January 30, 2004

New NYSE FAQs on Corporate

As predicted by Broc, the NYSE yesterday posted on its website a set of FAQs on the new corporate governance rules in Section 303A of its listed company manual. There are 51 FAQs (up from the 47 predicted).

Companies Choosy About Their Auditors

According to ratings and analysis service Auditor-Trak, in 2003 each of the Big 4 accounting firms lost more public company audit clients than it acquired. Smaller national firms — Grant Thornton, BDO Seidman and McGladrey & Pullen — collectively acquired 21% of the clients lost by their Big Four competitors. Perhaps more interestingly, 34% of the public companies that formerly used a Big Four auditor and made a change opted for a regional or local firm as a replacement. Any firm auditing public companies must register with the PCAOB of course; it would appear that perhaps the early claims that this requirement would lead to a further constriction of the universe of public auditors might have been off the mark.

Complying with SOX 404

There has been continued murmurings that the SEC will postpone the effectiveness of its new rules requiring management to report on its assessment of the company’s internal controls (see Broc’s Blog from January 14) but a recent survey conducted by PricewaterhouseCoopers found that a majority of companies are working earnestly to be prepared to comply on time. PwC reports that fully 95% of executives say that they expect their companies to meet the deadline for compliance with Section 404 but almost half admit that it will be hard to do.

It’s a Small World

And the themes underpinning Sarbanes-Oxley continue to resonate throughout. On Wednesday, a number of policy makers, business leaders, investors and other experts operating under the umbrella of the Latin American Roundtable on Corporate Governance issued its white paper on that topic. The Organisation for Economic Cooperating and Development, one of the groups working on the white paper, summarizes some of the key action items as “taking voting rights seriously; treating shareholders fairly during changes in corporate control and de-listings; insuring the integrity of financial reporting and improving disclosure; developing effective boards of directors; improving the quality, effectiveness and predictability of the legal and regulatory framework; and continuing regional co-operation.”

Meanwhile, the Financial Services Authority of Britain continues to keep up the pressure in Europe, having just levied its largest fine ever against a financial advisory firm for compliance failures. The fine, which was equal to almost one and a half million dollars, was assessed against a unit of Deloitte & Touche for failures related to its investment trust sales and other pension work.

Posted by Kimberley Drexler