Volume 6, Issue 7

July 2012

I. The Sarbanes-Oxley Act: The First Decade

The SEC Historical Society will present a conversation with former Sen. Paul Sarbanes (MD) and former Rep. Mike Oxley (OH) on “The Sarbanes-Oxley Act: The First Decade” on July 30 at 3:00 p.m. at the George Washington University’s Jack Morton Auditorium in Washington, D.C.

Professor Mark Beasley of North Carolina State University will serve as moderator of the hour-long conversation with the law’s sponsors.

Crafted in response to financial scandals that occurred at several large public corporations that shook confidence in the nation’s securities markets, the Sarbanes-Oxley Act set new or enhanced standards for all U.S. public company boards, management and public accounting firms.

If you would like to attend the program and reception (free of charge), please contact info@thecaq.org. Event seating is limited, so reserve your seat now.

The program also will be broadcast live via the SEC Historical Society’s web site from 3:00 to 4:00 p.m. (Eastern).

II. How Would Mandatory Firm Rotation Affect Boards of Directors?

Corporate Board Member magazine recently interviewed CAQ Executive Director Cindy Fornelli about the Public Company Accounting Oversight Board’s (PCAOB) consideration of ways to enhance auditor independence, objectivity, and professional skepticism, including through mandatory rotation, or term limits, for audit firms.

Fornelli noted that the issue is one that involves questions auditors and audit committee members should be asking on a regular basis. “Auditor independence, objectivity, and skepticism are important cornerstones of audit quality,” she affirmed, “ones that should be continually monitored by the audit committee and the auditing profession.”

Monitoring is one thing, but being compelled to change audit firms is quite another, according to Dennis Beresford, Ernst & Young executive professor of accounting at the University of Georgia. “It’s something that should be left in the hands of the audit committee to review on an annual basis, as they do presently, [and] to recommend the current firm for reappointment or to consider another firm,” Beresford told the publication’s Kimberly Crowe.

The PCAOB hosted a second public meeting on the topic on June 28 in San Francisco. Most panelists told the Board they oppose mandatory audit firm rotation.

III. CAQ Discusses Corporate Governance at CPE’s SEC Conference in China

Cindy Fornelli set the tone for the Center for Professional Education, Inc.’s SEC Conference 2012 in Shanghai, China last month. The two-day event provided an update on U.S. financial reporting, with a special focus on issues that affect Chinese and other Asia-based companies.

Fornelli discussed how investor confidence is a necessary element of thriving markets – and the natural tension that arises between two public policies that are essential for thriving markets: facilitating access to capital markets while ensuring that investors are properly protected. “My bottom line is that it is well worth the effort to strike the right balance between the two – and when in doubt, investor protection should outweigh the other,” she remarked. Fornelli went on to say that she believes China “can take advantage of the sometimes painful lessons we in the United States have learned over the years by adopting the corporate governance practices investors expect in today’s markets.”

Fornelli was joined at the event by CAQ Senior Director of External Relations Angela Desmond, who discussed recent PCAOB and CAQ activities and later moderated a panel discussion that included Fornelli, PCAOB Board Member Lewis Ferguson and Jason Flemmons, deputy chief accountant in the SEC’s Division of Enforcement, among others.

IV. Video Alert: The System of Investor Protection to Discuss the Audit Committee

External Auditor Ledger Lines, Audit Committee Chair Indy Pendent and the other representatives of the System of Investor Protection are returning for the CAQ’s third investor education video. The production will focus on the role and responsibilities of the audit committee, including its oversight of the company’s financial reporting process. “When all is said and done, the audit committee is an important hub for the System of Investor Protection,” the audit committee chair will tell viewers. For more information about the CAQ’s continuing series of investor education videos, visit www.CAQForInvestors.org.