SOX 404(b) Provides Investor Value After All

Since the 2002 enactment of the Sarbanes-Oxley Act, no provision of the law has provoked more animus than Section 404(b), which requires public companies to have external auditors annually assess the adequacy of their internal controls over financial reporting.Scorned recently by a prominent econ...

By David McCann • Dec. 17, 2018

Merck to Buy French Animal Health Company

Merck & Co. reached a deal to acquire the French digital animal identification solutions company Antelliq Group for $2.37 billion from funds advised by BC Partners. The transaction is all cash. Merck said it would assume $1.3 billion in Antelliq’s debt, which it intends to repay shortly after...

By William Sprouse • Dec. 14, 2018

Rate of Growth in Audit Fees Doubled in 2017: FERF

The median rate of growth in audit fees for public companies doubled for 2017 compared with the prior year, according to research released on Tuesday.The median reported fee increase among 83 public-company respondents — a majority of them at Fortune 500 companies — was 2.5%, following a median h...

By David McCann • Dec. 11, 2018

PCAOB to Focus on New Technologies in 2019

The Public Company Accountancy Oversight Board is singling out new technologies as an area of focus for audit inspections in the coming year.In its outlook on objectives and potential focus areas for 2019, the PCAOB said staff from its Division of Registration and Inspection would be looking at, ...

By Matthew Heller • Dec. 10, 2018

GE’s Big Goodwill Impairment Draws Scrutiny

Which of two facts about the goodwill impairment charge General Electric took in its 2018 third quarter was more eye-opening?Was it the size of the write-down? The approximately $22 billion accounting hit was the biggest impairment charge (of any type) for a U.S. company since ConocoPhillips wrot...

By David McCann • Dec. 6, 2018

AICPA Issues New Benefit Plan Audit Rules

The American Institute of CPAs has taken another step toward improving the quality of audits of financial statements of employee benefit plans.The institute said Monday its Auditing Standards Board voted to issue a new standard that addresses the auditor’s responsibility to form an opinion and re...

By Matthew Heller • Dec. 4, 2018

Why Apple’s Disclosure Changes Are the Right Move

[Editor’s note: This article can be considered as a partial counterpoint to our Nov. 28 article, in which investment manager Vitaliy Katsenelson explained his decision to sell all of his firm’s stock in Apple. This new article looks at Apple’s value and changing business model from the author’s p...

By Jeff Majtyka, Ellipsis, and President • Dec. 4, 2018

Ex-Autonomy Execs Charged With Duping HP

The former CEO and a former finance executive of Autonomy have been charged with lying about the U.K. software company’s financial condition before it was taken over by Hewlett-Packard in 2011.The U.S. federal indictment of ex-CEO Mike Lynch and Stephen Chamberlain, who served as Autonomy’s vice ...

By Matthew Heller • Nov. 30, 2018

Manipulate Cash Flow to Boost Credit Ratings?

About 25 years ago, an important innovation emerged in bank lending to companies. In contrast to the traditional practice of charging fixed interest rates based on centrally adopted benchmarks, like LIBOR or the prime rate, banks increasingly adopted a more flexible process called “performance pr...

By David McCann • Nov. 29, 2018

Is Not Telling the ‘Whole Truth’ Securities Fraud?

Does complying with company disclosure procedures and consulting with legal counsel protect public-company CFOs from liability arising from statements made in press releases and during investor conferences?Based on a recent federal court jury verdict against David Johnston, the former CFO of Aveo...

By Paul Hastings LLP and Nicolas Morgan and Brian Kaewert • Nov. 27, 2018

8 Keys for a Successful Financial Audit

Preparing for an audit isn’t usually on anyone’s list of favorite things but it’s a necessary evil. For software-as-a-service (SaaS) businesses, audit preparation can be particularly stressful because the business model presents its own set of unique challenges related to financial operations tha...

By SaaSOptics, CEO, and Tim McCormick • Nov. 26, 2018

Lowe’s Announces Mexico Exit, Q3 Sales Miss

Lowe’s Companies is planning to close its stores in Mexico to focus on its core retail business amid a lower-than-expected quarterly sales increase.As Reuters reports, under newly-appointed CEO Marvin Ellison, Lowe’s “has been streamlining its business by shutting underperforming stores and cutti...

By Matthew Heller • Nov. 26, 2018

Gap’s Namesake Brand Weighs on Comp Sales

Gap’s quarterly same-store sales missed analysts’ estimates, with the weak performance of its namesake brand offsetting comparable sales gains at Old Navy and Banana Republic.The apparel retailer said overall same-store sales were flat in the third quarter, compared to estimates of a 1.1% increas...

By Matthew Heller • Nov. 21, 2018

Digital Investments Carry Increasing Financial Risk

In this era of digital transformation, the specter of spending unwisely on digital projects has emerged as a significant financial risk for companies.So says Tim Raiswell, a financial-data analyst and a research vice president at Gartner, who recently completed a broad analysis of first-half 2018...

By David McCann • Nov. 20, 2018

Kohl’s Shares Dip 9% Despite Earnings Beat

Kohl’s on Tuesday posted another quarterly gain in same-store sales but its shares tumbled as investors reacted to a lower-than-expected earnings outlook for the full year.The retailer has been one of the hottest stocks this year and its third-quarter performance beat analysts’ estimates.Kohl’s n...

By Matthew Heller • Nov. 20, 2018

Converging Technologies Will Lead to ‘Continuous Auditing’

We hear all the time how technology is going to radically change our future — and in fact, that technology-driven change is in progress now and has been so for quite a long time.But the business world still may be caught unaware by the speedy pace of change. It’s hard to get our minds around it.A...

By David McCann • Nov. 19, 2018

SEC Notches First Cryptocurrency Offering Settlements

The Securities and Exchange Commission announced it has settled its first civil penalties against a company solely for registration violations for selling digital tokens in initial coin offerings.The two companies that settled, CarrierEQ, also known as Airfox, and Paragon Coin, conducted ICOs in ...

By William Sprouse • Nov. 16, 2018

Poor Nonfinancial Reporting Tests Investors’ Trust

Corporate executives can talk all they want, for public consumption, about their companies’ strong connections with investors and customers. But when asked anonymously, a good many of them admit that companies aren’t very much trusted.According to a new global study of 1,000 CFOs and controllers ...

By David McCann • Nov. 16, 2018

CFOs on the Move: Week Ending Nov. 16

Allen Parker has been appointed to head finance at Zillow Group. He had been vice president, finance, for Amazon Devices, Amazon Pay, and Appstore since 2011.Risk-management provider Constellis has selected Gordon Foster to lead the finance function. He previously held the top finance spot at ASR...

By Joan Urdang • Nov. 16, 2018

Financial Systems: The Good, The Bad, and The Ugly

Let’s talk private equity portfolio companies and the financial systems they use.Here’s the good: The overwhelming majority of private equity (PE) stakeholders understand the value of effective financial information systems within portfolio companies. Those systems not only support day-to-day ope...

By Ayla Queiroga and Kristen Contreras • Nov. 15, 2018

Internal Controls Violations in Cyber-Fraud Cases?

(Editor’s note: The author is a former chief accountant of the Securities and Exchange Commission’s Division of Enforcement.)Companies are now on notice that they must consider cyber threats when devising and maintaining a system of internal accounting controls.A turning point came in mid-October...

By Howard Scheck • Nov. 15, 2018

Uber’s Spending on New Businesses Hits Profit

Uber’s net loss widened to more than $1 billion in the third quarter as the ride-hailing company invested heavily in future growth businesses ahead of an initial public offering.Other key metrics self-reported by Uber showed gross bookings for its ride-hailing and delivery services rose 6%, the t...

By Matthew Heller • Nov. 15, 2018

SoftBank Plans $21 Billion IPO

SoftBank announced it plans to sell $21 billion (2.4 trillion yen) of stock in its mobile telecoms unit, part of Chief Executive Officer Masayoshi Son’s effort’s to reposition the Japanese company as a global technology investor.The initial public offering would be the largest since Alibaba went ...

By William Sprouse • Nov. 12, 2018

A Way to Achieve Continuous Improvement at Regulated Utilities

Some think of utilities as a homogenous group that produce steady lackluster returns for shareholders. It is true that on average over the business cycle, utilities earn lower returns than the overall market, but the returns earned by utilities vary considerably.If you had invested $10,000 at the...

By Luke Kim and Gregory V. Milano • Nov. 12, 2018

Disney Surge May Accelerate Fox Deal Closing

The Walt Disney Co. reported better-than-expected earnings on Thursday, continuing the company’s strong recent performance. In response, the company’s stock price was up almost 3% in Friday morning trading and has risen about 10% for the year.Disney reported adjusted per-share earnings of $1.48, ...

By David McCann • Nov. 9, 2018