April 28, 2006

Battle Over a Footnote: Strange Results

Can anyone make heads or tails of this amended Form 8-K filed by National Presto Industries on April 25th (original filing date was April 13th). Appears that the company tried to set aside instructions from the SEC’s Division of Investment Management Staff, after which things got stranger and stranger…check out the 13 exhibits consisting of correspondence – including emails – between the SEC Staff, the company and the company’s independent auditor. This is not the company’s first scrape with the SEC; see this press release from 2002.

SEC Chairman Cox Testifies About Disclosure on the Hill

On Tuesday, Chairman Cox testified before the US Senate Banking Committee on the broad topic of improving financial disclosures. Here is a copy of his written testimony – and the FEI “Section 404 Blog” has notes about his oral comments, some of which address internal controls.

SEC Approves PCAOB’s Independence Rules Re: Tax Services

Last Thursday, the SEC finally approved the PCAOB’s auditor independence and ethics rules, which had been adopted by the PCAOB in final form last July (subject to the SEC’s blessing). In addition to addressing, pre-approval of tax services to audit clients, the new rules prohibit contingent fee arrangements for services provided to audit clients.

As noted in the Gibson Dunn memo posted in our “Auditor Independence ” Practice Area, the PCAOB’s new rules include several important matters for issuers to consider. As noted in this memo, “the PCAOB’s new rules include specific guidance regarding the manner in which audit committees are to pre-approve permissible tax services to be performed by the outside auditor. The rules also restrict an outside auditor from providing tax services to persons at an audit client who perform a “financial reporting oversight role” (other than directors). In addition, the PCAOB’s new rules provide that an auditor will not be deemed independent if the auditor (1) plans, markets or opines in favor of certain types of tax transactions for the audit client, or (2) provides tax services to an audit client for a contingent fee.”