January 30, 2008
FBI Gets into the Game to Uncover Fraud in Subprime Mortgage Fiasco
You know it has been a bad day when the third government entity is now investigating the subprime mortgage disaster. First it was the SEC, then the Attorney General's office of New York and now the FBI's Economic Crimes unit.
Fraud and insider trading allegations abound. One thing is for sure, some new regulations will come of this one.
Investment Banks and the banks around the world do not look too swift right now. First it was subprime mortgages with no rails and regs and now it is the French bank Societe Generale with the complete failure of controls and key performance indicators.
All I want to know is where were all these regulators before all this happened. There certainly was evidence before the whole thing blew up.
An excerpt from Business Week online: "Fall Guys?
It's not just public company executives who may need to worry about their sales. If, for example, a hedge fund manager pulled his own money out of a fund when he became aware of valuation problems, but left customers in, that, too, could be a problem. "That's not exactly insider trading, but it could involve fraud in connection with the sale of a security," says the investigator.
While there's no way of knowing yet what the probes will turn up, or whether any actions will rise to the level at which criminal intent can be established, Frenkel points out that the involvement of the FBI is not good news for executives at firms where wrongdoing is suspected.
"As we saw in the corporate fraud cases, companies have an incentive to resolve these investigations; that may include the sacrifice of corporate personnel," he says. "People often forget in the early stages of an investigation, their interests and those of a company can diverge. Companies can settle. They don't go to jail, people do."
Fraud and insider trading allegations abound. One thing is for sure, some new regulations will come of this one.
Investment Banks and the banks around the world do not look too swift right now. First it was subprime mortgages with no rails and regs and now it is the French bank Societe Generale with the complete failure of controls and key performance indicators.
All I want to know is where were all these regulators before all this happened. There certainly was evidence before the whole thing blew up.
An excerpt from Business Week online: "Fall Guys?
It's not just public company executives who may need to worry about their sales. If, for example, a hedge fund manager pulled his own money out of a fund when he became aware of valuation problems, but left customers in, that, too, could be a problem. "That's not exactly insider trading, but it could involve fraud in connection with the sale of a security," says the investigator.
While there's no way of knowing yet what the probes will turn up, or whether any actions will rise to the level at which criminal intent can be established, Frenkel points out that the involvement of the FBI is not good news for executives at firms where wrongdoing is suspected.
"As we saw in the corporate fraud cases, companies have an incentive to resolve these investigations; that may include the sacrifice of corporate personnel," he says. "People often forget in the early stages of an investigation, their interests and those of a company can diverge. Companies can settle. They don't go to jail, people do."
Audit Standard #6 from PCAOB: Evaluating Consistency of Financial Statements
The PCAOB has released Audit Standard #6 for review. If adopted by the SEC, it will become effective within 60 days - end of March 2008.
An excerpt is here: " The Board also removed the hierarchy of generally accepted accounting principles (GAAP) from its interim auditing standards. The GAAP hierarchy identifies the sources of accounting principles and the framework for selecting principles to be used in preparing financial statements. The Board believes that the GAAP hierarchy is more appropriately located in the accounting standards. Because the FASB intends to incorporate the hierarchy in the accounting standards, it no longer will be needed in the auditing standards. The Board has coordinated with the FASB and understands that the FASB intends to coincide the effective date of its GAAP hierarchy standard with that of the PCAOB."
As the world moves more toward one standard, these incremental moves make one accounting standard more possible. This will change the face of internal controls and their references as accounting standards change.
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
An excerpt is here: " The Board also removed the hierarchy of generally accepted accounting principles (GAAP) from its interim auditing standards. The GAAP hierarchy identifies the sources of accounting principles and the framework for selecting principles to be used in preparing financial statements. The Board believes that the GAAP hierarchy is more appropriately located in the accounting standards. Because the FASB intends to incorporate the hierarchy in the accounting standards, it no longer will be needed in the auditing standards. The Board has coordinated with the FASB and understands that the FASB intends to coincide the effective date of its GAAP hierarchy standard with that of the PCAOB."
As the world moves more toward one standard, these incremental moves make one accounting standard more possible. This will change the face of internal controls and their references as accounting standards change.
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
January 15, 2008
Smaller Non-Public Companies Have Higher Internal Control Standards than Smaller Public Companies
With all of the non-stop complaining about SOX 404, smaller public companies have received five years of delays on Section 404.
All during this time, the AICPA (American Institute of Public Accountants) was working on accounting standards regarding internal controls for NON-PUBLIC companies. These standards, SAS 107-112 require auditors to review internal controls over financial reporting for NON-PUBLIC companies. The affects companies with fiscal periods ending on or after December 15, 2006.
With the current deadline for public companies under 404(b) fiscal years on or after December 15, 2008 (possibly delayed to 2009), the public company standards are now lower than private companies. Interesting since internal controls are basic good business.
It is now difficult to make the case that smaller public companies cannot comply with ICFR standards when their private brethren will comply this year and be audited with a top down risk based approach.
Sound familiar? More detail on the unintended consequences of these delays can be reviewed in Lord Benoit's recent study.
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
All during this time, the AICPA (American Institute of Public Accountants) was working on accounting standards regarding internal controls for NON-PUBLIC companies. These standards, SAS 107-112 require auditors to review internal controls over financial reporting for NON-PUBLIC companies. The affects companies with fiscal periods ending on or after December 15, 2006.
With the current deadline for public companies under 404(b) fiscal years on or after December 15, 2008 (possibly delayed to 2009), the public company standards are now lower than private companies. Interesting since internal controls are basic good business.
It is now difficult to make the case that smaller public companies cannot comply with ICFR standards when their private brethren will comply this year and be audited with a top down risk based approach.
Sound familiar? More detail on the unintended consequences of these delays can be reviewed in Lord Benoit's recent study.
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
