes and how companies have dealt with it. Article
> Banks say no to Sarbox-like set of rules. Article
> How long to restate earnings? Article
> Forensic tools aid e-discovery probes. Article
> How much D&O insurance do ex-directors need? Article
> Fraud related restatement decline. Article
> Justice trends away from trials. Article

And finally ... Wall Street refugees seek new careers in finance. Article

Companies fret about auditor-held information

Tue, 27 Nov 2007 06:59:59 -0500

The New York Times notes that more companies are worried that the information their auditors amass in the course of audits will somehow become public--to be used against them. In one suit recently, a company was asked to hand over auditing records. The fear is that such information could open up a whole hornets nests--suits and regulatory actions. Not to mention embarrassment. It's fair to say that auditors are asking for more information than ever. In general, the legal protection of auditor-client communications is much weaker than that of lawyer-client privilege. According to the Times, roughly 30 states have auditor-client privilege laws, and few federal courts have addressed it. All this is certainly making more companies loath having to hand over information willy-nilly to auditors. Some are pondering solutions that would limit what they would have to turn over.

For more:
- here's the article

Travel expense controls in place?

Tue, 27 Nov 2007 06:59:58 -0500

Does your company have a hefty travel and expense bill every month? If so, you need to be careful that your accounting for such expenses is up to the challenge. At a minimum, you need a way to correctly keep records, audit spending, audit approvals and generate reports. Here's a few questions to help you evaluate your system from American Chronicle. Does your T&E software allow for policy configuration and policy auditing of individual expense reports? Does to allow only authorized personnel to access administrator roles and set policies? Can it itemize at a detailed level? Article

Bank showdown with auditors looming

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

The worst job in the industry right now: Auditing the books of top banks, the likes of Citigroup and JP Morgan Chase. The stakes are really high. The New York Post notes that little-known law, passed in the spirit of Sarbanes Oxley, that now prohibits banks from indemnifying auditors against mistakes. Most other companies can do this, essentially holding them blameless of mistakes that leads to suits. So if the accountants botch, there could be some real costs. Unfortunately, there are lots of hard-to-value assets and related balance sheets issues that will not easily be grappled with. Auditors will be in full cover-your-butt mode--AS5 be damned--and might press for additional write downs and other measures. Signing off on controls will likely not be easy.

For more:
- here's the New York Post article

Related articles:
- Sarbox and Merrill Lynch's audit committee
- Bar rises for internal auditors

The litmus test for AS5's value

Tue, 30 Oct 2007 07:59:59 -0400

Most of the talk about AS5 has noted the many hoped-for benefits, a streamlined, less confused approach. But there is an obvious litmus test: audit fees. One would expect a fairly dramatic decline. In a speech in Japan, SEC commissioner Paul Atkins put it bluntly: "If auditing fees do not come down as a result of these changes, then something is terribly wrong with the interpretation of Audit Standard 5 and perhaps with the competitive landscape in the auditing profession itself." So you have to ask, is there a way that costs will not come down? At individual companies, there could be a spike in complexity due to growth or diversification or something else. And you would have to think that audit firms are not keen to be giving up revenue. It may be that they find ways to mute any cost cuts. Still, we should see lower audit fees generally. Stay tuned.

For more on Atkins:
- here's a brief on WebCPA.com

Related articles:
- Will AS5 really make compliance easier?
- Can AS5 really trim audit bills?
- As expected AS5 becomes law, what to expect

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

CDA disclosures to follow Sarbox precedent?

Tue, 16 Oct 2007 06:59:59 -0400

The ramp-up to Sarbanes Oxley compliance was painful for many companies. For many, the pain got even worse in subsequent years, as many companies were left flailing for standards and guidance. Are we now seeing a repeat? Turns out the SEC has conducted a year-one review of CDA (compensation discussion and analysis) disclosures and isn't very happy. It wants shorter, less technical discussions, less focus on processes and more on the actual decisions. The SEC hopefully has learned a bit from its Sarbox experience. In the absence of solid guidance and strong examples, companies will embrace a cover-your-butt approach that will ultimately undermine the goal of the new disclosure rules, which is to provide a simple explanation to investors of why a company paid its top dogs what it did. It will be interesting to watch this unfold.

For more:
- here's a CFO.com article

BDO Seidman's brush with fate

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

The future of BDO Seidman is something that you have to question right now. A Florida jury hit BDO Seidman, a top five accounting firm, with a $351 million in damages for failing to uncover massive fraud at one of its clients. That came on top of an earlier award of $170 million in compensatory damages. At least one person thinks the company will not be crippled. But that may be wishful thinking. Most assume that the firm will be forced to seek bankruptcy court protection if it has to truly pay. All clients are in something of a quandary. If they were pondering a change, this might seal the decision. Of course the list of potential clients just shriveled. BDO Seidman says it will appeal--and has noted its past appellate success. That an accounting firm has a lot of this sort of experience is not really anything to brag about. But it may indeed serve the firm well. A lot is riding on this.

For more:
- see this article

Are the costs of Sarbox compliance really going down?

Tue, 07 Aug 2007 06:59:59 -0400

The conventional wisdom, when it comes to large-ish companies anyway, has been that companies are getting more savvy about compliance and that the costs have plateaued. Well, the latest Foley & Lardner survey has found that out-of-pocket costs associated with Sarbanes-Oxley compliance, including fees for vendor-based auditing and legal services, rose 12 percent last year to an average of $10 million for large companies ($1 billion plus in revenue). That's a significant hike. Audit fees, however, rose only 6 percent vs. 3 percent in 2005 and a whopping 67 percent in 2004. So while audit fees may be under control obviously, there are a lot of other costs as well. Legal fees and board compensation have driven the non-audit costs. The survey also found that 1 in 4 respondents say they are thinking about going private, the same as last year.

For more:
- here's the survey

Get your privileged password system up to par

Mon, 05 Feb 2007 19:01:38 -0500

A new report has found that companies are spending lots of money managing privileged passwords. Privileged passwords--which are not assigned to individuals but are used by multiple employees for administrative purposes--pose a costly compliance threat. Storing and monitoring such passwords is not easy and you can easily imagine employees passing them around. Before using privileged passwords, you may want to think about your system. Can you cut off an employee's access instantly? Do you have an auditing and reporting system set up? Are there people who have unnecessary and possibly dangerous access to sensitive information? Perhaps this should be part of your compliance program.