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Lessons Learned from the Transition to COSO 2013

Protiviti has shared with us a useful Top 10 Lessons Learned from Implementing COSO 2013. I especially like this section: It is presumed that everyone understands that a top-down, risk-based approa…

Click on the following for the discussion: normanmarks.wordpress.com

A good COSO 2013 discussion from Norman and Protiviti.

Dave Tate, Esq. (San Francisco/California)

My other blog: trust, estate, conservatorship and elder abuse litigation, http://californiaestatetrust.com

On the 2015 Audit Committee Agenda

10 things that audit committees should keep in mind as they consider and carry out their 2015 agendas.

Click on the following link for the discussion: www.kpmg-institutes.com

Good broad topic areas to consider, although I prefer the following discussion materials that I have written as they are more specific – click on the following link – Audit Committee Self-Evaluation Form David Tate Esq 10302014.

Dave Tate, Esq. (San Francisco / California).

3 Major Changes Congress Wants to Make to Social Security – On the Scale of Risk Management How Would You Score Congress?

Social Security needs change to survive over the long run, and Congress seems willing to take up the daunting task of a Social Security overhaul. – Sean Williams – Investment planning

Click on the following link for the article: www.fool.com

No surprise here.  Inactive and lack of diligent long-term planning. This issue has been around for 40-50 years.  A serious issue for old, middle age and young alike.

If you are young, why do you want to pay 13-14% (half from you and half from your employer) into this program when there is no reasonable certainty that it will be around for you when you retire, and if it is around there is no reasonable certainty about what the benefits will be.

If you are near or at retirement and you paid into this program for 40-50 years you are probably safe, if you don’t live for another 20 years.

If you are in the middle, not near retirement, and have been forced to pay into this program for 25-35 years, good luck to you.

How would you rate the Social Security program risk management? See my prior blog post about the NIST cybersecurity risk management framework, Click for Post .  I would rate Social Security risk management as Tier 1 – Tier 2.

Dave Tate, Esq. (San Francisco / California)

UK pressures Bank of America unit on risk management – Wall Street Journal

(Reuters) – British regulators are pressuring Bank of America Corp’s European investment-banking arm to improve its risk management practices, saying the current ones are “simplistic” an…

Click on the following for the article: au.news.yahoo.com

You may have been following the efforts to bring European and U.S. accounting standards into conformity, and how difficulty that has been.  I would evaluate the chance of bringing the various different governance and risk management codes into conformity as zero. And as the European regulatory agencies appear to be getting more active and demanding both with the code provisions and enforcement, we might expect European developments in these areas to become more center stage.  Dave Tate, Esq. (San Francisco / California)

Regulator launches consultation on ‘The essential trustee’ – Press releases – GOV.UK

U.K. Guide to trustees’ duties is updated.

I am following up on a post by a LinkedIn group member about a new regulatory initiative by the U.K. Charity Commission on trustee standard of care.  You can click on the following link to access the article: www.gov.uk

The following are my initial comments about the post and the regulatory proposal.

Thank you Jane.  I clicked on the materials.  As they are rather long for a morning before work read, I’ll have to get back to them in detail.  Preliminarily it appears to pretty much follow what in the U.S. would be the business judgment rule.

The very real distinction is whether a regulatory agency will really enforce the requirements. And with charities there are so many different types and missions, and people of tremendously different backgrounds who serve on the boards.

I have served on two nonprofit boards and as an audit committee chair – on one of the boards all members were pretty sophisticated, on the other board perhaps less than half would fit that criteria. But on both boards they all supported the mission, did not have conflicts, and tried to make correct and diligent decisions within their abilities.

Should some of the board members on the second board not be allowed to serve as board members?  Tough call. Depending on the final outcome of the regulations, they could have a chilling or at least limiting effect on who can or wants to serve on a charity board. The U.K. initiative will be very interesting to watch.

Dave Tate, Esq. (San Francisco / California)

Glass Lewis – Heat on the Audit Committee to Make It Right (Fraud)

I have been evaluating Glass Lewis’ Proxy Paper Guidelines, 2015 Proxy Season, An Overview of the Glass Lewis Approach to Proxy Advice, United States – there are many provisions pertaining to audit committees, audit committee members, and under what circumstances Glass Lewis will recommend voting for or against audit committee members and/or the entire committee. Audit committee members should read the Guidelines, to be informed. Some of the provisions are reasonable, others I believe are not or are overstated. This post discusses Standards for Assessing the Audit Committee #13 (material accounting fraud). Later blog posts will discuss other Standards. Although we all agree that material accounting fraud should not occur and should be prevented, as far as deciding whether or not to vote for or against an audit committee member or the entire committee when fraud has occurred isn’t or isn’t necessarily cut and dry.

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The STANDARDS FOR ASSESSING THE AUDIT COMMITTEE are at pages 9-11 of the Proxy Paper Guidelines.

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In pertinent part Glass Lewis advises: “When assessing the decisions and actions of the audit committee, we typically defer to its judgment and generally recommend voting in favor of its members. However, we will consider recommending that shareholders vote against the following: . . . .

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13. All members of an audit committee at a time when material accounting fraud occurred at the company.” (bold added)

My thoughts. Footnote 19 of the Paper, also states “Research indicates that revenue fraud now accounts for over 60% of SEC fraud cases . . . .” Provision #13 seems overstated and too bright line – (1) the audit committee members are significantly dependent on information provided by others including the CEO, CFO, internal audit, the independent outside auditor, foreign operations, etc. – (2) the audit committee only has oversight responsibilities – (3) what is “material,” quantitatively and qualitatively? – (4) what if the accounting treatment was a judgment call [i.e., see the new upcoming changes to “principles” based accounting for revenue]? – (5) why the entire audit committee as a group – each member has only one vote – really the entire committee out? – (6) what is “fraud”? – (7) fraud is often very difficult to prevent and detect – (8) what if the director is good for the company except perhaps in this instance of oversight? – (9) what if the audit committee was diligent and the fraud occurred anyway – (10) maybe recommend keeping the director, but not as an audit committee member? – (11) more?

Comment if you would like.  Please also tell others if you like this blog and my posts. Thanks.

Dave Tate, Esq., San Francisco / California, http://directorofficernews.com