Forgive the delay in posting this second day summary. I’ve also got a three more interviews to write up and another I’m hoping to still get to round out my profile. I’m also writing an exclusive story covering some of the highlights for those in the UK for Accountancy Magazine. Watch for it next month in their 120th year anniversary issue.
There was no lack of content or new friends. I will reiterate what I have already said prior and what was said on other blogs like Compliance Building, Securities Docket, IT Compliance, and Matt Kelly’s Compliance Week spot – There’s nothing like meeting people in person to create a new and stronger bond of cooperation and sharing. And that is exactly how I feel about Doug, Bruce, Alex, and Matt. I see great collaboration in the future, all for your benefit.
I stayed in DC over the weekend – a combination of changed plans, fear of bad weather delays on Friday, laziness, and a desire to get some quiet non-business writing done. While we were at Compliance Week last week, one of the most important trials in the accounting industry finally got underway – Banco Espirito Santo vs. BDO International. My first dispatch, with exclusive clips, was posted over the weekend, with more to come as I review complete trial footage after each day of court. All this takes is time. And sometimes a lot of money. I appreciate your support and your patience.
Former SEC Chairman, Kalorama Partners CEO, and Compliance Week Columnist Harvey Pitt’s speech was entitled, “Ethical Cultures in a Down Economy.” This was his fourth consecutive appearance at Compliance Week’s annual conference, only one more than me. He attempted to describe how companies can (and must) instill a culture of integrity, ethics and compliance in a deteriorating economic climate. There were a few good sound bites:
“Business leaders have to stop being my mom. Just because no one tells you you have cancer, doesn’t mean you don’t.”
Regarding Madoff scandal he says regulators never came out and admitted, “Something bad happened. We screwed up. We failed.”
“Audit firms, regulators still execute SOX with a “check-the-box” mentality focused on avoiding liability. The concept of Sarbanes-Oxley was good, but unfortunately has been ineffective in practice.”
“Real incentive for acting ethically is self-interest.” Huh? Harvey, how about heaven vs. hell?
And then I asked my question:
I didn’t attend the FASB Update on critical accounting developments for public companies by FASB Technical Director Russ Golden. I wanted to go see my fellow Maryland Association of CPAS Expo panelist talk about IFRS. But I hear Golden was very good. Go here for a summary.
The presentation, “Making the IFRS Transition” was moderated by former FEI CEO and Compliance Week Columnist Colleen Cunningham and included Eli Lilly Chief Accounting Officer Arnold Hanish and Microsoft Senior Director of Financial Accounting and Reporting Bob Laux. Both gave detailed updates on the status of their initiatives. In general, both firms have completed the planning and assessment stage and they emphasized that spending enough time on these two steps is essential. Given the delay in the timetable, both re-emphasized the importance of the assessment phase – figuring out what your differences will be now and making the necessary plans, both technical and financial, to absorb the impact.
Colleen is a great moderator and asks the questions I want answered. She asked the panelists what type of involvement their external auditors have in the IFRS conversion planning process:
I’m having a little trouble with the idea that companies are asking their external auditors for “advice” on IFRS issues during the analysis and assessment stage. What I heard was clearly a “pre-clearance” kind of approach that doesn’t seem to me to be in synch with the spirit of the independence rules. Companies are supposed to be staffed up with sufficient accounting expertise or willing to buy it from the appropriate independent service provider such that their auditor is not later opining on their own advice. Not having sufficient accounting technical expertise can turn into a material weakness in internal controls in their Sarbanes-Oxley assessment.
I think this needs to be be kicked around more by regulators so it doesn’t end up another self-fulfilling prophecy – auditors won’t say no or criticize because they’re the ones who gave the “go-ahead” in the first place. We’ve seen too many situations like this in the past and I’m tired of it. All that being said, Mr. Laux and Mr. Hanish appeared extremely knowledgeable and were detailed in their comments and responses to questions. But you have to wonder how far up the line that kind of appreciation for the detail goes. They both said that their Audit Committee would not be making accounting policy decisions or getting too involved other than being informed of decisions made. Seems perhaps a little too detached from decisions that may, in some companies, have a very, very big impact.
Another presentation I couldn’t attend but everyone seemed to be anxious to hear was the one by Steven Dreyer on the new S&P Assessments of corporate governance. I’ve written about the ratings agencies and their conflicts and issues are well know. In fact, there seems to be quite a schizophrenic attitude towards them as evidenced by this article about Moody’s stock doing well even though the franchise is under fire every day for its conflicts. I guess oligopolies win as long as they are preserved, no matter how much they may be perceived to be strictly self-serving.
From Doug Cornelius’ summary of Dreyer’s session:
All S&P cares about is the ability of the company to repay its debt. Corporate social responsibility is nice, but does not affect credit. S&P does not lower a credit rating on an airline because of a plane crash. They care about cash flow. They do care if a risk is a risk to cash flow. S&P is not a missionary for ERM.
So why are they adding ERM to credit ratings to non-financial institutions?
- Enhance Analytical Process & Focus
- Create More Forward-Looking Ratings
- Better Insights and Communication on Management
- Differentiate Better
Baker & McKenzie partner and former U.S. Deputy Attorney General Paul McNulty keynoted later in the day in a speech entitled, “A Tale of Two Sectors: The Challenges of Corporate Compliance When Enforcement Increases and the Economy Declines.” Not much to say about this. My tweet says it all. Others who were more interested wrote more.
“Structuring Internal Investigations: From the Inside to the Outside,” presented by Cooley Godward Kronish partners Neal Stephens and William Freeman was on my list of “must attends”. I will be brief now because I also interviewed them after the presentation and will be writing that up as a separate post. Messrs. Freeman and Stephens are still on a major high as a result of their successful defense of McAfee former general counsel Kent Roberts in a stock-option backdating case. (Roberts was acquitted last month.) Their presentation interspersed practical advice for handling super high-profile investigations with anecdotes and personal asides from the McAfee case. I told them when I asked for the interview: I like winners. That makes three legal superstars on the west coast for Cooley Godward.
Deputy Attorney General David W. Ogden was a member of the Obama transition team and has previously served as President Clinton’s Assistant Attorney General, Civil Division. He keynoted the formal closing of the conference. A good summary is here.