April 28, 2006
Kenneth Starr and the PCAOB - Huh?
Wait a minute. The PCAOB is being challenged by Kenneth Starr and his legal team? Huh?
What was the Freedom Fund thinking?
Last time we heard Starr's name he was on a "witch-hunt" against the Clintons. Lots of pain - no gain.
Click here to read more from this article by the Washington Post.
What was the Freedom Fund thinking?
Last time we heard Starr's name he was on a "witch-hunt" against the Clintons. Lots of pain - no gain.
Click here to read more from this article by the Washington Post.
April 27, 2006
Once Again the Facts do not Support the Arguments on Section 404 and IPO's
From Reuters yesterday:
"The New York Stock Exchange on Wednesday joined a chorus of business interests sounding the alarm over U.S. markets' exclusion from most of 2005's largest initial public stock offerings.
NYSE Group Inc. Chairman Marshall Carter told a congressional panel that many new global stock listings are going to non-U.S. exchanges due in part to U.S. litigiousness, costly regulations and accounting complexity..."
From this same hearing, another voice speaks:
"It is somewhat disingenuous to argue that many of these companies would have listed in the U.S. if only litigation or regulation were lessened. Many simply listed on their more natural markets ... In short, the sky is not falling, but we can do better," said Hooley, an Oregon Democrat."
An Ernst & Young Study showed the following:
"Only one of the largest 24 initial public stock offerings globally in 2005 was registered in the United States, according to a study by accounting firm Ernst & Young ."
"BUT the E&Y study also showed the United States in 2005 remained the world's top country in capital raised in IPOs, as well as world leader in the number of IPOs.
Two of the world's biggest IPOs last year included China Construction Bank Corp. and China Shenhua Energy Co. Ltd. . Both listed on the nearby Hong Kong exchange.
Two others were Electricite de France and Gaz de France , both French companies that listed on the multinational Euronext exchange, which operates out of Paris.
Copyright 2006 Reuters "
So let's not race to the bottom on standards. The US was not going to get those IPO's anyway. Why lower your standards on Sarbanes-Oxley and then find out it did not help the cause.
Standards are a good thing to have. Let's see what happens in a downturn in markets with NO standards. Then you can see some real calamity.
Stay the course.
If your company must document its internal controls over financial reporting, see www.issuescentral.com to learn more about Compliance Playbook(tm) or if your company is based in Canada, see www.compliancepartner.ca to learn more about Compliance Partner(tm).
"The New York Stock Exchange on Wednesday joined a chorus of business interests sounding the alarm over U.S. markets' exclusion from most of 2005's largest initial public stock offerings.
NYSE Group Inc. Chairman Marshall Carter told a congressional panel that many new global stock listings are going to non-U.S. exchanges due in part to U.S. litigiousness, costly regulations and accounting complexity..."
From this same hearing, another voice speaks:
"It is somewhat disingenuous to argue that many of these companies would have listed in the U.S. if only litigation or regulation were lessened. Many simply listed on their more natural markets ... In short, the sky is not falling, but we can do better," said Hooley, an Oregon Democrat."
An Ernst & Young Study showed the following:
"Only one of the largest 24 initial public stock offerings globally in 2005 was registered in the United States, according to a study by accounting firm Ernst & Young ."
"BUT the E&Y study also showed the United States in 2005 remained the world's top country in capital raised in IPOs, as well as world leader in the number of IPOs.
Two of the world's biggest IPOs last year included China Construction Bank Corp. and China Shenhua Energy Co. Ltd. . Both listed on the nearby Hong Kong exchange.
Two others were Electricite de France and Gaz de France , both French companies that listed on the multinational Euronext exchange, which operates out of Paris.
Copyright 2006 Reuters "
So let's not race to the bottom on standards. The US was not going to get those IPO's anyway. Why lower your standards on Sarbanes-Oxley and then find out it did not help the cause.
Standards are a good thing to have. Let's see what happens in a downturn in markets with NO standards. Then you can see some real calamity.
Stay the course.
If your company must document its internal controls over financial reporting, see www.issuescentral.com to learn more about Compliance Playbook(tm) or if your company is based in Canada, see www.compliancepartner.ca to learn more about Compliance Partner(tm).
April 25, 2006
SEC Chairman Cox Appears Before Senate Banking Committee - Small Companies Should Comply With Section 404
The new SEC Chairman is making his mark on the financial and investing world - both at home and abroad. It looks like smaller, publicly traded companies should get on with the task of implementing and validating the effectiveness of their internal controls over financial reporting. To read more go to the CFO.com article below.
http://www.cfo.com/article.cfm/l_comments/6848926?context_id=6848213#849
If your company is looking for an effective and "lean" approach to strengthening internal controls over financial reporting and SOX 404 compliance, please go to www.issuescentral.com to learn more about the Compliance Playbook(R). Canadian-based issuers needing to comply with SOX 404, or MI 52-109, please go to www.compliancepartner.ca to learn more about Compliance Partner(TM).
http://www.cfo.com/article.cfm/l_comments/6848926?context_id=6848213#849
If your company is looking for an effective and "lean" approach to strengthening internal controls over financial reporting and SOX 404 compliance, please go to www.issuescentral.com to learn more about the Compliance Playbook(R). Canadian-based issuers needing to comply with SOX 404, or MI 52-109, please go to www.compliancepartner.ca to learn more about Compliance Partner(TM).
Chairman SEC Cox says Thanks and Goodbye to the ACSPC
Well, at least he said thanks to the ACSPC (SEC Advisory Committe on Smaller Public Companies). I do not think this is the outcome that the committee was hoping for. See below, an excerpt of Chairman Cox's remarks yesterday:
"Statement of SEC Chairman Christopher Cox Regarding Final Report and Recommendations of Advisory Committee on Smaller Public Companies
by
Chairman Christopher Cox
U.S. Securities and Exchange Commission
Washington, DCApril 24, 2006
The Advisory Committee’s members and staff have performed an extraordinarily valuable public service in so thoroughly and professionally setting forth the views of America’s smaller public companies. I congratulate the Committee, its co-chairs, and every member for their hard work and valuable advice.
The Committee’s Final Report includes a compelling affirmation of the Sarbanes-Oxley Act of 2002 and the improved corporate governance and accountability the Act provides.
The report’s 32 recommendations reflect the culmination of a thoughtful, comprehensive and open process that included more than a dozen public meetings across the country, testimony from 42 expert witnesses, and countless hours of study and deliberation over the past 13 months. The Commission will carefully consider these and other recommendations as we go forward. For now, as we receive this report, the Commission can say with honest appreciation: thank you for a job well done."
As they say in sports, it ain't over til it's over! I think it is over! The fat lady is warming up. Better get those SOX 404 projects going again. Dust those binders off and review those internal controls over financial reporting. Welcome back to the highest standards in the world!
But there are choices. In the Dubai Stock Exchange, where there ARE no rules. You can start the year with the index at approximately 1200 and recently dive to around 600. This is what happens where there is total speculation and no regulation. Lots of money can be made on insider trading and other pasttimes, but there is no investor protection.
Congratulations to Chairman Cox for having the guts to speak the truth. Standards are a good thing. Stay the course.
"Statement of SEC Chairman Christopher Cox Regarding Final Report and Recommendations of Advisory Committee on Smaller Public Companies
by
Chairman Christopher Cox
U.S. Securities and Exchange Commission
Washington, DCApril 24, 2006
The Advisory Committee’s members and staff have performed an extraordinarily valuable public service in so thoroughly and professionally setting forth the views of America’s smaller public companies. I congratulate the Committee, its co-chairs, and every member for their hard work and valuable advice.
The Committee’s Final Report includes a compelling affirmation of the Sarbanes-Oxley Act of 2002 and the improved corporate governance and accountability the Act provides.
The report’s 32 recommendations reflect the culmination of a thoughtful, comprehensive and open process that included more than a dozen public meetings across the country, testimony from 42 expert witnesses, and countless hours of study and deliberation over the past 13 months. The Commission will carefully consider these and other recommendations as we go forward. For now, as we receive this report, the Commission can say with honest appreciation: thank you for a job well done."
As they say in sports, it ain't over til it's over! I think it is over! The fat lady is warming up. Better get those SOX 404 projects going again. Dust those binders off and review those internal controls over financial reporting. Welcome back to the highest standards in the world!
But there are choices. In the Dubai Stock Exchange, where there ARE no rules. You can start the year with the index at approximately 1200 and recently dive to around 600. This is what happens where there is total speculation and no regulation. Lots of money can be made on insider trading and other pasttimes, but there is no investor protection.
Congratulations to Chairman Cox for having the guts to speak the truth. Standards are a good thing. Stay the course.
April 20, 2006
Final SEC Advisory Committee on Smaller Public Companies Public Meeting/Swan Song
I would like to congratulate all of the ACSPC committee members on their work for this committee. Sarbanes-Oxley has certainly commanded alot of media time and intense debate over the last almost four years. For this committee, it has certainly been an interesting ride these last 13 months.
It has been refreshing to hear so much debate which has been open and free.
Having personally listened to or attended every one of these public meetings, there certainly have been some interesting technical gaffes on technology on such things as conference calls etc.
BUT, for those who have been quick to criticize these minor problems (as some bloggers have), let's not forget that the SEC does not have to hold these meetings in public. They have chosen to elevate this debate to a high level AND out in front of everyone. Nothing is hidden. Good for the SEC!
So before we are quick to snipe about a lack of perfection in the proceedings, let us not forget that there is not another country in the world that allows such a large amount of public input and has such transparency in its discussion and decision making processes. Everyone can be heard if they want to take the time to provide their input. Everyone is equal in this process.
Other countries who are very well regarded democracies choose to make all these types of decisions behind closed doors and without much real public input. They not only do not announce their decision making process, but put notices up before holidays so that they do not have to answer questions any sooner than possible.
Yes, the United States is imperfect, but I say, once again, "God Bless America" with all her faults. At least we can have open debate without fear of retribution and if we choose to do so, we can speak out with freedom and be heard.
That is something to value and NOT to take for granted.
It has been refreshing to hear so much debate which has been open and free.
Having personally listened to or attended every one of these public meetings, there certainly have been some interesting technical gaffes on technology on such things as conference calls etc.
BUT, for those who have been quick to criticize these minor problems (as some bloggers have), let's not forget that the SEC does not have to hold these meetings in public. They have chosen to elevate this debate to a high level AND out in front of everyone. Nothing is hidden. Good for the SEC!
So before we are quick to snipe about a lack of perfection in the proceedings, let us not forget that there is not another country in the world that allows such a large amount of public input and has such transparency in its discussion and decision making processes. Everyone can be heard if they want to take the time to provide their input. Everyone is equal in this process.
Other countries who are very well regarded democracies choose to make all these types of decisions behind closed doors and without much real public input. They not only do not announce their decision making process, but put notices up before holidays so that they do not have to answer questions any sooner than possible.
Yes, the United States is imperfect, but I say, once again, "God Bless America" with all her faults. At least we can have open debate without fear of retribution and if we choose to do so, we can speak out with freedom and be heard.
That is something to value and NOT to take for granted.
Money and the Path of Least Resistance (or Compliance)
There is much discussion in the North American financial community, government organizations and media about the large volume of IPOs over the last 12-18 months that have taken place on the AIM exchange in London. Click here for an article from Reuters. Even Alan Greenspan, ex-head of the Federal Reserve, is concerned that this increase in IPOs elsewhere is a negative reflection on U.S. market competitiveness.
The biggest culprit according to many commentators are the U.S. compliance rules (i.e. - Sarbanes-Oxley Act of 2002) which are driving the IPOs "overseas".
This is simplistic and not particularly accurate (Note to Readers: please give me your comments and criticisms on this topic to help improve the understanding of "cause and effect" and quality of discussion).
Other reasons that IPOs may be going "overseas" include:
The biggest culprit according to many commentators are the U.S. compliance rules (i.e. - Sarbanes-Oxley Act of 2002) which are driving the IPOs "overseas".
This is simplistic and not particularly accurate (Note to Readers: please give me your comments and criticisms on this topic to help improve the understanding of "cause and effect" and quality of discussion).
Other reasons that IPOs may be going "overseas" include:
- The economic cycle and market cap increases over the last two years have been heaviliy weighted to resource companies (mining. oil and gas, etc). U.S. exchanges have not typically represented these same sectors to the extent of the FTSE or the TSX for instance. All you have to do is take a look at gains on the FTSE and TSX indices (35%+ and 40%+ respectively) over the last two years versus the NASDAQ and DOW (roughly 20% each) to understand an important market dynamic and attractor.
- So based on 1. above it follows that many of the IPOs going overseas have been resource based. Nothing succeeds like success for a market (I.e. TSX-V or AIM) when you have domain expertise in a hot sector.
- U.S. exchange rate values over the last two years versus other currencies coupled with the change in U.S. market indices versus non-U.S. indices. If you spend a few minutes on the currency issue versus market gains you will also understand why money has often gravitated to non-U.S. markets. A U.S. dollar just isn't worth what it used to be.
- Cheaper money offshore. My guess is that other markets such as AIM are awash in petrodollars or "trading surplus dollars"that in many cases would not be invested in U.S. markets in any event (i.e. - politics, privacy, etc etc). These dollars have to go somewhere and these overseas markets are taking advantage of the situation. A market "awash" in money is going to attract new companies.
Now, are any of 1. through 4. really driven by the the Sarbanes-Oxley Act of 2002?
No.
These are critical components to the growth of overseas markets and central to the increase of IPOs in these same markets.
Which leaves us with the cost of compliance issue and Sarbanes-Oxley driving away IPOs that "should rightfully be happening on U.S. markets".
So, is compliance expensive? Certainly there is a cost to implementing financial and accounting standards, but the standards exist to protect investors. Current dissatisfaction with the cost of SOX (particularly Section 404) is very related to initial implementation, deferred procedural maintenance, excessive auditor attestation, and let's face it, management whining and procrastination. After a generation of focusing on productivity/growth, looking at controls is somehow seen as an unrelated, non-value added management exercise. All you have to do is take a look at the number of financial restatements to understand that there are some problems that need to get solved and quick!
Investors such as Calpers have made it clear that strong controls and compliance environments are a key evaluation factor in their investment portfolios. Investors want to have confidence in a company's financial statements and management's claim about the direction/stability of the business.
This discussion about compliance (i.e. - processes to ensure timely and accurate information)being expensive reminds me of the discussion in North America about how expensive quality was in the 1970s and 1980s when Made in Japan went from being a joke to being an industry destroyer. It turns out that getting things right the first time (quality and its close cousin, financial compliance) is actually cheaper. Stay tuned for this them in the coming weeks.
Some IPOs are going overseas because the compliance is more "flexible" and thus cheaper. Some IPOs are going overseas because those markets are more focused on those sectors and the stage of the economic cycle.
Hopefully the discussion above can help to initiate new perspectives in terms of the "IPO flight" and compliance debate.
April 19, 2006
Changes in Canadian Financial Compliance - The forecast calls for greater liability
Recent proposed changes to the Canadian equivalent to SOX (CSA Notice 52-313) are beginning to ripple through the TSX and TSX V markets.
Highlights include:
Highlights include:
- Proposed elimination of auditor review and attestation of a company's internal control over financial reporting (elimination of MI 52-111).
- Proposed expansion of CEO/CFO certification requirements to include discussion in the annual MD&A as to the effectiveness and process used to evaluate internal controls over financial reporting (expansion of MI 52-109).
- It is proposed that all TSX.V companies must now "evaluate" the effectiveness of their internal controls over financial reporting (this is a new requirement and an expansion of MI 52-109).
- All TSX and TSX.V companies (excluding SOX filers) must undertake "evaluation" of ICFR effectiveness for years ending on or after Dec 31, 2007 (New for all TSX.V companies. Sooner for smaller cap TSX companies based on the old MI 52-111.
What does this mean for management teams, audit committees and their auditors? An article published today in the Globe and Mail (click here) provides some ideas as to the impact.
Other organizations such as Thomson Carswell are running sessions in May in Vancouver, Calgary and other Canadian cities to further explain the impact of these proposed changes. Click here to learn more.
Ouch! Control problems and restatements are hitting close to home.
This is more than a little ironic. The co-chair (Herb Wander) of the SEC Small Business Advisory Committee can't be feeling too good about this . Click here to read more.
The real issue is that financial and accounting controls have not been a strong suit of the business community. The Committee has undertaken extensive work over the past year but appears to have largely become focused on cost, not on compliance. Compliance comes before cost because the lack of solid controls is always more expensive that getting it right in the first place. Do committee members think that financial and accounting controls are strong for the smaller and microcap companies? Methinks not, so I'm not sure how their recommendations protect investors.
To see how your company can affordably avoid the misfortune of poor internal controls please go to www.issuescentral.com and learn about the Compliance Playbook(R). For Canadian-based filers please go to www.compliancepartner.ca to learn more about the Compliance Partner(TM) product.
The real issue is that financial and accounting controls have not been a strong suit of the business community. The Committee has undertaken extensive work over the past year but appears to have largely become focused on cost, not on compliance. Compliance comes before cost because the lack of solid controls is always more expensive that getting it right in the first place. Do committee members think that financial and accounting controls are strong for the smaller and microcap companies? Methinks not, so I'm not sure how their recommendations protect investors.
To see how your company can affordably avoid the misfortune of poor internal controls please go to www.issuescentral.com and learn about the Compliance Playbook(R). For Canadian-based filers please go to www.compliancepartner.ca to learn more about the Compliance Partner(TM) product.
April 18, 2006
At the recent SEC Conference call for the Advisory Committee on Smaller Public Companies (ACSPC) some of the committee members were very interested in the progress of the AIM exchange. They were worried about the impact on the future of US markets.
They will enjoy success from companies who cannot pass muster with the capitalization requirements in other markets. Also, AIM is receiving a lot of investment from the Middle East. The question is this: Would money from oil rich middle eastern countries be invested in the US markets to the same extent given the tensions and strife between the US and several of these same countries? So when you ask the question about the success of AIM is all because of Sarbanes-Oxley or things possibly nearer and dearer to the American heart?
It is not all about Sarbanes-Oxley after all but about the friends you keep and the battles you must fight.
The other real question that will determine the long term success or failure of the AIM is not so much how many firms they can bring to market. Frankly, Canadian markets have been quite good for years at bringing smaller firms to market. The real challenge is can you get analyst coverage such that you can get any "heat" in your trading volume. No heat, no upside. No upside, no future capital investment.
An article, from the Globe and Mail, cites some interesting facts about the AIM market.
" And the number of foreign companies that have gone public here has almost doubled to 226 in that span. The surging resource market has had a big hand in AIM's success, as have general economic conditions, which are flooding the world's markets with liquidity. Companies appreciate the fact that “class-action” is virtually a foreign word in the U.K. market, while investors have been enticed with several tax advantages (as long as you hold an AIM stock for three years, you can pretty much eliminate any capital gains tax, which discourages people from flipping stocks)....Flexibility might be an understatement. For many Canadian investors, the AIM structure can look downright bizarre. There are no minimum requirements for market size or trading track records, and companies do not have to issue quarterly reports, which cuts down considerably on costs." For the complete article, click here.
If your company is traded on North American exchanges and files quarterly reports and needs to meet regulatory requirements of Sarbanes-Oxley or 52-109, see www.issuescentral.com to learn more about Compliance Playbook(tm) or www.compliancepartner.ca for Compliance Partner(tm).
They will enjoy success from companies who cannot pass muster with the capitalization requirements in other markets. Also, AIM is receiving a lot of investment from the Middle East. The question is this: Would money from oil rich middle eastern countries be invested in the US markets to the same extent given the tensions and strife between the US and several of these same countries? So when you ask the question about the success of AIM is all because of Sarbanes-Oxley or things possibly nearer and dearer to the American heart?
It is not all about Sarbanes-Oxley after all but about the friends you keep and the battles you must fight.
The other real question that will determine the long term success or failure of the AIM is not so much how many firms they can bring to market. Frankly, Canadian markets have been quite good for years at bringing smaller firms to market. The real challenge is can you get analyst coverage such that you can get any "heat" in your trading volume. No heat, no upside. No upside, no future capital investment.
An article, from the Globe and Mail, cites some interesting facts about the AIM market.
" And the number of foreign companies that have gone public here has almost doubled to 226 in that span. The surging resource market has had a big hand in AIM's success, as have general economic conditions, which are flooding the world's markets with liquidity. Companies appreciate the fact that “class-action” is virtually a foreign word in the U.K. market, while investors have been enticed with several tax advantages (as long as you hold an AIM stock for three years, you can pretty much eliminate any capital gains tax, which discourages people from flipping stocks)....Flexibility might be an understatement. For many Canadian investors, the AIM structure can look downright bizarre. There are no minimum requirements for market size or trading track records, and companies do not have to issue quarterly reports, which cuts down considerably on costs." For the complete article, click here.
If your company is traded on North American exchanges and files quarterly reports and needs to meet regulatory requirements of Sarbanes-Oxley or 52-109, see www.issuescentral.com to learn more about Compliance Playbook(tm) or www.compliancepartner.ca for Compliance Partner(tm).
April 12, 2006
Is SOX driving away North American IPOs?
If you listened in today on the SEC Small Business Advisory Committee's final review of its upcoming recommendations with respect to SOX 404, capital formation, etc, you would have heard much comment about how IPOs in the U.S. market are drying up primarily because of the cost of Sarbanes-Oxley.
Let's face it. The U.S. market has the world's highest investment standards and equity volumes. Marginal companies may be encouraged to begin their "public journey" elsewhere because of the attractiveness of "flexible regulatory regimes" ( What does that mean?! Gumby does Compliance! Next it will be optional compliance). In any event, the good companies all want to enjoy U.S. market valuations and trading coverage. The issues before the SEC and the Small Business Advisory are ones of standards and cost-effective implementation of those standards. The investing public is not well served by lowering the standards, nor are the companies themselves as their long-term cost of capital will increase. Effective compliance is good for business long term - just like good hygiene is important for public health.
Let's face it. The U.S. market has the world's highest investment standards and equity volumes. Marginal companies may be encouraged to begin their "public journey" elsewhere because of the attractiveness of "flexible regulatory regimes" ( What does that mean?! Gumby does Compliance! Next it will be optional compliance). In any event, the good companies all want to enjoy U.S. market valuations and trading coverage. The issues before the SEC and the Small Business Advisory are ones of standards and cost-effective implementation of those standards. The investing public is not well served by lowering the standards, nor are the companies themselves as their long-term cost of capital will increase. Effective compliance is good for business long term - just like good hygiene is important for public health.
April 11, 2006
Methinks thou doth protest (or was that attest) too much
Shakespeare would have loved the SOX and financial compliance market. Everyone is a victim in terms of cost/liability (Filer, Audit Firm, Investor, etc) and yet everyone is also a benefactor in terms of improved processes/client billings/information. The good stuff always cuts both ways.
On Wednesday, April 12th, the SEC Advisory on Small Business will be tele-conferencing to undertake a final review of its recommendations with respect to SOX 404, capital formation, and so on. But rest assured the focus will be on the provisions related to Internal Control over Financial Reporting (SOX 404) and the cost/benefit argument.
An interesting trend is emerging that some observers may have missed. While the initial impetus to SOX and financial restatements may have been some questionable ethics and financial engineering techniques at big name companies, it looks like what is emerging is a significant gap in the understanding, application and disciplined procedural execution of accounting standards across a significant minority of publicly traded firms. The reality is that reporting on the results of a publicly traded company is complex and detailed. Isn't it time we "upped" our accuracy, financial hygiene and standards? Don't we owe it to investors and their faith in the market?
To learn more about cost-effective tools to streamline your company's SOX compliance effort please go to www.issuescentral.com for information on the Compliance Playbook(R). Canadian-based filers needing to comply with MI 52-109 and/or SOX please go to www.compliancepartner.ca.
On Wednesday, April 12th, the SEC Advisory on Small Business will be tele-conferencing to undertake a final review of its recommendations with respect to SOX 404, capital formation, and so on. But rest assured the focus will be on the provisions related to Internal Control over Financial Reporting (SOX 404) and the cost/benefit argument.
An interesting trend is emerging that some observers may have missed. While the initial impetus to SOX and financial restatements may have been some questionable ethics and financial engineering techniques at big name companies, it looks like what is emerging is a significant gap in the understanding, application and disciplined procedural execution of accounting standards across a significant minority of publicly traded firms. The reality is that reporting on the results of a publicly traded company is complex and detailed. Isn't it time we "upped" our accuracy, financial hygiene and standards? Don't we owe it to investors and their faith in the market?
To learn more about cost-effective tools to streamline your company's SOX compliance effort please go to www.issuescentral.com for information on the Compliance Playbook(R). Canadian-based filers needing to comply with MI 52-109 and/or SOX please go to www.compliancepartner.ca.
April 07, 2006
"This is like deja vu all over again" - Nortel to restate its restatements
Yogi Berra ... very funny.
Nortel ... not so much.
Nortel announced on Thursday, April 6th that it would be making additional corrections to its previously corrected financial statements (previous announcement was March 10th). Click here to read more.
This is the sad continuation of serial restatements by this company and diminishes their abilities as innovators in communications and technology. It also highlights the critical nature of effective controls over financial reporting and key business processes. This needs to be a core strength of every company.
What are the consequences of poor controls for Nortel? They include: increased reputational risk; reduced employee morale and increased turnover; increased cost of capital; loss of faith in management by many investors; and, a critical if necessary "distraction" to correct financial hygiene issues that are reducing the ability of the company to compete and thrive. So, is anyone out there for strong controls?
To affordably improve your company's internal controls over financial reporting and Sarbanes-Oxley compliance, please go to www.issuescentral.com and learn more about the Compliance Playbook(R). If you are a Canadian-based filers (either SOX or MI 52-109) please go to www.compliancepartner.ca and learn more about Compliance Partner(TM).
As for Nortel and financial restatements, what would Yogi Berra say? "It ain't over till it's over."
Nortel ... not so much.
Nortel announced on Thursday, April 6th that it would be making additional corrections to its previously corrected financial statements (previous announcement was March 10th). Click here to read more.
This is the sad continuation of serial restatements by this company and diminishes their abilities as innovators in communications and technology. It also highlights the critical nature of effective controls over financial reporting and key business processes. This needs to be a core strength of every company.
What are the consequences of poor controls for Nortel? They include: increased reputational risk; reduced employee morale and increased turnover; increased cost of capital; loss of faith in management by many investors; and, a critical if necessary "distraction" to correct financial hygiene issues that are reducing the ability of the company to compete and thrive. So, is anyone out there for strong controls?
To affordably improve your company's internal controls over financial reporting and Sarbanes-Oxley compliance, please go to www.issuescentral.com and learn more about the Compliance Playbook(R). If you are a Canadian-based filers (either SOX or MI 52-109) please go to www.compliancepartner.ca and learn more about Compliance Partner(TM).
As for Nortel and financial restatements, what would Yogi Berra say? "It ain't over till it's over."
April 05, 2006
Impact of Financial Restatements on Smaller Issuers
Financial restatements are tough on everyone ... most of all shareholders and their confidence in their investments.
Take a look at what happened to one smaller issuer, Richardson Electronics (NASDAQ, Symbol: RELL) over the last 24 hours. Today, the electronics company reported that it would restate its results for the three years ending in May 2005 as well as for the first two quarters of the current fiscal year. The $100+ million market-cap discovered errors in financial accounting at one of its Italian subsidiaries. NASDAQ investors cut over 20% of the company's market capitalization when shares began trading.
Ouch! Somebody is $20 million lighter.
Solid internal controls over financial reporting are fundamental to reducing this kind of market cap erosion.
To learn more about how your company can affordably strengthen internal control over financial reporting to comply with SOX Section 404 please go to www.issuescentral.com to learn more about the Compliance Playbook(R) . Canadian-based issuers needing to comply with SOX or MI 52-109 are encouraged to learn more about the Compliance Partner(tm) product by going to www.compliancepartner.ca.
Take a look at what happened to one smaller issuer, Richardson Electronics (NASDAQ, Symbol: RELL) over the last 24 hours. Today, the electronics company reported that it would restate its results for the three years ending in May 2005 as well as for the first two quarters of the current fiscal year. The $100+ million market-cap discovered errors in financial accounting at one of its Italian subsidiaries. NASDAQ investors cut over 20% of the company's market capitalization when shares began trading.
Ouch! Somebody is $20 million lighter.
Solid internal controls over financial reporting are fundamental to reducing this kind of market cap erosion.
To learn more about how your company can affordably strengthen internal control over financial reporting to comply with SOX Section 404 please go to www.issuescentral.com to learn more about the Compliance Playbook(R) . Canadian-based issuers needing to comply with SOX or MI 52-109 are encouraged to learn more about the Compliance Partner(tm) product by going to www.compliancepartner.ca.
April 04, 2006
Take the Public's Money and You'll Have to Pay a Price
The previous blog entry dealt with recent comments from SEC Chairman COX (see below).
It seems that the SEC Chairman and others are pushing back on relaxing/neutering the 404 provisions as they apply to smaller companies. Why is this given all the pressure to eliminate 404 for smaller companies because it is costly and onerous? Perhaps it is because they are worried about creating a small cap compliance ghetto where the perceived risk (and cost of capital) is increased relative to today's market. Maybe they want the U.S. markets to continue to maintain the highest standards relative to foreign markets, and avoid the "race for the bottom" with respect to investment standards that is occurring on other markets. Or, perhaps it is because they know that smaller companies have significant existing challenges with respect to improving internal controls over financial reporting and there is no point in delaying the need to improve financial "hygiene" for this segment of issuers. If you take the public's money you are going to have to pay the price.
It seems that the SEC Chairman and others are pushing back on relaxing/neutering the 404 provisions as they apply to smaller companies. Why is this given all the pressure to eliminate 404 for smaller companies because it is costly and onerous? Perhaps it is because they are worried about creating a small cap compliance ghetto where the perceived risk (and cost of capital) is increased relative to today's market. Maybe they want the U.S. markets to continue to maintain the highest standards relative to foreign markets, and avoid the "race for the bottom" with respect to investment standards that is occurring on other markets. Or, perhaps it is because they know that smaller companies have significant existing challenges with respect to improving internal controls over financial reporting and there is no point in delaying the need to improve financial "hygiene" for this segment of issuers. If you take the public's money you are going to have to pay the price.
What Can Small Business Expect from SEC Chairman Cox with respect to SOX 404?
Recent comments made by the SEC Chairman point to little or no "dilution" of SOX 404 (Management's Assessment of Internal Control over Financial Reporting) for smaller issuers.
As outlined in an article at CFO.com (Small-business 404 Waiver Unlikely: Cox) it appears that if you take the public's money you should expect the same compliance standard regardless of market capitalization and organizational size. Mr. Cox's emphasis will be on making the provisions of SOX 404 more efficient (i.e. - probably looking at the interpretation of AS2 audit standard, or the scope of auditor attestation).
For more information on the article please click here.
To understand how your emerging to mid-size business can affordably strengthen internal controls over financial reporting please go to www.issuescentral.com to learn more about the Compliance Playbook(R). If you are a Canadian-based issuer then go to www.compliancepartner.ca to obtain information on the Compliance Partner(tm) product.
As outlined in an article at CFO.com (Small-business 404 Waiver Unlikely: Cox) it appears that if you take the public's money you should expect the same compliance standard regardless of market capitalization and organizational size. Mr. Cox's emphasis will be on making the provisions of SOX 404 more efficient (i.e. - probably looking at the interpretation of AS2 audit standard, or the scope of auditor attestation).
For more information on the article please click here.
To understand how your emerging to mid-size business can affordably strengthen internal controls over financial reporting please go to www.issuescentral.com to learn more about the Compliance Playbook(R). If you are a Canadian-based issuer then go to www.compliancepartner.ca to obtain information on the Compliance Partner(tm) product.
Internal Control Provisions of Sarbanes-Oxley "Flushing Out" Bribery
It seems that another one of the consequences of SOX is a renewed look at bribery and its corrosive effects. According to the following April 3, 2006 article (Coming Clean About Bribery) found at CFO.com, there is a dramatic increase in formal disclosures as to violations of the Foreign Corrupt Practices Act (FCPA) as it relates to bribery. The improved internal control activities driven by SOX are the primary reasons for this increase.
To further view this article at CFO.com please click here .
To improve your organization's internal controls over financial reporting learn more about the Compliance Playbook(R) at www.issuescentral.com. If you are a Canadian-based publicly traded firm, please go to www.compliancepartner.ca to learn more about the Compliance Partner(tm) product offering.
To further view this article at CFO.com please click here .
To improve your organization's internal controls over financial reporting learn more about the Compliance Playbook(R) at www.issuescentral.com. If you are a Canadian-based publicly traded firm, please go to www.compliancepartner.ca to learn more about the Compliance Partner(tm) product offering.
