VideoThe Securities and Exchange Commission took another step closer to implementing provisions of the Sarbanes-Oxley Act, passed back in July.
The commission proposed rules that would require public companies to disclose information about internal control reports, company codes of ethics, and audit-committee financial experts.
In addition, it proposed rule changes that would prohibit actions designed to improperly influence auditors.
Specifically, the proposals would require companies to disclose the number and names of the "financial experts" serving on their audit committees, disclose whether they have adopted a code of ethics for their principal executive officer and senior financial officers, and file, in their annual reports, an internal control report of management.
The proposed rules would define a code of ethics to deter wrongdoing and promote honest and ethical conduct, avoidance of conflicts of interest, full, and fair, accurate, timely, and understandable disclosure in reports and documents that a company files with the commission. The new rules would also apply to other public communications made by a corporation.
Under the internal report proposal, a management team would have to state its responsibilities for establishing and maintaining adequate internal controls and procedures for financial reporting. A publicly traded company would also have to offer assessments of its internal controls and procedures for financial reporting. In addition, the independent accountant for a filer would have to attest to, and report on, management's evaluation of the company's internal controls and procedures for financial reporting.
The proposed rules from the SEC would also require a company to file an annual internal control report as part of its annual report. This report would address management's responsibility to establish internal controls and procedures for financial reporting. It would also require a management team to evaluate the effectiveness of those controls and procedures as of the last day of the company's fiscal year.
Further, a company's auditor must attest to, and report on, management's assertions in the internal control report. The proposal would also require companies to conduct quarterly evaluations of their internal controls and procedures for financial reporting.
The SEC said it is seeking comments on the rule proposals.
Penn. Insurance Group Sues Deloitte & Touche
Pennsylvania insurance officials are suing Deloitte & Touche LLC for their role in the demise of Reliance Insurance Co.
In a civil lawsuit, state insurance commissioner M. Diane Koken accused the auditor's actuary Jan A. Lommele of "professional negligence and malpractice, misrepresentation and breach of contract," according to the Associated Press.
They were also accused of aiding and abetting breaches of fiduciary duties by Reliance's chairman, Saul Steinberg, and other former officials, according to the account.
D&T denied any wrongdoing. Spokesman Paul Marinaccio told the AP: "Deloitte & Touche performed its services for Reliance in accordance with all applicable professional standards and will defend itself accordingly."
The lawsuit alleged that the accountants understated expected insurance claims by more than $500 million and overstated assets by about the same amount. That left the company's 1999 reported financial surplus a "billion-dollar overstatement," according to a published account of the suit.
More Grim Health-Care Cost News
Here's yet another study predicting double-digit health-care cost hikes for 2003.
Global outsourcing and consulting firm Hewitt Associates said it expects a 15.4 percent average increase for 2003, on top of a 2002 rate hike of 13.7 percent.
Hewitt said it expects some companies to continue absorbing the majority of next year's increase, but many are increasing employees' share of health-care premiums.
The average employee contribution for 2003 will be 19 percent for their own coverage and 24 percent for dependent coverage, according to Hewitt.
"Unless there is a fundamental change in the way health care is delivered, costs will double in the next five years," said Jack Bruner, national health-care practice leader at Hewitt. "This is a major concern for senior management as it impacts the bottom line of companies across the country."
On average, Hewitt forecasts that companies will receive 2003 cost increases of 15 percent for preferred provider organizations (PPOs), point-of-service (POS) plans, and traditional indemnity plans, and 16 percent for health maintenance organization (HMO) plans.
Translated into dollars, the average cost per person for most major companies will increase from $5,157 to $5,982 for HMOs, $5,545 to $6,367 for PPOs, $5,639 to $6,485 for POS plans, and $6,304 to $7,249 for indemnity plans, according to Hewitt.
The good news in all of this: initial reports from Hewitt in July had corporate health-care benefit costs for 2003 jumping up a whopping 22 percent.
And in fact, the California Public Employees' Retirement System (Calpers), the largest employee health-care purchaser in California, has already agreed to a health-care package that includes a 25.1 percent increase for HMOs. "The marketplace is extremely difficult," says Clark McKinley, a Calpers spokesman.
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