August 21, 2006

Updating Policies: Prohibition on Tax Services

In the wake of the recent PCAOB rules on auditor independence, many companies have been updating their pre-approval policies regarding non-audit services. Some companies have even been cobbling new policies together that prohibit personal tax services from being performed by the independent auditor for persons in a financial reporting oversight role. In our “Pre-Approval of Non-Audit Services Policies” Practice Area, we have posted a sample of one of these new policies in a Word file.

The Big 2000

A few weeks ago, our “Q&A Forum” passed the 2000th question mark, which is really higher since a fair number of those include follow-ups. Quite a body of achievement if I must pat ourselves on the back as there is quite a bit of practical content buried in the Forum. I’m not sure if we can keep up with the growing pace of questions – and I remind you that we welcome your own input into any query that you see. And remember there is no need to identify yourself if you are inclined to remain anonymous when you post a reply…

Inspector General Recommendation: Continuous SEC Surveillance of Larger Companies

Last month, the SEC’s Office of Inspector General issued this report which recommends that the Division of Corporation Finance engage in continuous surveillance of larger companies. According to the report, this recommended program would be operated in a manner similar to that used by the SEC’s Office of Compliance Inspection and Examination for investment advisors. The report also recommends that Corp Fin better manage its workload and use risk factors more frequently during its preliminary screening of filings.

I beg to differ. I understand that a large portion of the overall US market cap consists of the huge capitializations of a relatively small group of companies – but these companies typically also have the most resources to devote to compliance matters. And as a general matter, it is my understanding that more frauds are perpetuated at smaller companies compared to larger ones. So using scant SEC Staff resources to continuously oversee the General Electrics of the world doesn’t seem like the best way to protect investors…