PCAOB Promises Hard Push on AS5
Board to Crack Down via Audit Inspections

Goelzer

PCAOB inspectors have begun scrutinizing audits to determine whether accounting firms have taken Auditing Standard No. 5 to heart. The Board wants to demonstrate its commitment to AS5—adopted last year to ease the burden of Sarbanes-Oxley compliance—and believes a stronger focus on AS5 during inspections will achieve that. “We can’t just issue a standard and then sit back and see what happens,” PCAOB board member Daniel Goelzer says. Corporations, still skeptical that auditors take AS5 seriously, are likely to welcome the move. Full details are inside.

PCAOB Promises Hard Push on AS5

States Moving to Adopt e-Discovery Rules

Pepper

The federal courts revamped their rules for civil procedure 18 months ago to bring them into line with the Internet age. Since then, states have been bringing their own rules into line with similar overhauls. “Inch by inch, states are acting to put something on the books,” says Farrah Pepper, co-chair of the Electronic Data Discovery Initiative at the law firm Gibson, Dunn & Crutcher. Inside is a look at which states have overhauled what discovery rules—including California, which may adopt rules that have some significant departures from the federal versions.

States Moving to Adopt e-Discovery Rules

Charting a Path Through Parallel Probes

Kaizer

A federal appeals court recently overturned a two-year-old California district court decision that had blasted the SEC and Justice Department for using a civil probe as a front to gather information for a criminal Justice Department investigation. In reality, legal experts say, such “parallel probes” are a common tactic. Inside, we offer some tips on what the pitfalls are in parallel probes, and how they can affect an executive’s (and a company’s) legal strategy. Says Andrew Kaizer of the law firm McDermott Will & Emery: “It is not outrageous behavior for [the SEC and DoJ] to coordinate.”

Charting a Path Through Parallel Probes

Activists Come Up Short on Bank Fights

Ferlauto

Annual meeting season for the banking industry reached a crescendo at the end of last month, with high-profile gatherings at Washington Mutual, Citigroup, Merrill Lynch, and elsewhere. Shareholders did force out directors at WaMu, but other banks defeated resolutions for shareholder say-on-pay votes. Richard Ferlauto of the American Federation of State, County, and Municipal Employees Union admitted the say-on-pay defeats were discouraging. “We thought this would be the break-out year,” he says. Full details of the meetings are inside.

Activists Come Up Short on Bank Fights

FASB Acts on Intangibles, Bankruptcy; More

Herz

The Financial Accounting Standards Board has published final guidance on how companies can determine the useful life of renewable intangible assets, as well as guidance that overturns a long-standing bankruptcy accounting rule regarding the adoption of emerging accounting standards. Also in the Accounting Industry Update this week: The PCAOB has disciplined another small audit firm; FASB and China have reached an agreement to converge accounting standards sometime in the future.

FASB Acts on Intangibles, Bankruptcy; More

Auditing Royalty Payments From Overseas

Schanfield

A reader recently asked us what the best approach is to auditing royalties due on licensing agreements for tangible goods. Inside this week, Arnold Schanfield, who heads the internal audit and enterprise risk management practice of ERM Associates, outlines several possible answers, depending on how well you trust your overseas partner. Regardless of your particular situation, he says, companies “must establish license and trademark agreements, as well as a system of legal and financial controls to provide assurance that the company receives the revenue it is due.” His full answer is inside.

Auditing Royalty Payments From Overseas

SEC on Mutual Recognition; Fee Hikes; More

Ruder

A top SEC official recently offered more detail on how the Commission plans to improve cross-border cooperation to oversee securities trading. Achieving such mutual recognition of regulators is “extremely important, very difficult, and likely to be very lengthy,” former SEC Chairman David Ruder tells Compliance Week. Also in The Filing Cabinet this week: The SEC has proposed sharp hikes in its fees to register securities and is moving forward on amendments for its cross-border tender, exchange offer, and business combination rules.

SEC on Mutual Recognition; Fee Hikes; More

The Basics of Auditing ERM Programs
Everyone recognizes the need for good risk-management programs, but nobody seems to know how to audit them to ensure they actually work. This week, Compliance Week Columnist Dan Swanson, former director of professional practices at the Institute of Internal Auditors, explores how to conduct an ERM audit. In general, he says, “internal auditors should assure management and the board that everything that should be done to manage risks is being done.” More of his insights and recommended steps to take are inside.

The Basics of Auditing ERM Programs

WEBCASTS Upcoming Webcasts on Compliance Week Compliance Week hosts two types of Webcasts: Sponsored Webcasts, which are free to attend, and CPE Webcasts, which grant one CPE credit per attendee and cost $50 for subscribers: Date Name Description May 13 Webcast SEC Plans for Foreign Private Issuers Join experts from DLA Piper to discuss how recent SEC actions will affect reporting requirements for foreign private issuers. May 20 Webcast Making ERM Work: Insights From Risk Assessments Join Shawn Tebben of risk consulting company Protiviti in a discussion of practical ways for meeting ERM challenges. May 22 Webcast Continuous Controls Monitoring Join Approva to learn how Continuous Privacy Monitoring tools can safeguard your applications that hold sensitive information.

Britain Mulls New Whistleblower Protection

Tattersall

Britain’s Financial Services Authority may soon have new power to offer immunity to corporate whistleblowers. Currently, would-be whistleblowers remain vulnerable to prosecution for the very market abuses they want to report, and so they rarely come forward. John Tattersall, a partner in the London office of PricewaterhouseCoopers, says the new enforcement power is especially vital to tackling insider-trading cases, which even the FSA admits are rampant in London. The full story is inside.

Britain Mulls New Whistleblower Protection

Brits on IT Security; Liability Caps; More

Thomas

The Financial Services Authority has warned that companies need to do more to protect customer data. In addition, Information Commissioner Richard Thomas, who polices data protection laws, says companies need to take the issue more seriously. Also in Global Glimpses this week: the E.U. moves to ease its Company Law compliance; efforts to converge Japanese accounting standards with IFRS are on track; Australia introduces statutory limits on auditor liability; and Canada is seeking comment on its internal control requirements.

Brits on IT Security; Liability Caps; More

Who’s Coming and Going in the GRC World

McMurray

Washington Mutual has named John McMurray as its new chief risk officer on the heels of the mortgage and credit crisis fallout. He assumes the role from Ron Cathcart. McMurray joined WaMu in August 2007 from Countrywide Financial, where he also served as chief risk officer. In addition, General Electric has appointed a new chief accounting officer, while E-Trade Financial Corp., has announced the resignation of its general counsel. More governance industry gossip is inside.

Who’s Coming and Going in the GRC World

Date	Lead Article	Description
April 29	The Diverse World of Compliance	Companies have little sense of how a “typical” compliance department works, according to new Compliance Week research.
April 22	FCPA Enforcements Roll Onward	Enforcement of the Foreign Corrupt Practices Act may be slow so far in 2008, but that’s not expected to last much longer.
April 15	Under the Radar: Safety Controls	The airline industry’s recent grounding of flights is a reminder of the difficulty in enforcing environmental, health, and safety controls.
April 8	Could the SEC Really Disappear?	Treasury Secretary Henry Paulson’s proposed overhaul of the financial regulatory system has big plans for the SEC.
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