A recent study has found that a 1999 SEC rule requiring companies to disclose certain information about their audit committees hasn’t lived up to expectations:
Before adoption of the regulation, there was no mandate on audit-committee size; independence was required of only a committee majority; and no definition of independence was provided, giving companies considerable leeway in how they met the requirement. The new mandate represented a marked change.
Yet, the new study says, the market placed no premium on companies being forced to comply with the rule. “Mandating a fully independent audit committee with at least three outside directors is not, on average, value enhancing,” write the authors, Seil Kim of the City University of New York and April Klein of New York University.
Okay, so the rule is not value enhancing. But if the rule did not exist, would audit committees be manned by deadbeat brother-in-laws? Common sense tells me, “No,” but I have to believe that a rule that requires companies to not stuff their audit committees with decidedly unqualified and conflicted individuals has to be worth something.
You’re doing it wrong
There is a choice quote in this SEC press release announcing accounting fraud charges against Osiris Therapeutics executives:
“As alleged in our complaint, Osiris Therapeutics falsely portrayed to investors that its revenue was growing so rapidly that its performance was consistently exceeding expectations,” said Julie Lutz, Director of the SEC’s Denver Regional Office. “Corporate cultures cannot be so fixated on higher revenues that they use illegal accounting gimmicks to meet the financial numbers they desire.”
It’s true; companies that use illegal accounting gimmicks to achieve the financial results they want will get in trouble. However, corporate cultures that use legal accounting gimmicks to meet the financial numbers they want are rewarded and revered. It’s important to know the difference and proceed accordingly.
Accountants behaving badly: Aloha Edition
A Hawaii grand jury was just kidding when it indicted an accountant for embezzling $6 million from a non-profit:
A grand jury has filed a superseding indictment against a former accountant for a Hawaii nonprofit, adding an additional $1 million in fraud charges.
The new charges bring the total that Lola Jean Amorin is alleged to have stolen from the Arc in Hawaii to nearly $7 million.
It’s the largest white collar crime case the city prosecutor’s office has handled, officials said.
You may recall that this was called a “particularly egregious” case before so now I imagine it’s somewhere in the range of “exceptionally” to “extraordinarily” egregious.
Elsewhere in accountants behaving badly in paradise: Oahu accountant accused of embezzling $860,000+
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Featured jobs from DePretis CPAs in Pleasanton, Calif. and BlueCross BlueShield of Tennessee in Chattanooga. Also, the University of North Carolina discusses why not all online graduate accounting programs are created equal.
Previously, on Going Concern…
I’ve been on paternity leave the last couple of weeks, but Greg Kyte chipped a cartoon on the time value of money. I imagine that’s a first of its kind, anywhere. Also, we re-purposed an old post I wrote about embracing office politics.
In other news:
- Beer Is Not A Metaphor For Tax Fairness
- Concerns Mount Over the Pass-through Tax Cut
- Broadcom Offers $105 Billion to Buy Rival Chip Maker Qualcomm
- Here’s a guide to the major revelations in the Paradise Papers
- Scotland rugby league players ‘too drunk to board flight’ are sent home