Has the Pre-Sox Era Returned?

Posted by Ernest E. Badway on March 06, 2013

Auditors engaging in non-audit consulting?  A major accounting firm pushing for more consulting work?  Recently, the SEC’s chief accountant indicated that there were concerns at the SEC regarding auditor independence as a result of this push for non-auditing work from accounting firms.

In particular, the concern related to auditing firms boosting their non-audit consulting business.  This is particularly troubling given this was a issue was one of the impetuses giving rise to the  enactment of the Sarbanes-Oxley Act.  This SEC concern relates to there being developed a conflict of interest.  Such a conflict may result in a diminution of auditor independence. 

Although the SEC has spoken on this topic, no action has yet been announced.  We would not be surprised if we did not SEC attempt to "nail some hides to the shed."

There is No Escape from Whistleblowers Overseas

Posted by Ernest E. Badway on March 06, 2013

Alas, the Dodd-Frank whistleblower protections cover informants overseas.

The United States Court of Appeals for the Fifth Circuit, recently, held that the Dodd-Frank whistleblower protections cover informants that report to the SEC information about FCPA violations.  The court, citing that the plain language of the act, indicated that such individuals were covered.  This is an intriguing development given the recent issues relating to extraterritorial jurisdiction that the United States Supreme Court has even considered.

As such, companies must be aware of these issues going forward and consider the proper precautions.

Sarbanes-Oxley Redux

Posted by Ernest E. Badway on September 05, 2012

We have not talked about the Sarbanes-Oxley Act in sometime, so let's jump right in!! 

Interestingly, over the last 10 years since Sarbanes-Oxley became effective, audit costs for public and private companies have increased significantly.  We recently came across a survey published by Financial Executives International, indicating, that these fees increased somewhat over the last 10 years.  Additionally, the vast majority of those polled by the survey did not support the PCAOB’s mandatory audit rotation plan, stating that it would increase costs significantly. 

In reporting troubling results, the survey stated that only 37% of private companies had risk management processes in place.  That means a significant majority of private companies could be at risk.  One wonders if this leads to trouble in the future.

Finally, there was some positive aspects of the survey.  The report found that those companies with centralized operations on both the public and private level saved money in audit fees as opposed to those who had decentralized operations.