VideoMarie Leone, CFO.com | US
April 21, 2006
- The Cost of 404 Uncertainty
I believe most CFO's will agree that the costs of doing any financial project are lower once the organization has committed to a specific set of Project and time goals and objectives.
The Start-Stop approach to 404 (with the CEO uncommitted because he may not have to do "404") is the source of excessive cost.
A company that COMMITS to an investment approach to 404 regardless of "waffeling" at the political level. Will get the lowest cost, best performance, 404 compliant internal control system.
It is an investment analysis of "get-er-done", versus high audit fees forever.Posted by James Finn | Apr 27, 2006 5:15 PM ET
- Moving the argument
When regulators and others get a chance to redefine what small business means, we're just shifting the concern, and the ability to cheat, to another area. The people that 404 is intended to control will find a way to manipulate results in order to avoid being regulated. And that does nothing to restore public and investor confidence.
It would be time much better spent to better scope internal controls on financial reporting, and get out of the business of documenting and testing $5 transactions.Posted by Bernard Boona | Apr 23, 2006 5:17 AM ET
- Determination of small company
I thought small companies were determined by market cap only. The article stated that small companies are determined as having a market cap of $128 million or less and $10 million or less of revenue. What happened to the two thresholds of $100 million or less and $700 million or less of market cap?
Posted by Nathan Habegger | Apr 20, 2006 1:43 PM ET
- We need to RETHINK requirements
We don?t need a waiver for small companies and we don?t need a tiered structure based on arbitrary metrics. What we need is recognition that a system of internal control is scalable. The selection of control procedures should be expressly defined as a matter of judgement exercised by management
in light of such considerations as the size of the business, the complexity of its systems and procedures and the need to appropriately allocate resources. What hurts all business is the notion that the same checklist should be universally applied in a ?one size fits all? approach to fine assessments.
In my estimation, both the PCAOB and the SEC need to revisit and largely rewrite existing guidance to better address the Act?s requirement for a management assessment of controls ? not an external auditor assessment as has been stressed in almost everything written so far. The UK adopted the Turnbull guidance relating to matters of internal control some years ago. It goes onlyto requirements for management and the Board, it appears to have been successfully applied, and it could well be used as a model for future PCAOB and SEC work.
In my comment letter to the PCAOB and the SEC, I strongly suggested they adopt a ?principals based? approach to guidance as has been done in the UK. I further provided an illustration of management requirements that could be further developed by the SEC, and external auditor requirements that could be refined by the PCAOB. Yes it needs work, but we need to start somewhere and develop a more rational alternative to what we have now. My point is that with a little creative thinking we can develop a set of requirements that complies with the Act yet is universally applicable, more cost effective and very possibly more beneficial to shareholders.
See what you think: SEC CommentPosted by Den Stevens | Apr 19, 2006 10:58 AM ET
- EXEMPT THE BABIES
SURE, GO AHEAD AND EXDEMPT THE BABIES BUT I WOULD NEVER INVEST IN THEM OR LOAN THEM ANY MONEY.
Posted by jeffrey tilton | Apr 15, 2006 9:51 PM ET
- Find Reasonable Ground
The definition of reasonable ground for smaller companies ($787 million of market cap or less) includes the development of reasonable guidance for smaller companies and their auditors. It also includes adequate implementation time for both to educate and increase their accounting and audit staffs over a reasonable timeframe of 3 to 4 years. There is a severe shortage of accounting expertise in the accounting field. It will be nearly impossible to add 6000 new SOX 404 attestations in a shorter time period.
Posted by Robert Briscoe | Apr 14, 2006 8:49 PM ET
- Major Investors support Keeping 404
Think back about four years when the investors were expressing serious doubts about their faith in the markets and truthfulness in financial reporting. That same year the Sarbanes-Oxley Act of 2002 was introduced to help restore investor confidence. Well it seems that those same investors in 2006 (i.e. - Calpers, with over $ 200 bn in assets under management) continue to believe that all publicly traded companies should be held to high standards of financial reporting and control effectiveness. Amongst the approximately 100 letters submitted to the SEC Small Business Advisory Committee prior to the April 12th teleconference was one by Rob Faulkner, President, Board of Administration, California Public Employees' Retirement System (Calpers). According to Mr. Faulkner, Calpers invests across all sizes of companies and business sectors. He also says that the public employees of California would not be well served by creating a multi-standard system for SOX 404 compliance. You can infer that Calpers may further increase its cost of capital assumptions for small companies in the future if it feels that the companies are more suspect with resect to standards for financial "hygiene". Surely the Committee does not see this as a reasonable outcome. The focus should be on making 404 and internal controls more effective to make the companies AND investors happy.
Posted by Charley Best | Apr 14, 2006 8:37 PM ET
- I Object !!
If the company is Public, then there should be strict internal controls to protect the shareholders. A Private entity is exactly that..private. It's not about the annual revenue number!
Let the IRS and the SEC stay seperate because if they get married, no one can afford for them to have children.
John@CPASearchGroup.comPosted by J Whisman | Apr 14, 2006 1:26 PM ET
- It Depends on Whose Ox is being Gored...
Public companies are rightly speaking out about the excesses of costly regulation and PERSONAL liability being heaped upon them by self-rightous legislators. On the other hand, audit firms have found a wonderfully lucrative annuity they vehemently want to protect. This is all about money, not "restoring trust"...
Posted by GARY CADEMARTORI | Apr 14, 2006 11:56 AM ET
