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Control Chatter                                                     May 2010
News that Control Professionals Need to Know

 
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In This Issue
Take a look at our "New" Website
Fund industry reform is overdue
Goldman settlement with SEC could be costly
Global fraud on increase
A Sharper Tool in the Enforcement Toolbox
You Complete My Audit
FREE Assessments
Changes Completed for Control Chatter Format and ICI Website
At the end of last year we asked you to provide us your suggestions for improvement to our Control Chatter newsletter and you came through.  You said you wanted more articles but shorter articles, with brief summaries, so you could decide if you had any interest in "reading more" on the subject. Your also suggested we include "How-to" articles or hints and tips on subjects related to internal control and corporate governance.  We took your suggestions and changes have been completed on both the newsletter and the website.
 
Announcements - there is an announcement  area for each of the main pages.. It is located just below the blue header. Check out the announcement on our completely redesigned home (welcome) page at Internal Control Institute. Visit us often to keep up with the latest news in internal control and corporate governance.
 
Fund industry reform is overdue, Bogle says
MarketWatch
By Chuck Jaffe

 
 
BOSTON (MarketWatch) -- Jack Bogle, founder of the Vanguard Group, said the mutual fund industry must take steps to improve itself and serve the investing public better, with money managers caring more about shareholders, corporate governance and long-term investing. Speaking at a question-and-answer session Wednesday at the CFA Institute's 2010 Annual Membership Meeting, Bogle held out suggestions for what securities regulators can do to improve the fund business, but did not hold out much hope that politicians can get the job done. "For better or worse, we have to have regulatory reform," said Bogle, who started Vanguard -- now the world's largest mutual fund company -- in 1974.
Bogle's suggestions include the return of the Glass-Steagall Act, which kept traditional banks out of the investment banking business, along with rules for transparency on derivative trades.
read more...
Goldman settlement with SEC could be costly
By David Ellis May 12, 2010
CNNMoney.com
If you can't fight the federal government, you may as well pay 'em. Especially if you're Goldman Sachs. In recent days, Wall Street has been abuzz with speculation that Goldman attorneys have entered preliminary talks with the Securities and Exchange Commission with the hopes of settling the outstanding federal fraud charges now facing the company.Executives at the New York City-based investment bank have offered similar hints."There are a myriad of opportunities out there and I won't rule any of them out," Gary Cohn, the company's president and chief operating officer, said at the conclusion of the firm's annual shareholder meeting last week....A settlement with the SEC would likely bring to an end at least some of the negative publicity Goldman has had to endure since regulators charged the company and one of its employees with defrauding investors in the sale of a complex mortgage investments....Some legal experts said that a settlement could exceed the $1 billion the SEC claims that investors lost on the deal....A penalty of more than $1 billion would rank as the largest SEC settlement in the post-Sarbanes-Oxley era, eclipsing the $800 million AIG (AIG, Fortune 500) paid to the agency to settle claims related to misstatement of financial results in 2006, according to NERA Economic Consulting. read more...
Global fraud on increase, says E&Y
By Pat Sweet
Accountancy May 2010
Global fraud is on the rise, and company boards are becoming increasingly concerned about their personal liability from fraud, bribery and corruption, according to Ernst & Young 's 11th Global Fraud Survey. The report shows a doubling in the number of companies in Western Europe to have experienced a significant instance of fraud in the past two years, up from 10% to 21%. Fraud levels also remain high in Latin America (21%), and the Middle East and Africa (18%). Overall, 76% of respondents are worried about liability issues arising from any fraud. The report surveyed more than 1400 CFOs and heads of legal, compliance and internal audit, in major companies in 36 countries across the world. read more...
by Stuart H. Gelfond and David B. Hennes
Boardmember.com
As with the aftermath of most financial crises, the period following the events of 2008 has led to an environment with increased emphasis on transparency and accuracy in financial disclosures, and close scrutiny of performance or incentive-based executive compensation. As part of this new landscape, the Securities and Exchange Commission is sharpening the edge of one of the tools in its enforcement toolbox: Section 304 of the Sarbanes-Oxley Act....Section 304, known as the "clawback provision," imposes severe financial penalties on CEOs and CFOs-and only those officers-if the financial statements issued by their company are determined to have been materially inaccurate. Section 304 provides that "if an issuer is required to prepare an accounting restatement...as a result of misconduct," the CEO and the CFO shall reimburse the company by disgorging: (i) any bonus or other incentive-based or equity-based compensation received, and (ii) any profits realized from the sale of company stock, during the twelve-month period following the filing or public issuance of the financial statements that require restatement. Only the SEC has enforcement power under Section 304; a company cannot enforce the provision against an executive. read more...
You Complete My Audit
by Sarah Johnson
CFO Magazine
The relationship between accounting firms and their corporate clients has been shaky over the past decade, to say the least. In the wake of the Sarbanes-Oxley Act, accounting firms dumped some risky clients, shuttered ancillary consulting arms, and raised fees. That strained the collegial bond between firms and their clients.
More recently, as we reported last month ("Auditing Your Auditor"), fees have dropped and it has become very much a buyer's market. At the same time, companies are demonstrating a new willingness to switch auditors. Last year, 1,331 public companies changed auditors, according to Audit Analytics; 82% of the time the client initiated the switch, versus the auditor dropping the account. read more...
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The Internal Control Institute™ (ICI) a worldwide organization  devoted exclusively to internal control and corporate governance. The Institute is dedicated to the developement world-class educational programs and best practice guidelines on internal control and corporate governance based on the Sarbanes-Oxley Act and the COSO internal control framework.  Visit us on the web at the Internal Control Institute
Control Chatter is a monthly news summary of the top stories concerning internal control and corporate governance.  Control Chatter is prepared by the staff of Internal Control Institute for the benefit of their members and associates. Please consider it for your personal use or pass it on to associates who may have an interest in one or more of the topics by clicking on the Forward email button below.