As nearly everyone knows by now, one of the most significant provisions of Sarbanes-Oxley is “Management Assessment Of Internal Controls,” known to most firms as “SOX 404.” Section 404 requires that annual reports be accompanied by a statement clarifying that company management is responsible for creating and maintaining adequate internal controls, and that management has […]
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Posted inBoards & Shareholders
Accounting Violations Linked To Acquisitions, CEO Age
According to a two-and-a-half year study conducted at the Robert H. Smith School of Business at the University of Maryland, firms that violate accounting rules are more likely than their peers to provide extravagant stock options to their CEOs, to have history of making numerous acquisitions, and to have younger CEOs. The study looked at […]
Posted inTechnology
Electronic Filing and the EDGAR System: A Regulatory Overview
Below is the complete text of an outline prepared by staff members of the SEC Divisions of Corporation Finance and Investment Management to aid electronic filers. Compliance Week has also made available a downloadable PDF version of the outline, which can be found in the box in the right-hand column. Overview In early 1993, the […]
Posted inFrom the Archive
Shareholder Approval Of Equity Compensation Plans
On June 30, the SEC approved rules requiring shareholder approval of equity compensation plans, including stock option plans. The new rules will also require approval for repricings and material plan changes. The rules were originally proposed and adopted by the New York Stock Exchange and the Nasdaq Stock Market, and will apply to their listed […]
Posted inFrom the Archive
Corporate Governance on a Budget
Recent reports suggest that the cost of corporate governance reform has become quite significant, especially for small- and mid-cap companies. If you are responsible for compliance by a small- or mid-cap company, this increase in estimated costs can be staggering. However, if your company has relatively simple management and business structures and adequate in-house support, […]
Posted inFrom the Archive
Study: Don’t Wait For FASB; Cheaper To Expense Now
FASB plans to require companies to expense stock-options next year, but a new study shows it may be wise to act now. Buck Consultants, part of Mellon Financial, predicts that technology companies will experience a median decrease in EPS of approximately 20 times greater than companies that voluntarily adopt stock-option expensing guidelines now. The reason, […]
Posted inInternal Controls
Audit Fees May Rise 35%; Numbers Match Other Study
An informal survey of Financial Executives International members showed that companies expect their annual audit fees to increase by an average of 35 percent in order to cover required 404 attestations. Though the numbers came from an unscientific sampling of under 100 executives, they were actually within the range of a Foley Lardner study covered […]
Posted inAccounting & Auditing
Handling Earnings Announcements Under New Rules
It’s almost earnings reporting season again. To help companies get ready, this article reviews practices for handling earnings announcements in light of new SEC rules that took effect on March 28, 2003 and recent guidance provided by the staff of the SEC’s Division of Corporation Finance in the form of an FAQ issued on June […]
Posted inEthics & Culture
When It Comes To Ethics, Directors Seldom Get Training
Ethics policies are only “Step One.” Step Two requires training. But an educated, ethical workforce still won’t prevent senior executives from committing fraud if they’re intent on doing so, nor will it motivate a Board unable (or unwilling) to identify potential problems. It’s surprising, then, that—while most companies have conducted ethics and compliance training for […]
Posted inInternal Controls
Cautionary Language in Disclosure Control Effectiveness Statements
As most companies know by now, “disclosure controls and procedures” involve gathering, analyzing and ultimately communicating information that must be disclosed in Exchange Act reports. The SEC has provided flexibility for companies to develop processes that are consistent with their business and culture, but senior executives ultimately have to assess the effectiveness of their disclosure […]