Ethical Lapses, Illegal Actions, And Corporate Governance – What Should A Board And Business Do – Forwarding Post By Scott Wornow – Chocked-Full Of Helpful Information

I am forwarding a timely and helpful discussion by Scott Wornow of the Coblentz firm in which Scott discusses situations that we now regularly see in the multi-media social, business and political news: issues and situations to consider when an executive, or the business, or a high-profile person who is associated with or linked to the business is accused of a significant unethical or illegal act or lapse of judgment. Below I have provided a link to Scott’s discussion, and I have also provided a few snapshots from Scott’s discussion. Headings contained in Scott’s discussion include, for example, topics covering Contracts and Quasi-Contracts; Morals Clauses; Fiduciary Considerations; and Regulatory; Compliance and Risk Management. Scott’s discussion covers a lot of issues in a concise and to-the-point discussion. This is a discussion that is important for all businesses including public companies, nonprofits and NGOs, private companies, and even governmental entities.

These issues can cross into many different areas including law, liability and remedial actions, social and business reputation, crisis management, investigations, internal controls, governance and leadership, “righting the ship,” culture, HR and tone at the top, enterprise risk management (ERM) processes and who has responsibility for risk management, compliance policies and processes, protecting the business’s assets pre- and post-crisis, ESG, boards and audit and risk committees, the FCPA, the new DOJ guidelines on corporate compliance programs, internal and outside audit, executive officers, directors, senior managerial officers and other professionals, and in-house counsel responsibilities and possible liability, dealing with regulatory agencies, and other areas. Also consider whether the industry in which the business operates is subject to additional specific statutes, regulations, rules, or expectations that are relevant to these topics. You will find discussions on many of these topics throughout this blog.

The following are some snapshots from Scott’s discussion (I added the yellow highlights), and below the snapshots I have provided a direct link to Scott’s full discussion.

Click on the following link to access Scott’s full discussion.

Ethical Lapses, Illegal Actions, and Corporate Governance

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Remember, very case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

The following are other summary materials that you might find useful:

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

From a prior blog post which you can find at https://wp.me/p75iWX-dk if the below scan is too difficult to read:

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Forwarding from Scott Lenet – Venture Capital Desperately Needs More Governance

I am forwarding a link to a discussion by Scott Lenet about venture capital desperately needing more governance. I have also provided below a screenshot from part of Scott’s article. And I note of interest that Scott makes a reference to the NACD’s new Directorship Certification program which is starting soon. Here is a link to Scott’s article:  Click Here For The Article

And here is a screenshot to part of Scott’s article:

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Remember, very case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

The following are other summary materials that you might find useful:

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

From a prior blog post which you can find at https://wp.me/p75iWX-dk if the below scan is too difficult to read:

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If California Government, Nonprofits, And Education Are Leaders In ERM, Governance, And ESG, Others Will Follow

I ask, what would happen if California government, nonprofits, and education adopted, implemented, and embraced in their operations ERM (enterprise risk management), governance, and ESG (environment, social, and governance) practices, and openly discussed and disclosed their practices? People would notice and follow. For the purpose of this discussion I have noted California government, nonprofits, and education because it seems that at times or for certain issues people who are involved in these activities or positions already are concerned about or are interested in ERM, governance, and ESG. Waiting for public and private businesses, and possibly their auditors, to be induced or possibly compelled into these practices by statute, regulation, or rule is not the only option. Lead and others will follow. For example, we already have criteria or standards for:

– Risk management and ERM (consider as guidance, e.g., materials from COSO (the Committee of Sponsoring Organizations of the Treadway Commission); ISO (the International Organization for Standardization); and other guidance, etc.);

– ESG (consider as guidance, e.g., materials from the SASB (Sustainability Accounting Standards Board); and other guidance, etc.); and

– Governance (consider as guidance, e.g., the above guidance; applicable statutes, regulations and rules; court case precedence; the business judgment rule; and materials from the SEC and the stock exchanges; and other guidance, etc.).

The opportunities and the solutions to move these practices forward already currently are and have been at-hand – California (elected offices and representatives, and departments), nonprofits, and education can lead by example, and others will follow. See also below re ERM and COSO, audit committees, and investigations. Dave Tate, Esq. (and California CPA, inactive). San Francisco and California.

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Remember, very case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

The following are other summary materials that you might find useful:

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

From a prior blog post which you can find at https://wp.me/p75iWX-dk if the below scan is too difficult to read:

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D&O Compass/ISS – Trends in Director Skill Sets – Starting to Include culture/HR, CSR or ESG . . . Non-Financial Skills

I found the following interesting from D&O Compass, as reported by Institutional Shareholder Services, Inc. – perhaps desired director skill sets are including or starting to include culture or HR, corporate social responsibility or ESG, and other non-financial skills and backgrounds.

But I am a bit curious about one of the comments: “. . . there is an ongoing director-level shift away from ‘traditional’ skills such as financial expertise, audit expertise, and CEO experience.” I would argue, however, that financial expertise, audit expertise, and CEO experience also can relate and be pertinent to culture or HR, corporate social responsibility, and ESG.

In fact, as you might know from my other posts and materials, it is not uncommon for the audit committee to be delegated initial risk management oversight (although in my view overall oversight of risk management remains as a board responsibility), and it has been my view that culture, corporate social responsibility and ESG, including governance, offer potential opportunities for internal audit and external audit to provide new and enhanced value-added services that could be helpful to management including executive management, the board, and audit or risk committees, and that those services could also benefit the organization as a whole and the shareholders. Please excuse the less-than-fantastic quality of the D&O Compass materials, as that was the best that could be done. Best to you, David Tate, Esq., San Francisco/California.

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

The following are other summary materials that you might find useful:

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

From a prior blog post which you can find at https://wp.me/p75iWX-dk if the below scan is too difficult to read:

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MITSloan online tool to measure and compare company cultures – you should be aware – comments and screenshot FYI

This came to my attention – MITSloan online tool to measure and compare company cultures. I have previously written about culture, which, for example, is also an element of the COSO ERM framework, and was considerably in the news in 2018, including at the board level. But as I noted: will culture continue to be in the news, and will executive management and boards really take active interest? Culture also is, or could be a component of ESG.

Now apparently, and coming soon I suspect, proposals for different ways to measure culture. One or possibly two standards that are widely accepted would be helpful. Too many possible standards are not helpful, except to argue that there is no recognized standard. Business leaders, executive management, HR, directors, audit and risk committees, internal and outside auditors, in-house counsel, etc., should take note and be aware.

Regarding internal and outside audit, I have thought for a long time that they could (if they wanted to) become involved in auditing, or in auditing certain aspects or components of or processes relating to culture, governance, risk management, fraud risk, etc. I could argue that the value of internal audit and of outside audit are being passed by others who are taking the lead.

And if you are on a board, or on an audit or risk committee, where you are significantly reliant on other people to report to you, might this type of information be helpful to you in your oversight capacity? I have no explicit knowledge about how MITSloan goes about measuring and comparing company cultures, and I don’t know whether I would consider the criteria and processes that they use to be reliable and helpful; however, might it be interesting to search to see if your company is listed and evaluated? Dave Tate, Esq., San Francisco/California

Every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

The following are other summary materials that you might find useful:

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

From a prior blog post which you can find at https://wp.me/p75iWX-dk if the below scan is too difficult to read:

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ESG – SEC Commissioner Comments – And Who At Your Board Has Oversight?

Is ESG, or some version of it here to stay? There isn’t agreement on this. My view is that, yes, ESG or some version of it is here and will remain, either by market forces and expectations, or by statute, regulation or rule. However, for example, click on the following link to a recent June 18, 2019, speech by SEC Commissioner Peirce and her discussion and some criticism of ESG – https://www.sec.gov/news/speech/speech-peirce-061819. If you follow ESG developments you already know that ESG or aspects of it and related disclosures are slowly being mandated internationally, while in the U.S. market forces and expectations are more at play.

My view also is that at least some of ESG is already covered by risk management or enterprise risk management. “Environmental,” yes that’s a risk management issue. “Social,” yes certain aspects of “social” are or can be risk management issues, including, for example, culture, reputation, and perhaps some aspects of safety. “Governance,” yes that’s a risk management issue. But I agree with the comments or criticisms or warnings of the risk that under the heading of ESG, or risk management, or enterprise risk management, or sustainability, or corporate social responsibility, and the list goes on, anyone could at least argue that their particular special or particular interest fits somewhere under those headings, and that business or a particular business must take action with respect to that particular special or particular interest. The ability to make such an argument also has increased exponentially, and we are seeing it played out, as everyone has or can have an opinion on anything and everything through social media and other opportunities.

So . . . my view is that one way or another these issues are here to stay, and management must address and deal with them as appropriate for each individual business (and the industry in which the business operates). You can also see in the news that by different means different businesses are dealing with or handling these issues, and the ways of doing so will continue to develop.

One might ask, within a particular business (because businesses are separate and individual and should not be lumped as a whole), are there people at the board level who are exercising some oversight of the business’s procedures and processes for handling ESG or aspects of ESG, or risk management or enterprise risk management over environmental, social and governance matters?

People should remember, or should learn, that for most but not all matters, issues and tasks the board’s role is oversight not day-to-day management or involvement, such as, for example, under the business judgment rule. See my prior post with business judgement rule slides at https://wp.me/p75iWX-fm. But director proxy voting recommendations are also becoming more widely disseminated and vocalized about individual directors.

With respect to risk management, the board often delegates to the audit committee the initial oversight of risk management. However, my view is that any committee to which risk management is delegated should still report to the board about its oversight and what it has found, done, and recommended in that regard, and that oversight of overall risk management remains as a board-level matter. See also various stock exchange rules and auditing pronouncements referring and relating to audit committee, or board involvement in the oversight of risk management.

Board and audit committee responsibilities and potential new responsibilities, or at least what some people are arguing those responsibilities should be, also have increased and are greatly increasing. Risk management isn’t new, although what should or might be done to oversee risk management or enterprise risk management is still developing. For the most part, ESG as possibly a separately recognized item is new – and I would argue that “ESG” as a recognized item is vague and ambiguous because there is no agreement about just what criteria or items comprise ESG. I would also suggest that even if it is not specifically legally required, the board and/or its delegated committee should begin, if they don’t already do so, exercising appropriate oversight of management’s procedures and processes relative to ESG and if not of ESG then certainly risk management or enterprise risk management relative to appropriate environmental, social, and governance matters.

These certainly are developing areas of law and possible responsibilities.

Every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

The following are other summary materials that you might find useful:

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

From a prior blog post which you can find at https://wp.me/p75iWX-dk if the below scan is too difficult to read:

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What Do You Do About The Cease And Desist Order With KPMG As Your Auditor?

On June 17, the SEC issued a cease and desist order against KPMG. You can find the order at https://www.sec.gov/litigation/admin/2019/34-86118.pdf.

The order is pretty detailed. Respondent KPMG admits to the facts set forth in Section III, and to certain violations. What do you do about the order if KPMG is your company’s auditor and you are on the audit committee, or if you don’t have an audit committee and you are responsible, or one of the people who is responsible for engaging the auditor for your business?

Everyone would acknowledge that the order discusses truly unfortunate and regrettable past events and actions by the people who were involved, which then reflects poorly upon and can negatively impact KPMG. Other than KPMG, five “Other Relevant Persons” are named or identified in the order. Three of the “Other Relevant Persons” previously worked for the PCAOB. The four “Other Relevant Persons” who worked at KPMG were all separated from the firm in 2017. The order is 21 pages in length, so this is a summary discussion. The order recognizes KPMG for self-reporting the situation, initiating an investigation under the oversight of a Special Committee of the Board, cooperating with the SEC, and undertaking remedial actions. Thus, although the cease and desist order is new, remedial actions started in 2017.

Presumably every audit engagement partner has been prepared to discuss the cease and desist order with audit clients and prospective audit clients. And if I was on the audit committee or was responsible for engaging the services of the auditor, I would raise, and to the extent possible, discuss the issue of the order with the engagement partner, in addition to any other questions that I might have about KPMG as the business’s auditor. Keep in mind that the engagement partner might well have some legal and privacy limitations about what she or he can say about the cease and desist situation and order. If KPMG has already been engaged as the auditor, I would still have those discussions with the engagement partner. Depending on the situation, I would also consider updating and requesting comments from the full board about the order and my discussions with the engagement partner. And to the extent possible, as additional information I would consider having developments and social and business media pertaining to this situation monitored, for example, to know how it is being viewed, and to monitor developments and that this situation involving KPMG doesn’t turn more negative for some unknown reason.

Some of the comments that I have read are already extremely negative toward KPMG as an entity. In that regard, I first view the people who were directly involved including their specific actions or inactions and the titles and authorities that they held within KPMG, while I separately view the actions or inactions of KPMG as an organization including the possible actions or inactions of executive officers, directors and managing agents or representatives, governance, culture and ethics, oversight, risk management, tone at the top, self-reporting and transparency, prompt and active remedial actions, and related processes and procedures.

If you are an audit committee member, or if you are responsible for engaging the outside auditor, you might also want to consider my June 9, post discussing the new PCAOB guidance pertaining to auditor communications with audit committees concerning auditor independence. Although that guidance is on an issue that is different than the KPMG cease and desist order, I believe you might find that guidance helpful during discussions with the engagement partner about the cease and desist order – for example, the guidance might provide some insight or feel as to the detail in which you might expect the engagement partner to be willing or able to discuss the cease and desist order and perhaps actions being taken by KPMG as a result. You can find my June 9, post and discussion at https://wp.me/p75iWX-ge.

The cease and desist order does not state or mean that KPMG cannot be or is prevented from being the auditor of your business. Indeed, pursuant to the order, KPMG self-reported and began remedial actions back in 2017. However, obviously the actions of the people who were directly involved do reflect poorly upon the organization, and some of the people who were involved held important or high or relatively high positions. The order, to which KPMG has agreed, requires the firm to implement significant remedial actions, training and oversight, all of which would be prudent. Obviously, it is important for every auditor, and, similarly, every business and organization including public and private businesses, nonprofits and governmental entities, to prevent judgment and ethical improprieties and shortcomings, and to promptly and appropriately address and remedy any such situation if it does occur.

Every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this website. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the new Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

 

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

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