Last week, both houses of Congress passed a new Iran sanctions bill, the “Iran Threat Reduction and Syrian Human Rights Act” (HR 1905), which is now headed to the President for his signature. This law once enacted is likely to have a significant impact on transactions with Iran, including companies in their ’34 Act disclosures.
Prohibited Transactions
Under this new law, the U.S. government – within 60 days of its passage – must prohibit non-US foreign entities that are owned or controlled by US Persons from knowingly engaging in any dealings, directly or indirectly, with the Iranian government and with “any person subject to the jurisdiction of the Government of Iran” that are prohibited as to U.S. Persons, and would make U.S. parent companies subject to civil penalties for violations of this new prohibition by their owned/controlled entities. We interpret the language highlighted in the previous sentence to effectively prohibit transactions with Iran itself, as any person or entity within Iran would presumably be subject to the jurisdiction of the Iranian government.
Although we would have to see OFAC implementing regulations to understand the precise scope of the prohibition, this change would essentially convert the Iran sanctions program into something resembling the Cuba embargo, under which both US companies and their owned/controlled foreign subsidiaries are prohibited from doing business with the Cuba. In such case, the foreign subsidiaries of US companies would likely be subject to the same kinds of prohibitions on doing business with Iran as the US parent company itself.
The legislation allows for a 180 day grace period (before the civil penalties would apply) for US companies to end their owned/controlled entities doing business with Iran or to divest themselves from such entities. Implementing regulations will hopefully clarify whether a non-U.S. subsidiary’s termination of Iran-related business within 180 days of H.R. 1905’s enactment would remove potential liability for the U.S. parent company.
Required Disclosures
Effective 180 days after enactment, ’34 Act reporting companies will be required to publicly disclose specific information about relevant Iran-related activities in annual and quarterly reports filed with the SEC. They will have an obligation to determine whether they or any affiliates have knowingly:
– engaged in any sanctionable activity under the ISA;
– engaged in any activities targeted by the Iranian Financial Sanctions Regulations (“IFSR”);
– engaged in the transfer of goods or technologies or the provision of services to Iran or Iranian parties to commit serious human rights abuses against the people of Iran; or
– conducted transactions with blocked persons (“Specially Designated Nationals”) designated for (i) involvement in activities related to terrorism or the proliferation of weapons of mass destruction or (ii) being part of the Government of Iran (including owned or controlled entities), except in the latter case for transactions authorized by the Office of Foreign Assets Control in the Treasury Department.
These companies will be required to describe in detail each activity listed above, which disclosure must include, at a minimum: (i) the nature and extent of the activity, (ii) the gross revenues/net profits, if any, attributable to the activity, and (iii) whether the company or any affiliate intends to continue the activity. To the extent a company includes such disclosure in its annual or quarterly report, the Act will also require it to submit a separate report with the same information to the SEC. The Act requires the SEC to promptly forward reports about such Iran-related activities to the President and Congress for further investigation and to post such reports on the SEC’s website.
Head’s Up: NYSE More Closely Screening Terms of New Preferred Stock
Here’s news – and analysis – from Mark W. Jones of Troutman Sanders:
In connection with a recent offering, we have learned that the NYSE is reviewing the terms of preferred stock being submitted for listing more closely. The NYSE told us that it has concluded that many series of preferred stock have, in the past, been listed without complying as fully with its listing standards as the NYSE would like. In light of that, NYSE is now scrutinizing new series of preferred more closely to ensure better compliance.
From a practitioner’s point of view, we think there are at least two morals to this story for those seeking to list preferred stock:
1. Use of a recently NYSE-listed precedent does not mean that NYSE will currently view your terms as compliant. In our deal, the NYSE objected to several terms – even though our preferred is substantively identical to a series listed by NYSE in late May 2012.
2. It is necessary to a smooth listing to submit draft terms to the NYSE for review as early as possible. Our NYSE listing rep did review the entirety of our articles and insisted on several (relatively minor) changes relating to voting rights across classes and contingent board rights.
The Latest Developments in Non-Profit Executive Pay
In this CompensationStandards.com podcast, Christina Young and Sandra Pace of Steven Hall & Partners discuss how setting executive pay in the non-profit world differs from doing so for public companies, including:
– How do non-profit boards set pay compared to public company boards?
– What are some of the challenges non-profit boards face in developing peer groups in order to gather comparable compensation data?
– What practice pointers do you have for non-profit directors making compensation decisions?
Wrapping up a project that I fevershly commenced six months ago – and have poured my heart and soul into – I am happy to say the inaugural 2013 Edition of Romanek’s “Proxy Season Disclosure Treatise & Reporting Guide” is at the printers. You will want to order now so that you can get your copy as soon as it’s done being printed in a few weeks. With over 1150 pages spanning 27 chapters, here is a detailed table of contents to help give you a sense of how practical it is. You can return it any time within the first year and get a full refund if you don’t find it of value.
The Irony of “Emerging Growth Companies”: Plenty of Examples to Go Around
Much has been written about Manchester United and other well-seasoned companies taking advantage of the new JOBS Act provisions that allow companies to go public as an “emerging growth company” without some of the regulatory burdens that they formerly would face (even ESPN has a Q&A on Man U’s IPO). Sadly, there are another wave of companies using the EGC framework that clearly shouldn’t be in the public market (as was predicted here and elsewhere when Congress was in the process of enacting this legislation without hearings, etc.).
Here is one example – WeRvaluecoupons – with some thoughts from Lynn Turner:
Here is the Form S-1 from yet another “emerging growth company” spawned by Congress (with a notice provision of “How2gopublic.com”). Its CEO is multifaceted as his title is a long one: President, Treasurer, Director, Chief Executive and Chief Accounting Officer. “Chief Bottle Washer” is about the only thing not on the list.
This company from Reno and incorporated in Nevada, has an auditor all the way across the country from Parsippany, New Jersey. The company has $5000 in cash and owes $2000 to venders (which coincidentally is the same amount as the auditor’s fees). It looks like an investor in this company would have better odds making a bet in Vegas at a black jack table.
The company states it will rely on debt financing in the future. But how is that? It has no cash flow and no assets to secure debt financing with, unless it comes from generous friends and family who have nothing better to do with their cash. This has all the trappings of the penny stock companies that a couple decades ago cost investors dearly.
One the other hand, one can only ask what sane investor would buy this stock from the selling shareholders (it appears the company is not itself selling any shares). It will be interesting to see how many hundreds of jobs this company creates.
Study: Endowments Doing Less Than Expected Given History as ESG Pioneers
Recently, the IRRC released this study that reveals college and university endowments’ environmental, social and corporate governance (ESG) investments as being less prevalent than often believed, particularly given their history as sustainable investing pioneers dating back to 1970s anti-apartheid campaigns. As noted in this press release, these finding are particularly surprising at a time when active incorporation of ESG factors into investment decisions is increasingly widespread among mainstream investors.
Over the past few years, the revolving door at federal agencies has gotten a fair amount of Congressional and media attention – as noted in this blog – even though the tradition been around as long as there has been a government. It’s only natural since one is quite likely to stay within your own profession when you leave the government. One doesn’t leave the SEC to become a doctor.
As noted in this recent NY Times article, a group of accounting professors has issued a study showing that the revolving door actually toughens enforcement results at the SEC. The study also found no evidence that law firms that hire large numbers of SEC alumni are able to extract more lenient enforcement outcomes from the agency.
My Ten Cents: SEC’s Revolving Door Is Not a Biggie
Personally, I’m not surprised in the least by the study’s findings. Generally speaking, SEC alumni treat the agency with more respect than those that have not graced its hallways – and I imagine that translates into not trying to push the envelope beyond the grey areas of the law. And I can’t imagine that the colleagues that they leave behind would cut corners for them. People that work at the SEC believe in the mission of investor protection. David Smyth agrees with my conclusion, noting that “financial industry defendants would respect (and be inclined to hire) staff who were smart and tough in their work, instead of unethical patsies who were willing to look the other way in exchange for a favor.”
I’ll add two observations. One is I’ve never had a conversation with anyone while working at the SEC or afterwards that somehow indicated that their future career played any kind of role in how they approached a situation while they worked at the SEC. And I’m a social guy and talked with hundreds of Staffers both during my two tours of duty at the SEC and afterwards.
The second is the SEC really benefits when someone that has been there before returns to the Staff. Unless you’ve worked at the SEC, you can’t imagine how different it is than private practice (and vice versa). They truly are two different animals. So someone returning to the Staff will be able to contribute right away – and in a big way because they have the background of the dual experiences. The SEC Commissioner that I worked for – Laura Unger – was unique because she had served in the SEC’s Division of Enforcement before she went to work on Capitol Hill. That gave her a huge leg up when she analyzed cases that came before her when she was in a position of deciding how to proceed on dozens of cases every month.
The bottom line is that it’s all about integrity. Either you have it or you don’t. And the fact that you’re willing to take a huge pay cut and go back into the government more than likely reveals that you have a lot of it. Not the opposite…
On Friday, SEC Chair Schapiro issued this statement about Knight Capital Group’s trading error, which is prompting the agency into conducting roundtables and investigations and hastening the SEC’s efforts into proposing rules that would require exchanges and other market centers to have specific programs in place to ensure the capacity and integrity of their systems. This in the wake of many retail investors giving up on playing the market – leaving machines to trade with each other in a high frequency trading world.
In our “Q&A Forum,” a member recently asked: “We are an NYSE issuer whose specialist is Knight & Co. whom you have undoubtedly heard on the news. We are closely monitoring Knight’s performance relating to the trading of our stock. I understand that Knight & Co. manages about 15% of our stock on the NYSE. How might this debacle impact us?”
As one of the handful of NYSE “Designated Market Makers” (DMMs), Knight is a major market participant with the responsibility, among others, to conduct both physical and completely automated auctions for several hundred NYSE listed stocks assigned to it, and to maintain an orderly market in those stock. As a DMM, Knight also constantly competes as a market participant using “algorithmic” quotes, in an entirely automated process.
These computerized processes based on trading algorithms can go awry. Thus, as Knight has reported, on Wednesday morning it accidentally unleashed millions of orders to buy and sell stocks based on rogue algorithmic quotes. Characterized as a software glitch, Knight incurred some $440 million in losses for itself in the process, and caused major price volatility in a large number of listed stocks This in turn immediately adversely impacted Knight’s capital base and threatened its ability to stay in business.
As the extraordinary volatility in some stocks was happening, incoming orders were directed away from Knight. Also during that period existing mechanisms to curb volatility in single stock prices were triggered to a limited extent, resulting in trading pauses for some of the affected stocks. Once stability returned, transactions by other market participants occurring at the artificial prices were canceled by the exchanges. Because of the sudden and significant impact on Knight’s capital base, the issue now is the ability of Knight to continue in its role not only as a New York Stock Exchange DMM, but also as a major wholesale market maker generally.
As reported, Knight is actively engaged in efforts to shore up its capital base. If Knight were unable to remain a DMM, the stocks assigned to it would be allocated to other DMMs, and trading would continue as before, with another DMM having the same responsibility, commitments, and accountability in the market. However, because DMMs are active, competing market participants, and there are only a few of them, the quality of the market could be seen as diminished with the exit of a major player. The trepidation that has kept retail investors away in droves for some time would be amplified. Trading in individual listed securities, and price discovery, should not be impacted however, although as this most recent disruption reminds us, “algo” trading has fundamentally changed our stock markets. New “limit up-limit down” measures to curb volatility have been approved and are to be implemented on a pilot program basis effective February 4, 2013.
Hedge Funds & General Solicitation: The Brewing Controversy Over the SEC’s Rulemaking Plans
As I blogged recently, the SEC has noticed an open Commission meeting for August 22nd to consider three rulemakings. As noted in this Institutional Investor article, it appears that the SEC may adopt an Interim Final Rule on that date rather than go through the normal proposal and comment period. As reflected in this Investment Company Institute letter to the SEC, there are some that are not happy about this fast-track approach to an important rulemaking…
More on “The Mentor Blog”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– The Endangered Public Company
– Officer Removal: California Weighs In
– Delaware Expedites Proceedings to Enjoin Enforcement of Advance Notice Bylaw
– SEC’s Internal Controls Still Deficient
– Federal Judge Identifies Three Statement Categories That Are Not Actionable Under Securities Laws
1.Does your Audit Committee review your company’s earnings releases prior to their release to the media?
– Yes – 96.2%
– No – 3.9%
2. If the answer to #1 is “Yes,” how many days prior to public issuance of the earnings release is a draft typically sent to the Audit Committee?
– One day or less – 20.0%
– Two days – 22.0%
– Three days – 36.0%
– Four days or more – 22.0%
3. Does the Audit Committee hold a meeting for the purpose of discussing each earnings release prior to their release to the media?
– Yes, and mostly (or all) by telephone meetings – 73.6%
– Yes, and mostly (or all) by face-to-face meetings – 18.9%
– No – 7.6%
4. If the answer to #3 is “No,” is the Audit Committee informed about issues that will be discussed in the related earnings release?
– Yes, in writing – 30.0%
– Yes, at a meeting – 50.0%
– No – 20.0%
5. Does your Audit Committee hold a single meeting to review both the earnings release and draft Forms 10-Q and 10-K?
– Yes – 45.3%
– No – 54.7%
Please take a moment to participate in this “Quick Survey on Insider Trading Policies: Pledges & Margin Accounts” – and this “Quick Survey on Rule 10b-18 & Buybacks.”
Insider Trading for Dummies: Don’t Google “How to Avoid Getting Caught”
Yesterday, the SEC issued this press release charging a guy in Bristol-Myers Squibb’s Treasury department with insider trading on confidential information about companies being targeted for potential acquisitions.. Who googles how not to get caught when insider trading?!
Study: Whistleblowers Don’t Do It For The $$$
This Cooley alert – entitled “Are Most Whistleblowers Just Rogue Employees Out For a Buck?” – delves into a study that found only 2% report observing misconduct externally and that whistleblowers are not necessarily motivated by money. The alert refers to a Compliance Week piece entitled “SEC’s Whistleblower Bounties Will be Awarded Subjectively” also worth reading. Finally, check out this Forbes article entitled “Whistleblower Case Against GE, New Report Show Real Motives For Attacks on SEC Program”.” This study seems significant because it debunks one of the main arguments against the SEC’s whistleblower program – that it would eviscerate internal compliance systems.
This is the only match of the final round – a winner will be decided! The Black Jack Table vs. the Toolbox (which squeaked out a victory over the Pink Clear Pig). Voting ends at COB next Wednesday. As noted in these rules (and keep sending more pics for the next tourney), please vote for one of the following two cubes below:
Inspection Reports: PCAOB Addresses Audit Committees Directly (A Rarity)
For as long as I can remember (or at least back to this blog in ’05), I have been recommending that companies demand that their independent auditors inform audit committees when the PCAOB is reviewing a company’s file during a PCAOB inspection of the auditor (the PCAOB doesn’t require that auditors share inspection reports with their clients, but also doesn’t prohibit them either – the reports are confidential merely in the hands of the PCAOB and SEC). Yesterday, the PCAOB issued an 26-page informational release that deals with this topic (here is the related press release).
As noted in FEI’s “Financial Reporting Blog,” it is rare for the PCAOB to issue guidance in the form of an “informational release.” And at least equally as rare that the PCAOB issues guidance that pertains to audit committees directly.
In addition to listing 4 questions that audit committees should ask their auditors in its executive summary, the informational release goes on to explain its inspection process in depth and the possible implications for audit committees of those inspections. It is definitely a must-read document and something that should be shared with all directors, not just audit committee members…
Our New “10-K and 10-Q Exhibits Handbook”
Spanking brand new. Posted in our “Form 10-K” Practice Area, this comprehensive “10-K and 10-Q Exhibits Handbook” provides a heap of practical guidance about how to navigate under Item 601 of Regulation S-K. This one is a real gem – 58 pages of practical guidance…
On CompensationStandards.com’s “The Advisors’ Blog,” I’ve blogged a few times about these NY proposals that are a sleeper for many more companies than you would think. One of our members found it a bit challenging to try to explain in simple terms why this Executive Order and the promulgating agency regs are so problematic from the viewpoint of the corporate community – so she put together the Q&As below:
Q1. My company is incorporated in Delaware, and this is a New York Executive Order — so this does NOT apply to my company, right?
A1. Wrong. The Executive Order applies to service providers that receive NY state funds or NY state-authorized payments — regardless of where the companies are incorporated or headquartered.
Q2. But my company is public, and it does not provide health care or similar services — so this does NOT impact my company, right?
A2. Wrong. The problem with the Executive Order and the proposed regulations is that many terms are either undefined or ill-defined, and the scope is potentially broad enough to cover any entity — including public companies — that receive NY state funds to provide any services. For example, companies that provide technology services, energy services, consulting services or financial services to New York State could be impacted.
Q3. If this applies to my company, what does it mean?
A3. There are three major items that companies reviewing the Executive Order and proposed regulations are concerned about:
1. Limits on Executive Compensation: A service provider cannot use more than $199K of state funds or state-authorized payments to pay any employee in the company;
2. Limits on Administrative Expenses: A service provider must use at least 75% (increasing to 85% in 2015) of the state funds or state-authorized payments to provide program services — as opposed to administrative expenses such as compensation to staff that does not directly provide program services (including a CEO, CFO and controller), overhead expenses and office operating expenses; and
3. Disclosure Obligations: A service provider will be required to file certain reports but no specific information has been released yet about the contents of these disclosures.
Q4. You keep mentioning state funds and state-authorized payments – what do those terms mean?
A4. Wish we knew for sure. Like many of the provisions in the regulations, these terms are defined in a very convoluted manner. The definition of state funds refers to funds appropriated in the annual state budget – but excludes a limited subset of procurement contracts. State-authorized payments is very broadly defined, referring to any payments distributed upon approval by a NY state agency or a NY governmental unit (also excluding a limited subset of procurement contracts). As a practical matter, this would appear to pick up contract payments made by New York as a service customer to public companies for ordinary course business.
Q5. There must be some sort of an exemption for companies like mine, right?
A5. The rule applies to covered providers, and this definition has certain thresholds; if they are not met, then the company would be exempt from these provisions. An entity is a covered provider if it (1) receives state funds or state-authorized payments (as mentioned, not clearly defined) in an amount greater than $500K for at least 2 years and (2) at least 30 percent of the entity’s total annual in-state revenues (undefined) for the most recent calendar year were derived from state funds or state-authorized funds. Therefore, given these broad terms and ambiguities, it is difficult to conclude definitively that a company is not a covered provider.
Q6. Where can I learn more about this – and what can I do about it?
We are hoping that companies, as well as legal and business organizations, will share their concerns about these issues in Albany. Specifically, they should consider contacting Gov. Cuomo’s office to ask that the Executive Order be appropriately amended to clarify impacted entities (for e.g., it should not apply to public companies that are subject to SEC obligations, including Say on Pay votes). In addition, they should consider submitting a comment letter to the state agencies that have proposed these regulations. Even though over dozen state agencies have proposed implementing regulations, the proposals are virtually identical and therefore the same comment letter could be submitted to all the agencies. Also, even though the official comment period ends shortly, the Governor’s Office has indicated that the agencies will consider comments submitted after that time.
Surprise! US OTC Companies Could Become Subject to Canadian Reporting Obligations
The stated purpose of the Instrument is to discourage the manufacture and sale in the adopting jurisdictions of OTC quoted shell companies that can be used to facilitate abusive market practices. However, the Instrument will have the unintended but significant effect of subjecting major well-established issuers who have securities listed on exchanges outside of North America and that only trade OTC in the United States to Canadian public company reporting obligations. Significantly, these issuers may unknowingly become subject to Canadian public company reporting obligations, as it is common market practice for U.S. broker-dealers to apply to have a FINRA ticker symbol assigned to an issuer’s securities without the knowledge or involvement of the issuer.
Our August Eminders is Posted!
We have posted the August issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!
Have you ever had a job where you had to look busy when your boss was around? But you really weren’t. When I worked in the stock room at Sears as a kid, we thought we coined a term for that art – “shamming.” We thought we coined the term, but it shows up in the dictionary!
Anyways, with the elections just ahead of us – and the good folks in Congress madly dialing for dollars – there are no less than five pieces of legislation being considered by the House of Representatives this week. One bill, HR 6161 – the ”Fostering Innovation Act” – would gut SOX Section 404(b). This bill does not foster innovation in any way and is thus quite misleading with this title. In fact, if retail or drug companies selling to consumers use such misleading titles they would be charged, perhaps with fraud! Thanks to Lynn Turner for his help here!
Here are pieces that describe these – and other – recent legislative efforts:
Corp Fin Provides JOBS Act No-Action Relief for Bank Holding Companies
In the “Dodd-Frank Blog,” Jill Radloff notes that Corp Fin has begun granting no-action relief to suspend ’34 Act reporting obligations for bank holding companies as the Staff indicated they might under one of the JOBS Act FAQs.
More on our “Proxy Season Blog”
We continue to post new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– NYSE Director Steps Down After Majority Withhold Vote
– How Your Annual Shareholder Meeting May Be Covered: Social Media Style
– A Review of Corp Fin No-Action Rulings on E&S Proposals
– Big Fireworks at Wells Fargo Annual Shareholders Meeting
– Chesapeake: Poster Child For Poor Governance
The celebration of full employment! At least for those of us with jobs. It was ten years ago today that Sarbanes-Oxley snuck up on us. Per the two polls I ran back in May:
– A majority (59%) believe that internal controls was the biggest long-term game-changer, followed by CEO/CFO certifications (27%); Section 16 reporting being cut to 2 business days (16%) and creation of the PCAOB (16%)
– Most people will celebrate by either silently crying in a bathroom stall; banging out an extra memo or watching a Downton Abbey rerun
And if you’re a glutton for punishment, catch the SEC Historical Society’s webcast today with former Senator Sarbanes and Rep. Oxley…or read this article about the anniversary…
A member emailed me this nugget: “I saw Mike Oxley on a talk show shortly after Sarbanes-Oxley became law. He was asked to mention some interesting questions posed of him since passage of the Act. He said that several people asked him when it was that he changed his first name to “Mike” from “Sarbanes.” Pretty funny.”
My NY Times Op-Ed on Sarbanes-Oxley
Pretty cool. I had op-ed piece entitled “A Good Step, But Miles to Go” in the NY Times last Wednesday that was part of a quartet of op-eds in this “Room for Debate” series. The other op-eds were penned by PCAOB Chair Jim Doty, former PCAOB Board Member Kayla Gillan and Michael Peregrine of McDermott Will & Emery. Lot of folks emailed me about my groovy old man picture… and more than one member noted that they missed our “Billy Broc” Oxley and Dave “The Animal” Sarbanes video skits.
More on “The Mentor Blog”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– A New Insider Trading Approach by the SEC?
– SEC’s Novel Insider Trading Case: No Penalties If No Profit or Loss Avoidance
– Conflict Minerals: House Holds Hearing on Costs and Consequences
– FINRA’s New COBRADesk Goes Live on June 4th: Existing Filings Don’t Migrate
– California to Vote on Corporate Political Contributions Ban
This is the 2nd match of the 5th round – the battle among the Final Four! In an unbelievable turn of events, the two cubes in today’s contest both made a last day push to move past their competitor in the Elite Eight. And the pink clear pig continues to roll even though it was seeded in the bottom half of the brackets before the tourney started. Lot of pig lovers out there! As noted in these rules (and keep sending more pics for the next tourney), please vote for one of the following two cubes below:
Here’s news from Lynn Turner: As noted in this “Going Concern” blog, Deloitte & Touche has once again been cited for lax auditing. Previously they were cited by the PCAOB. This second qualified report on the quality of their audits comes from one of their peers – E&Y – and the AICPA. As discussed in the blog, the shortcomings highlighted relate to their failure to properly implement a “principles-based approach” and over a lack of auditing of management’s estimates. Auditing of estimates made by management is often of concern to investors because it is how management frequently manipulates and “manages” earnings. Furthermore, this supports the views of some at the PCAOB that auditors are “too close” to (ie. views) management as their client.
This is the very first qualified peer review report issued on a Big 4 firm, or one of their predecessors, since peer reviews began back in 1977. There have been well over 50 reports issued since then – and this is a first. To put it in perspective, not even Arthur Andersen who received a peer review report in 2001 after Enron and Worldcom imploded received a qualified report.
This raises a question as to what state boards of accountancy will do. They often require peer reviews and if a qualified report is issued, and no action is taken by the state board, then it raises the question of why require them in the first place. It also raises a question of what audit committees will do or what steps they will take to ensure quality audits are performed, especially with respect to auditing of management’s estimates or if a firm uses a “principle based” auditing approach.
In this podcast, Ted Knutson of Thomson Reuters discusses the art of journalism, including:
– How do you get story ideas?
– How do you figure out who would be good people to talk to for a story?
– What have been the biggest types of surprises when researching a story?
– What is your favorite area to report on?
