Sarbanes Oxley backdating

the Sarbanes-Oxley Act of 2002 (SOA). The measuring stick as to whether a company meets the standards of SOA is determined by the effectiveness of the design of and compliance to its internal processes. These internal processes include control activities used to ensure the reliability of the financial reporting and disclosure. The practice of options backdating, apparently widespread from 1996 through 2002, is widely believed to have been short-circuited by the enactment of Sarbanes-Oxley in 2002. Although backdating had not yet been recognized as a problem, the provisions of Sarbanes-Oxley requiring that insiders report the acquisition of securities, including ... Sarbanes-Oxley Lowers Corporate Fraud Lawsuits After five years, the Sarbanes-Oxley law has reduced corporate fraud. It was crafted to restore investor confidence with tighter rules for audits and ... I take a uniformly hard line on backdating contracts. I’m rather surprised that Kwall and Duhl never even mentioned Sarbanes-Oxley, but any company subject to SOx should never ever backdate, as it compromises the internal controls on financial transactions and disclosure that SOx mandates; this may prove to be legally innocuous when the backdating is within a fiscal quarter, but when a ... Section 403 of the Sarbanes-Oxley Act accelerates the reporting deadline of executive stock option grants to be within two business days after the grants. This study investigates the effect of Section 403 on the extent of CEO influence over grant date stock prices aimed at enhancing the value of executive stock option awards. In the case of illegal options backdating, the connectedness of Section 162(m) increased because of links with the Sarbanes-Oxley Act, which added shortened deadlines for reporting options grants. Sarbanes-Oxley Act. Legal Ethics, Confidentiality, and the Organizational Client Larry P. Scriggins, 58(1): 123–144 (Nov. 2002) The ethical rules governing lawyers representing organizational clients when the lawyer encounters actual or potential criminal or fraudulent conduct on the part of the client, or those acting for it, are in sharp focus today. The Sarbanes-Oxley Act was not just a response to Enron despite the failures its collapse exposed. As the Los Angeles Times reported January 26, 2002, less than two months after Enron filed for bankruptcy: 'There was a total failure by everyone, a complete breakdown in the system, in all the checks and balances. The Sarbanes Oxley Act Under SOX, employers are strictly prohibited from retaliating against employees who report illegal or unethical conduct. Employees are also protected when making disclosures about shareholder fraud or violations of SEC rules and regulations. The master vendor file is the repository of all significant information about the company's suppliers. While a company may have been willing to live with those risks in the past, it risks getting a negative assessment in its Sarbanes‐Oxley audit if it continues to employ poor practices with regard to its master vendor files.

[Audit Project Help] Looking for some help to answer a few core questions.

2014.11.20 03:55 Test_the_limits [Audit Project Help] Looking for some help to answer a few core questions.

Looking to get some help/insight into an Auditing class project/presentation. We are asked to evaluate an SEC AAER (Accounting and Auditing Enforcement Releases) and answer some core questions:
1) What were the auditing deficiencies? 2) What is the proper accounting? 3) What were the red flags? 4) What should the auditor have done differently?
Here is the AAER: http://www.sec.gov/litigation/opinions/2012/34-67900.pdf
The AAER is on the Company Embarcadero Tech Inc. & its CEO (Wong) and their controller (Michael C. Pattison)
TLDR: As a team, they backdated stock and Pattison (Controller) a licensed CPA at the time, was convicted and ordered to pay a fine, in conjunction with the Commission permanently disqualifying Pattison as a practicing accountant before the Commission.
I have the basics of some of these questions, but The AAER case really does not give very much information on the auditors and what procedures and such they used.
So I was looking for any help or insight to answers to any of these questions. Below is a start to the information that I have. (at this point some of the information may be better under a different core question) But I wanted to post information that I have worked on thus far.
What were the auditing deficiencies?
• Gathering sufficient audit evidence o Date check of when Wong approved o Pattison did not properly record backdated stock option grants (Proper presentation & Disclosure) o To be legal, backdating must be clearly communicated to the company shareholders, properly reflected in earnings, and properly reflected in tax calculations o Pattison produced quarterly summaries that he knew contained backdated information, and parking backdated stock options in various inactive employee accounts for later use o “every stock option grant during the period in question has a grant date selected with hindsight, yet (Pattison) never expressly disclosed the date of ACTUAL APPROVAL by CEO Wong on ANY document. o
• Exercising due professional care o Pattison did not tell the auditors that Wong instructed him to “sock away” stock options or to “wipe” the Scantland grant • By contrast, Rule 102(e)(1), codified by the Sarbanes-Oxley Act of 2002,41 authorizes the Commission to discipline professionals for "improper professional conduct," defined for accountants as conduct that the Commission finds "results in a violation of applicable professional standards," and meets certain mens rea requirements.
• Demonstrating appropriate level of professional skepticism o After the auditors tested the Scantland grant as part of their review, they recorded in their workpapers Pattison's explanation that the Scantland grant had been an error and recorded in the wrong place under the wrong name. Pattison did not tell the auditors that Wong instructed him to "sock away" stock options or to "wipe" the Scantland grant.
• Using inquiry as form of evidence (relying too much on this method) o Embarcadero’s VP of human resources spoke with Pattison & Pattison admitted that he “put some options in an employee’s account for another employee” and the VP responded with “ it is just wrong on so many levels” (He did not do anything else! May 2004)
• Relying on internal controls (rely too much/failing to react to known control weaknesses) o Pattison knew that Scantland was no longer an employee and that the stock options were not intended for him o Pattison recorded the recording of all equity account activity, including activity related to the issuance of stock options to employees (Segregation of duties) • Under APB 25, a company granting an in-the-money stock option is required "to record an expense for the 'profit,' treated as compensation to the option recipient over the [option's] vesting period."15 In other words, the benefit to the option recipient is recorded on the company's corporate books and in the company's financial statements as a non-cash compensation expense.16 Otherwise, "the company's reported net income is overstated for each of the years the options vest, potentially deceiving the market and investors."17 Pattison knew that under APB 25 "in-the-money" options had to be reported as a compensation expense. o Pattison produced quarterly summaries that he knew contained backdated information, and parking backdated stock options in various inactive employee accounts for later use o Board of Directors did not properly designate individuals to maintain records of stockholders.
submitted by Test_the_limits to Accounting [link] [comments]


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Sarbanes-Oxley Act

  1. Sarbanes-Oxley: The Impact 15 Years Later - YouTube
  2. Sarbanes-Oxley
  3. Introduction to SOX and Internal Controls - YouTube
  4. Sarbanes Oxley in Auditing
  5. Sarbanes Oxley Act and Effect on Auditing
  6. Understanding the The Sarbanes-Oxley Act - YouTube
  7. The Sarbanes Oxley Act of 2002 - YouTube
  8. What is OPTIONS BACKDATING? What does OPTIONS BACKDATING mean? OPTIONS BACKDATING meaning
  9. How To Say Sarbanes-Oxley - YouTube
  10. SOX (Sarbanes-Oxley) Control Documentation and Testing ...

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