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Inside Sarbanes Oxley — All the SOX news that's fit to print

If your organization isn’t already offering incentives to ferret out inappropriate behaviors, the new Dodd-Frank Act and whistleblowing rewards just might (and could make your company the next public spectacle).

Deloitte’s “Whistleblowing and new Race to Report” offers a very useful orientation to the impact of this new act. From their site,

The Dodd-Frank Wall Street Reform and Consumer Protection Act has created rewards of 10 to 30 percent of monetary sanctions for whistleblowers who report to the Securities and Exchange Commission (SEC) original information leading to securities law enforcement actions that recover more than $1 million. 

Press releases announcing settlements by the SEC in the first seven months of 2010 show how large future rewards for whistleblowers could be.

In addition, proposed changes to U.S. Federal Sentencing Guidelines may lead to a reduction in organizational sentences when the organization has an effective compliance and ethics program that incorporates direct reporting obligations from the head of the compliance program to the board of directors or audit committee.

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Internal Audit: The Continuous Conundrum

by Toby Lucich on May 27, 2010

The department painstakingly went through its inventory of SOX controls to determine which ones could be assessed just by analyzing data in company systems. Then data-analytic scripts were written to allow exceptions to be found. Now, for example, the entire population of journal entries can be examined quickly for segregation-of-duty violations.

..Look directly for irregularities traceable to the finance operation. Journal entries by senior finance executives or business-unit leaders are flagged, because entries normally are made by lower-level accountants. Likewise, any entries that boost revenue by a certain percentage, particularly those that put the business unit just above its budgeted monthly goal, are flagged.

Internal Audit: The Continuous Conundrum


How to choose the right nonexecutive board leader

May 26, 2010

Ever since stock-listing requirements prompted many US companies to name an independent director to serve as the chairman, lead director, or presiding director of the board, these companies have been grappling with what, exactly, this board leader should do and how to find the right person for the job. The change in governance followed corporate [...]

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How To Punish Leadership Negligence

May 25, 2010

In any sensible system of institutional governance, negligence would be sanctioned. So why is it that leaders of major corporations often seem to escape punishment for negligent conduct? Why is it that Tony Hayward, the head of BP, can publicly admit that it was “probably true” that the company should have done more to prepare [...]

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Just Released – COSO’s Analysis of Fraudulent Financial Reporting 1998-2007

May 25, 2010

COSO has released a new research study, Fraudulent Financial Reporting: 1998-2007,that examines 347 alleged accounting fraud cases investigated by the U.S. Securities and Exchange Commission (SEC) over a ten-year period ending December 31, 2007. It provides an in-depth analysis of the nature, extent and characteristics of accounting frauds occurring throughout the ten years, and provides [...]

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How mature is your Enterprise Risk Management (ERM) Practice?

April 28, 2010

I wanted to share what I found to be surprising statistics from their recently published 2010 Report on the Current State of Enterprise Risk Oversight: 2nd Edition” published in February. 48.7% of respondents describe the sophistication of their risk oversight processes as immature to minimally mature. Forty-seven percent do not have their business functions establishing [...]

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SEC Approves Enhanced Disclosure About Risk, Compensation and Corporate Governance

April 27, 2010

(12/16/2009)The Securities and Exchange Commission today approved rules to enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies. In particular, the new rules require disclosures in proxy and information statements about: The relationship of a company’s compensation policies and practices to risk management. The background and [...]

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Control Rationalization – 8 Best Practices

April 20, 2010

The health of your business requires consideration that a continual over assessment of risks and controls encumbers your resources and leads to unnecessary testing. External auditors need a business case to justify reducing SOX compliance requirements. As the business owner closest to the daily processes of your organization, you are in the best position to [...]

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SOX Life: Revisiting your Control Environment

April 13, 2010

I have had too many conversations about “just one more layer for good measure” when it comes to controls in the enterprise. Never enough time” and “too many competing demands” seems to be the recurring theme, as folks complain about staffing being reduced 10% since 2007, and cashflow being as tight as most of us [...]

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Amended Custody Rules and SAS 70s

April 12, 2010

On December 30, 2009, the Securities and Exchange Commission (SEC) finalized theamendments to the custody requirements of Rule 206(4)-2 (the “Rule”), under theInvestment Advisers Act of 1940. What do you need to do to prepare and complynow that the Rule has gone into effect as of March 12, 2010? See Deloitte’s “March 12th Effective Date [...]

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