TheCorporateCounsel.net

May 2, 2006

Coke’s Form 10-Q Risk Factor Disclosure

Last Monday, I blogged about the new risk factor disclosure requirement to consider for the 10-Qs being filed over the next few days. A subsequent question was asked in our “Q&A Forum” about what to do if a company has no material changes to the risk factors described in its last Form 10-K (see #1712 in the Forum).

I like the approach that Coke took to this issue. As reflected in its Form 10-Q filed recently, Coke directs readers to its 10-K without expressly stating that there was “no material change.” This is the best approach I’ve seen so far. Here is what Coke disclosed:

“In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2005, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.”

More from the PCAOB on Inspections and Internal Controls

Possibly in response to the rising internal control audit costs, the PCAOB issued a statement yesterday on the approach it intends to take with regard to inspections of internal control audits during this year’s inspection cycle, which commences this month. The key emphasis will be on the efficiency of the auditors’ performance of internal control audits and the inspectors will be delving into whether the auditors have achieved the objectives of Standard No. 2 with the least expenditure of effort and resources. This will include an examination of how well auditors implemented the PCAOB’s guidance from last May (which was supplemented by the November 30, 2005 Report on the Initial Implementation of PCAOB Auditing Standard No. 2.)

This year’s inspection cycle will include the annual inspections of the nine firms – eight U.S. and one Canadian – that audit more than 100 public companies (as required per SOX Section 104). Additionally, the PCAOB will continue its three-year cycle of inspections of firms that audit 100 or less public companies.

Also yesterday, the SEC and PCAOB announced the panels for their May 10th joint roundtable on the second year of internal control reporting. A related briefing paper and agenda were also issued by the SEC.

Also, last Thursday, the PCAOB issued an “Overview of Auditing Standard 4 – Reporting on Whether a Previously Reported Material Weakness Continues to Exist,” which summarizes key points from PCAOB’s previously issued AS4. As you might recall, this overview was requested by the SEC when it finally approved Standard No. 4 in February.

NYSE Updates Its Affirmations and Certifications

Last Friday, the NYSE updated its Section 303A Annual and Interim Written Affirmations and Section 303A Annual CEO Certification for domestic companies. The changes appear to be minor, and include adding the company’s ticker symbol, eliminating references to the transition period for classified boards that expired last year and simplifying text.

Here is a full comparison of the 2006 forms to the 2005 forms. Note that if your company has already submitted its 2006 Section 303A Annual Written Affirmation, a new submission is not required.