Compliance Blog

FEI (Financial Exectives International) has published a list of the top ten concerns for 2005. You guessed it: Sarbanes-Oxley is number two on their list. Even more interesting is that most of the other items on the list are indirectly covered by Sarbanes-Oxley as well.

See an excerpt of the article here:
"FEI Outlines Top Ten Financial Reporting Challenges for 2005-- Financial Executives International has identified the top 10 financial reporting challenges for 2005. These challenges will impact the way companies manage their businesses, report their financial results, and compensate their employees. The challenges include:

1. Stock option expensing. The Financial Accounting Standards Board
(FASB) has mandated that all stock compensation be expensed beginning
June 30, 2005 for most public companies. Smaller public companies and
private firms have until the first annual reporting period after Dec.
15, 2005.
2. Complying with Sarbanes Oxley Section 404. The requirement for
reporting on internal controls is already in place for accelerated SEC
filers with years ending after November 15, 2004, but during 2005 all
companies have to comply. Increasingly, lenders and state regulators
are asking private companies about the status of their internal
controls environment. Private companies may also see audit procedures
used by their external auditor become more "integrated" with internal
controls as the audit firms change their procedures."

For the complete article, click here.

When your company needs a more effective and rapid compliance tool, check out www.issuescentral.com or call (416) 977-1496 and learn more about Sarbanes-Oxley Compliance Playbook(tm).

Microsoft has made two mistakes in Europe, 1) Being too successful and 2) Based in the USA. This allows the Europeans to try to establish dominance against anything American. Everywhere you go in the world, American products are dominant, but no where is this more evident than on the desktop. Microsoft will weather this one out too. But wow, their legal department certainly has permanent job security.

An excerpt of the ruling is here:
"A European court refused to grant Microsoft (MSFT:Nasdaq - news - research) a stay on antitrust sanctions Wednesday, forcing it to move ahead with plans to sell a version of Windows that doesn't include the Media Player music and movie program."
For the complete article, click here.

To make sure your company complies with Sarbanes-Oxley, see www.issuescentral.com to lear more about Issues Central Sarbanes-Oxley Compliance Playbook(tm) or call (416) 977-1496.

As more and more tremors rock the insurance industry around the world, sources are saying that the insurance industry will be the next recipient of a Sarbanes-Oxley like legislation. The issues in insurance around acturial and financial stability are huge. The industry is complex and to outsiders, not well understood.

An excerpt on an article of similar problems in the UK:
"Seeking to bring best practice to mutual governance
By Andrea Felsted Published: December 21 2004

Paul Myners yesterday revealed a swathe of sweeping reforms to the way mutual life offices are run in the wake of the Equitable Life debacle.

Mr Myners described the recommendations in his review of mutual life offices' corporate governance as a way of lifting mutual corporate governance to the standard of that in public limited companies, and in some areas taking it even further forward.
The government asked Mr Myners to carry out the review following Lord Penrose's report into the crisis at Equitable Life. Lord Penrose was critical of the failure of Equitable board members to ask about or understand the actuarial and financial risks the troubled mutual was running.
Equitable was forced to put itself up for sale four years ago after the House of Lords ruled against it over its refusal to honour its guaranteed annuity rates, which promised a minimum pension even when interest rates fell.
At the heart of Mr Myners' recommendations is that mutual life assurers adhere to a version of the revised combined code on corporate governance, which is a special version of the code for mutuals on best practice on how companies should be governed."
For complete article, click here.

To help your company comply with excellent governance and internal controls, see www.issuescentral.com for more information on Sarbanes-Oxley Compliance Playbook(tm) or call (416) 977-1496 today.

The SEC is taking a second look at small company impact from Sarbanes-Oxley costs. This is an interesting dilemma. Small companies could have the same negative impact on investors that large companies can have: they both take the public's money. But obviously, we do not want to squash the future "large" companies. It will be interesting to see how this is handled. The bottomline is that all companies, regardless of size, should have proper internal controls. In my experience, it is easier to commit fraud than in small companies than large ones because there are usually fewer controls and people. More control is usually held by fewer people-therefore, more ease in committing fraud.


This article outlines the concerns here:
"SEC to study small companies' Sarbanes-Oxley costs
By Joel Rothstein
WASHINGTON, Dec 16 (Reuters) - A panel to examine whether small public companies are being forced to bear exorbitant costs to meet corporate reforms enacted in 2002 was announced by the U.S. Securities and Exchange Commission on Thursday.
Companies have complained that the Sarbanes-Oxley Act imposes excessive requirements for corporate disclosure, maintaining internal controls over financial reporting, and access to capital markets, areas on which the new panel may recommend rule changes.
The panel will be co-chaired by attorney Herbert Wander of Katten Muchin Zavis Rosenman, and James Thyen, president and chief executive officer of Kimball International Inc. (KBALB.O: Quote, Profile, Research) , an Indiana-based furniture and electronics maker.
The SEC said between nine and 19 additional members will be appointed. The panel is due to report its findings by January 2006.
SEC Chairman William Donaldson told reporters the commission was not trying to roll back the Sarbanes-Oxley law, that grew out of accounting scandals at Enron Corp. (EONPQ.PK: Quote, Profile, Research) and WorldCom, now known as MCI (MCIP.O: Quote, Profile, Research) .
But Donaldson said the agency has leeway to move rules around to lessen the burden on small companies." For the complete article, click here.

To learn more about how to rapidly and affordably comply with Sarbanes-Oxley, see www.issuescentral.com or call (416) 977-1496.

For guys like the Rigas' and Conrad Black, etc, we are so glad laws like Sarbanes-Oxley exist. This is who these laws are meant to catch. For those who see a public company as their own personal piggy bank, they should feel the full force of the law. We only hope that the Rigas' are unable to get off on some technicality. Put them in jail for a long time. Their arrogance is beyond belief and their actions ARE punishable by law.

An excerpt on the Rigas filing:
"In a filing released by prosecutors Tuesday, the government asked U.S. District Judge Leonard Sand, who is scheduled to sentence the pair early next year, to enter a judgment against them for $2.533 billion. Lawyers for the Rigases are expected to oppose the motion, which was filed Friday in Manhattan federal court. The Rigases "defrauded Adelphia's shareholders, bondholders and lenders in order to enrich themselves and other members of the Rigas family," prosecutors said in the filing. " For the complete article, click here.

To find out more about how your company can rapidly and affordably comply with Sarbanes-Oxley, see www.issuescentral.com to see a walk through of Issues Central Sarbanes-Oxley Compliance Playbook.

With the conflict of interest provisions in Sarbanes-Oxley (An external auditor cannot do the entire Sarbanes-Oxley internal controls documentation and testing on the client side), auditors are taking on fewer and fewer audit clients to enable them to do work on the internal control side for any client.

Read this excerpt for more:
"Many audit firms have resigned the audit just to preserve the consulting business,” said Ron Conlin, a partner focused on accounting research at J.D. Power and Associates.
Accounting firms aren't just stealing one another's clients. They're stealing accountants, too.
Keglovits, for example, joined RSM McGladrey from Big 4 firm Deloitte & Touche about a year ago. David Hazels, heading Grant Thornton's Sarbanes work in Kansas City, came over from KPMG.
Accounting firms are also moving partners from their tax, human resources, benefits and other areas to help with Sarbanes. They have also hired away internal auditors who work at public companies and lured some accountants out of retirement." For the entire article, click here.

If your company has pursued purely a services solution to Sarbanes-Oxley, what are you going to do next year? Spend the same effort and money? Learn more about Issues Central Sarbanes-Oxley Compliance Playbook(tm) at www.issuescentral.com on how a content/tool can make your life simpler now and in the future

Finally, the federal government will be subjected to the same types of regulations that Public Companies are now subject to. This makes a lot of sense when you consider all the "funny money" calculations that governments do around "savings" and budgeting and reporting in general. It is time for more disclosure on how calculations are made. I hope we can stand the shock.

An excerpt on this topic here:
"Federal officials need to better account for government money, according to Office of Management and Budget officials, who plan to release new financial management regulations before 2005.
Stricter financial control standards will be printed in OMB Circular A-123, a revised version of which is in the final stages of internal clearance, said Linda Springer, OMB controller. The circular governs implementation of the Federal Managers' Financial Integrity Act, which requires agency chiefs to issue annual assurances that internal financial controls are functioning properly.
Compliance with the circular's requirements will be mandatory starting in fiscal 2006. "

For a "walk-through" of how your company can more effectively and rapidly comply with Sarbanes-Oxley, see www.issuescentral.com today to see Sarbanes-Oxley Compliance Playbook(tm).

Despite Canada's stature in the world with much forward thinking in many areas, securities legislation has not been in this category. The regional provincial control in this country mean that they have THIRTEEN securities regulators. Wow. This has made for little progress and that Canada's securities regulations have fallen behind much of the G7 countries.

Finally, yesterday there was a change: some unification of the regulations has finally occurred. The regulations mimic much of the Sarbanes-Oxley sections, with the exception of Section 404, internal controls. The Canadian version is quite vague. Hopefully, this too will improve over time. Let's face it, everyone talks about Enron, but last time I checked Bre-X and Nortel were based in Canada. So there are enough fraud cases everywhere to justify tighter internal controls in Canada as well.

For a summary of some of the new board mandates, see the excerpt of an article here:
" Board Mandate: The board should adopt a written mandate (new) in which it explicitly acknowledges responsibility for the stewardship of the issuer, including responsibility for:

• satisfying itself as to the integrity of the CEO and other executive officers and that these officers create a culture of integrity throughout the organization (new)
• adopting a strategic planning process and approving an annual strategic plan
• identifying principal business risks and ensuring the implementation of risk management systems
• succession planning,
• adopting a communication policy,
• internal controls and management information systems, and
• developing the issuer’s approach to corporate governance, including establishing a set of corporate governance principles and guidelines specifically applicable to the issuer. "

For the complete article, click here.

To learn more about how to effectively document and test your company's internal controls, see www.issuescentral.com for more information about Sarbanes-Oxley Compliance Playbook(tm).

Smaller publicly held companies are being dumped by larger accounting firms who already have too much Section 404 work with large clients. Maybe it is time to take a different view to the problem and not rely solely on services firms who will provide no infrastructure. This means year 2 and on will be as time consuming and costly as year 1. Maybe some product support and self-sufficiency is what is needed. Where labor is unavailable, put some technology in to help.

An excerpt highlighting this issue:
"Not enough accountants. Some accounting firms are shedding clients as they struggle to keep up with Sarbanes-Oxley work. Wireless equipment maker Endwave was dumped by Ernst & Young in September, forcing the Sunnyvale, Calif., company to turn to second-tier firms BDO Seidman and Grant Thornton. They were also too busy.
Endwave ended up with local firm Burr Pilger & Mayer. CFO Julianne Biagini says the new accountants have done a good job, but she's worried that "they aren't going to have the back-up resources (of a big firm)." Ernst & Young says it's trying to hire more staff to meet demand." For the complete article, click here.

To learn more about an effective and affordable solution to help, see www.issuescentral.com and learn more about Sarbanes-Oxley Compliance Playbook(tm).

Arthur Levitt asks public companies to compare the costs of managing internal controls properly compared to the costs of restatements of earnings, not to mention the effect on market confidence in a company when it is deemed that a company's reporting is unreliable.

An excerpt from a speech is here:
"Sarbanes-Oxley has been the major factor in restoring public confidence to our markets."And he called the costs of complying minor compared with the occasional need by firms with lax internal controls to restate their financial reports." says Arthur Levitt, former SEC Chief from 1993-2001. For the complete article, click here.

For information on how to comply with Sarbanes-Oxley effectively and affordably, see www.issuescentral.com to learn more about the Sarbanes-Oxley Compliance Playbook(tm).

Another country speaks out about Corporate Governance - Pakistan. This is good news in a region that would not be one that would command "top of mind awareness" for having corporate governance. It seems that this is all the rage these days. Easier said than done though.

An excerpt on this article is here:
"Pakistan Institute Of Corporate Governance Set Up
Updated on 2004-12-06 08:04:42
ISLAMABAD, Pakistan : Dec 06 (SADA) - The Pakistan Institute of Corporate Governance has been set up as a non-profit organization for promoting the culture of good corporate governance in the country.
Chairman, Securities and Exchange Commission of Pakistan (SECP), Dr. Tariq Hassan, talking to newsmen here, told that the government plays a key-role in providing a legal environment for paving the way for advancement of corporate governance, however, its primary responsibility rests on the corporate sector.
He said, "The basic objective of setting up of this Institute is to extend a helping hand for encouraging positive traditions of corporate governance to take roots and get strengthened besides providing a healthy environment for the implementations of SECP's proclaimed Codes of Corporate Governance." Click here for the complete article.

For complete information on how your organization can more effectively, rapidly and affordably manage your Sarbanes-Oxley compliance, click www.issuescentral.com

There are no longer any excuses to say that you did not know where to call if fraud is detected. Sarbanes-Oxley has made it obvious and available to report fraud. It will be interesting to see if there is an increase in such reports. But it certainly is a good try. Some fraud will never be detected without the knowledge of insiders. Where there is collusion or really perfect fraud, it may be impossible to detect without the help of those who have the facts.

For an excerpt on an article on this topic, read here:
"The Public Company Accounting Oversight Board (PCAOB) has made it easier to submit enforcement tips and complaints via a new online form (www.pcaobus.org/tips), email (tips@ pcaobus.org), or toll-free number (800.741.3158). The new system allows individuals to easily provide information concerning any matter relating to the board and its responsibilities under the Sarbanes-Oxley Act of 2002.
"As the recent scandals have shown, individuals with integrity do often step up and take a stand when they see misconduct taking place," said Claudius Modesti, PCAOB director of enforcement and investigations. "We want to make sure that these individuals have an easily accessible way of reporting any information that they might have."
For the complete article, click here.

To see how your organization can affordably and effectively comply with Sarbanes-Oxley, click www.issuescentral.com to see how Issues Central Sarbanes-Oxley Compliance Playbook(tm) can make the compliance task easier and more effective.

Oops, they did it again. The SEC decided to extend, the deadline, a little for companies with market caps of less than $700 million with filing dates of November 15, 2004 to February 28, 2005. They have 45 extra days to file.

Here is an excerpt from the SEC press release:
"The exemptive order applies to an accelerated filer that has a fiscal year ending between and including November 15, 2004 and February 28, 2005, and that had a public equity float of less than $700 million at the end of its second fiscal quarter in 2004. Commission rules define an “accelerated filer” as a company that has a public float of at least $75 million; has been subject to the SEC's periodic reporting requirements for at least 12 months and has filed one annual report; and is not eligible to use the SEC's small business reporting forms.

The Public Company Accounting Oversight Board also met today to adopt a temporary rule, subject to Commission approval, that would permit the delayed filing of auditors’ internal control reports consistent with the Commission’s order." Click here for the complete press release.

To find out more about how to effectively comply with Sarbanes-Oxley Section 404 no matter what size your company is, see www.issuescentral.com or call (416) 977-1496.