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Corporate Governance - What You Need to Know |
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Topics
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News of Noteworthy Events and Trends
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Trend-Setting Quotes The audit report should change and auditors most of all worry that unless it does they will issue an opinion that no one reads or needs. James R. Doty Chairman, PCAOB, in a speech in December 2011.
I believe the PCAOB’s project relating to the auditor’s reporting model is a particularly important initiative in understanding whether there is information that investors are not getting from auditors today that would be useful in making investment decisions. James Kroeker Chief Accountant,US Securities and Exchange Commission in remarks made at a conference in June 2011.
New For 2010 Proxy Season
The SEC has published an investor alert entitled New Shareholder Rules for the 2010 Proxy Season. The alert provides investors with information related to the recent changes to broker voting rules and the impact of those new rules on proxy voting.
The SEC has also launched a new Spotlight page that provides investors with general information on the mechanics of proxy voting, the e-proxy rules, corporate elections and other proxy matters. |
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In the Spotlight
Corporate governance has been in the spotlight in recent years, especially following the financial crisis. The Center for Financial and Accounting Literacy publishes periodic updates on noteworthy events and trends. For updates on recent developments, click on the links below.
US Regulatory Reforms Following the Financial Crisis of 2009 Recent Changes in Proxy Rules - Disclosures and Voting New Releases for Audit Committees |
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US Regulatory Reforms Following the Financial Crisis
Both boards of directors and shareholders will be affected by legislation established in response to the lessons learned from the financial crisis of 2009. The key governance reforms included in the Dodd-Frank Act as currently drafted are as follows:
Changes in Proxy Rules - Disclosures and Voting
The SEC's enhanced proxy disclosure requirements for the 2010 proxy and annual reporting season took effect February 28, 2010. The staff has issued a small business compliance guide to help smaller companies comply with the new requirements. |
Special Report - Lessons Learned from Financial Crisis
Special Report - Changes in Proxy Rules
Small Business Compliance Guide
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New Releases for Audit Committees
June 21, 2011.
March 22, 2011. The PCAOB issued a news release announcing its intention to initiate a rule-making process to expand the independent auditor's report to provide more information for users of financial statements.
July 12, 2010. The PCAOB issued a practice alert on "Auditor Considerations Regarding Using the Work of Other Auditors and Engaging Assistants from Outside the Firm." The alert reminds firms of the need for proper supervision and review of audits of financial statements of issuers in the China region. In some cases, audit reports are being issued by US firms, even though the majority of audit procedures are performed by auditing firms or individuals located outside the US. "Investors are put at risk," warned SEC Director George Diacont, "when the firm issuing the audit report has performed none of the procedures itself, or cannot effectively communicate with those conducting significant audit procedures because of language barriers."
April 7, 2010. The PCAOB issued a practice alert on "Auditor Considerations Regarding Significant Unusual Transactions."
March 29, 2010. The PCAOB issued a proposed audit standard on Communications with Audit Committees.
March 15, 2010. The SEC's Division of Corporation Finance updated its Compliance and Disclosure Interpretations (C&DIs) to clarify the requirements related to executive compensation disclosures and corporate governance (Items 402 and 407 of Regulation S-K). The clarifications address non-equity incentive plan awards, executive discretionary bonuses, and additional services received from a compensation consultant.
January 15, 2010. The SEC approved PCAOB Auditing Standard No 7, "Engagement Quality Review."
October 29, 2009. Internal Revenue Service (IRS) Commissioner Douglas Shulman make a speech about the role boards of directors should play in overseeing business tax risks and tax strategies.
October 19, 2009. The SEC issued a final rule on "Internal Control Over Financial Reporting in Exchange Act Periodic Reports on Non-Accelerated Filers." This rule gives smaller public companies more time to comply with the internal control audit requirements of Section 404(b) of the Sarbanes-Oxley Act.
April 21, 2009. The PCAOB issued a Practice Alert on Fair Value Measurements and Impairments.
January 1, 2009. The AICPA released a plain-English Guide to Independence. Though aimed directly at auditors, audit committees might find it helpful, too. |
PCAOB's news release on changes to audit reports
PCAOB's alert on Audit Work Done Outside the Firm
PCAOB's alert on Unusual Transactions
Proposal on Communications with Audit Committees
SEC's final rule on SOX 404(b) for smaller public companies
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New From the IASB The IASB has launched an investor site as part of an outreach program designed to enhance investors' participation in the development of IFRS. Visit the site and sign up for the IASB's investor alerts here. |
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More Tools to Help Restore Investor Confidence
May 21, 2010. The House Financial Services Capital Markets Subcommittee held a hearing on "Accounting and Auditing Standards: Pending Proposals and Emerging Issues."
April 20, 2010. The House Financial Services Committee held a hearing on "Public Policy Issues Raised by the Report of the Lehman Bankruptcy Examiner." This report highlighted questions about whether companies structure transactions in ways that obscure transparency and undermine investor confidence in financial reporting.
April 18, 2010. The FASB wrote a letter to the House Financial Services Committee to assist with the hearing on "Public Policy Issues Raised by the Report of the Lehman Bankruptcy Examiner." The FASB's letter summarizes accounting guidance related to repurchase agreements and consolidation of special purpose entities and agrees to work with the SEC to consider whether any further standard-setting actions are warranted.
February 22, 2010. The SEC published an investor alert entitled "New Shareholder Rules for the 2010 Proxy Season." The alert provides investors with information related to the recent changes to broker voting rules and the impact of those new rules on proxy voting.
February 22, 2010. The SEC launched a new spotlight page that provides investors with general information on the mechanics of proxy voting, the e-proxy rules, corporate elections and other proxy matters.
October 21, 2009. The U.S. Securities and Exchange Commission introduced a website packed with practical tools and advice for investors.
July 1, 2009. The SEC approved an amendment to New York Stock Exchange (NYSE) Rule 452, eliminating broker discretionary voting. This change takes effect in 2010 and bars brokers from voting the shares of investors who don't cast their own votes in uncontested elections for board members - a change that could prevent the reelection of directors at some companies where a majority vote is required.
March 24, 2009. The National Association of Corporate Directors (NACD) launched "America's Challenge for Corporate Directors: Renew Commitment to Corporate Governance and Oversight Excellence," a nationwide campaign challenging every corporate board and individual director to restore public and investor confidence in publicly traded companies by strengthening corporate governance and oversight of America's corporations.
February 10, 2009. The Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) released a document entitled Evaluating and Improving Governance in Organizations. |
Accounting and auditing hearing
FASB's letter on Repos and Issues Raised in Lehman Bankruptcy
SEC's alert for 2010 proxy season
SEC Order approving amendment to NYSE Rule 452
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Other Global Initiatives and Resources
OECD Corporate Governance Principles
The Paris-based Organization for Economic Cooperation and Development (OECD) issued several important documents:
The OECD issued a set of corporate governance guidelines in 1999 and revised them in 2004 in the wake of the Enron meltdown and other financial scandals. The OECD is also addressing the implications for corporate governance of the financial crisis of 2008 and 2009.
In February 2010, the OECD issued "Good Practice Guidance on Internal Controls, Ethics, and Compliance."
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