The FCPA Blog – Richard Bistrong: The dangerous charm of agents – a very well-written scenario

Below is a link to an article from The FCPA Blog (The Foreign Corrupt Practices Act Blog). The article discusses a hypothetical (or perhaps actual) scenario that can happen to any corporate representative on any day. The following is a copy and paste from the beginning of the article (to get you interested in reading the remainder):

“What is it about agents, fixers, and intermediaries that makes them so attractive while potentially toxic to multinationals?

If you haven’t spent extended time with them, it’s hard to understand.

So here’s what I shared last week at the FCPA Blog NYC Conference.

During our session called The Other Side of the Sting, Getting Stung, Dick Cassin asked, “What’s it like working with intermediaries, on a personal level?”

That’s not something we often hear about. In most of my readings, agents are abstract concepts, part of an “issue” about potential ethical and legal hazards. But there’s often something much deeper going on.

Most top agents are extremely kind, courteous and gracious people. Let me add overly polite. When their clients come to see them at far off locales, either for the first time or over the course of an engagement, the agents are wonderful hosts. From arrival at an airport until departure, the client is treated as an honored guest, often even invited for a meal or two at the agent’s home.”

And here is the link to the entire article: CLICK HERE

Read the remainder of the short article. You can envision this scenario happening all the time, or not at all. The point is that there always is a risk. The agent might simply be being nice, and hospitable, or in accord with country or community customs. So, yes, obviously you all know that you need/must have a robust compliance and disciplinary program that is outwardly supported by executive and mid-management, and the board members, on down to all employees and throughout the entire organization, and the organizations suppliers and affiliates, but also keep in mind that some of these situations, if they turn wrongful, might also only be prevented or stopped and remedied by an engrained corporate culture of integrity and honesty.

Best to you, Dave Tate, Esq., San Francisco and California

Click on the following for Tate’s Excellent Audit Committee Guide, Tate’s Excellent Audit Committee Guide 10202016 with Appendix A

The Business Judgment Rule (animation, for fun, but it’s correct):

Audit Committee 5 Lines of Defense 07182016


New ISO Anti-Bribery Standard – Will It Give Companies An Absolute Defense?

ISO has published its new international anti-bribery standard, ISO 37001. You can find select information about the new standard HERE and at http:// .

The short PowerPoint presentation in part says:

The Standard benefits an organization by providing:

  • Minimum requirements and supporting guidance for implementing or benchmarking an anti-bribery management system
  • Assurance to management, investors, employees, customers, and other stakeholders that an organization is taking reasonable steps to prevent bribery
  • Evidence in the event of an investigation that an organization has taken reasonable steps to prevent bribery.

SO HERE’S AN INTERESTING QUESTION: will compliance with the standard give the company a free pass on bribery liability with the SEC and other state and federal entities and agencies if in fact a bribery occurs? I bet not. However, consider that generally liability does not result unless the person or entity charged has breached or failed to satisfy the applicable standard or duty of care (except in select situations, e.g., such as strict liability or products liability, etc.), and that breach or failure causes damages. Thus, if the applicable standard becomes ISO 37001, and if that standard is met or satisfied, it certainly is arguable that no fault or liability should result if a bribery occurs.

Best to you, Dave Tate, Esq., San Francisco and California. See also Tate’s Excellent Audit Committee Guide (updated October 2016), tates-excellent-audit-committee-guide-10202016-final-with-appendix-a

The Business Judgment Rule – a short animation (for fun, but also correct):

Audit Committee 5 Lines of Defense 07182016


Sustainability Disclosures – From PWC – Audit Committee Need to Know?

I’m forwarding this along – sustainability disclosure guidance from PWC – click on the following link for the materials and the discussion, CLICK HERE

And I am thinking that there could be a need for increasing audit committee member expertise in the sustainability disclosure area.

Below is a snapshot from the PWC website, followed by a link to Tate’s Excellent Audit Committee Guide (updated January 2016), followed by the Audit Committee 5 Lines of Diligence and Defense. Thank you. Dave Tate, Esq., San Francisco and California.

PWC Sustainability Disclosure Guidance


See also my Tate’s Excellent Audit Committee Guide, updated January 2016, Tate’s Excellent Audit Committee Guide 01032016 with Appendix A Final

Audit Committee 5 Lines of Defense 07182016



Trade Secrets And How To Protect Them – Royse Law Firm Webinar – Very Important For Every Business

Below is a link to a detailed and very useful webinar from my friends at the Royse Law Firm discussing trade secrets and how to protect them – this is a very important topic for every business and entity. Click on the following link for the discussion:

New PCAOB Guidance On Form AP – Yes, To My Surprise, Some Of This Is Interesting

I have previously commented briefly about the new audit partner disclosure requirement – essentially, my comment was that I did not really see what the big deal is about this. But on June 28, 2016, the PCAOB issued staff guidance for Form AP, and as a result, I have to step back a little my initial comments. The following is a link to the PCAOB guidance, and Form AP, CLICK HERE

I still don’t believe in the broad view that it is a big deal to name the audit partner, however, I am now seeing that it might be possible to do a tally on how many audits a particular person (identified by a specific numeric code for that particular person) is listed as the audit partner, and it would not surprise me if someone in the future, or even the PCAOB, or the SEC, or plaintiffs’ counsel in a litigation case for auditor liability, questions the number of audits on which someone can effectively perform as the primary audit partner?

Further, if my reading of the Form AP, and the guidance, are correct, it appears that the Form requires the auditor/auditing firm to provide the numbers of hours spent performing the audit, and it appears that to some extent those hours need to be further divided or broken down into some of the different important audit areas or programs.  This information could be useful for a number of purposes. It would allow a comparison of audit fee to hours spent between different entities and industries (and how much is being charged per hour). It gives the regulatory entities, such as the PCAOB and the SEC useful information to evaluate audit effectiveness. If admissible in court, it could be used to argue in particular cases whether the auditor spent enough time on a particular audit area or program. And the information about the different audit firms involved in the audit and their time spent might be similarly interesting.

And all of this might be of interest to the audit committee in its hiring, evaluation and retention of the audit firm, assuming, of course, that someone or some entity compiles and reports this information in a useful format.

Best, Dave Tate, Esq., San Francisco and California

Click on the following for my Tate’s Excellent Audit Committee Guide, Tate’s Excellent Audit Committee Guide 01032016 with Appendix A Final

See also my trust, estate, conservatorship, power of attorney, and elder abuse litigation blog at

Audit Committee 5 Lines of Defense 07182016


Basic Insurance for Start-Up Companies – Priya Cherian Huskins, Esq., Woodruff Sawyer

Passing this along, Basic Insurance for Start-Up Companies, the following is a worthwhile read from the D&O Notebook, Priya Cherian Huskins, Esq., Woodruff Sawyer, click on the below link/box for the discussion, enjoy,

Best, Dave Tate, Esq., San Francisco and California.

TATE’S EXCELLENT AUDIT COMMITTEE GUIDE updated January 2016, click on the following link,

Audit Committee 5 Lines of Defense 07182016



Really Massive Changes in Accounting, Auditing, Reporting and Communicating – The End Of Accounting?

Although I practice as an attorney, I previously practiced as a CPA and I have experienced several times over the years when there were significant changes occurring in the accounting practice and profession. But right now, I believe that I am witnessing multiple massive changes that have been long in the making. The following is a link to an Accounting Today article which does a pretty good job of discussing some of the changes, and also includes a question whether this is the end of accounting – click on the following link, CLICK HERE

It’s not like these changes are screaming at you in the headlines, but the cumulative effect is significant, new changes are continuing and will continue, and perhaps more important, the reasons for the changes are permanent.

For a long, long time the value of the audit and of the audit report have been questioned.

For a long, long time, the value of the information provided by an accounting that is prepared in conformity with generally accepted accounting principles has been questioned.

Different stakeholders also have different needs, and speed at which the flow of information is needed and expected is ever-increasing. Audited financial statements, for example, don’t tell you very much about the future investment or business generating value of the entity or of the transactions reported, or of the risks that are associated.

So now, for example, in addition to GAAP accounting we have non-GAAP accounting and reporting, we are seeing an increased ability to audit all transactions by computer software, GAAP is moving from the more detailed and specific rules based approach back to the more principles based approach that was in place when I first became a CPA, and non-GAAP measurements or criteria are becoming or should become more important such as some of the governance criteria (integrity, tone-at-the-top, culture, etc.), sustainability, transparency, risk management, and more emphasis on internal controls such as COSO.

However, I don’t agree with the suggestion or question in the title to the above linked article – it’s not the end of accounting. Traditional accounting serves a useful purpose – can you imagine what a free for all it would be without traditional accounting? There would be absolutely no checks or balances. There would be a “zero” reliability factor, and no comparability between different entities or industries.

But there is no question that the changes that have occurred and that continue to occur in accounting and auditing create both opportunities and risks for investors, financial institutions and other stakeholders, executive, financial, accounting and audit officers and professionals, boards, and audit and risk committees. The people who will excel are the people who will embrace and become expert in these changes. It’s a lifetime of learning to stay ahead and relevant.

Best to you. Dave Tate, Esq.

The following is a link to my Tate’s Excellent Audit Committee Guide, updated January 2016, CLICK HERE

Audit Committee of the Future – From the CAQ

Below is a link to a paper by the Center for Audit Quality entitled The Audit Committee of the Future. Although the discussion paper is a disappointment (too basic, and lack of meaningful insight) as the CAQ usually has worthwhile materials, in the list of five ways to enhance the audit committee, I thought that one of the five ways is worth noting for its subject matter (but again, not for the discussion insight). The following is the discussion about fostering robust communication and engagement:

“Fostering robust communication and engagement: In addition to enhancing communication with investors and other parties via disclosure, panelists agreed that audit committees need to focus strongly on developing healthy channels of internal communication. “That’s an important skill set for the chairman of the audit committee,” said one, “how to make sure you’re having those periodic meetings outside the boardroom with the auditor, with the internal auditor, with the CFO, with the controller.” Of course, the onus on fostering communication does not fall on the audit committee chair alone. “It’s important to have all parties around the table fully engaged,” said one participant. Others emphasized the need for external auditors to engage in dialogue, particularly if a sense emerges that the audit committee is not asking the right questions. “You need an audit firm to speak up,” said a panelist.”

Obviously the above comments can be expanded upon greatly, including, for example, discussions about agenda setting, risk management and internal controls, critical decision making processes, investigations, and follow up.

Here is a link to the CAQ paper

Click to access caq_insights_audit_committee_future.pdf

And the following is a link to Tate’s Excellent Audit Committee Guide, updated January 2016. Enjoy. CLICK HERE FOR THE POST CONTAINING A LINK TO THE AUDIT COMMITTEE GUIDE

Best, Dave Tate, Esq., San Francisco and California,

Audit Committee 5 Lines of Defense 02132016 David W. Tate, Esq.


Comments on the DoJ Fraud Section Plan and Guidance

Recently, on April 8, 2016, I wrote a post about the new DoJ Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance. Here is a link to that post and the Plan and Guidance CLICK HERE.

I did not at that time provide comments about the Plan and Guidance, which is only 9 pages in length. Whereas audit committees definitely should read and understand the Plan and Guidance, and take it into consideration for the purpose of pre-policies, processes and practices, and then also if an event or occurrence happens, my additional overview comments are as follows.

As you read through the Plan and Guidance, unfortunately I believe that you will find that for the most part it vaguely says that you should conduct an investigation of everything and everyone who might be relevant to the event or occurrence, that you should self report everything that you find (except for attorney-client information and materials, but of course the Fraud Section might argue about what qualifies as being attorney-client privileged), and that the Fraud Section will then consider what benefits it will grant, if any, to you for doing so. In that regard, I have to say that the Plan and Guidance is noncommittal, vague and overly broad, and might be considered heavy-handed, and as such isn’t particularly helpful or not nearly as helpful as it might have been.

The Plan and Guidance also only applies to the Fraud Section – thus, it does not apply to any of the other numbers of governmental entities, divisions, departments or sections that might also be looking into the event or occurrence. But, please do read and understand the Plan and Guidance anyway.

And the following is a link to my Excellent Audit Committee Guide – read it and pass it around, CLICK HERE.

Best, Dave Tate, Esq. (San Francisco/California)

What Insight Do Audit Committees Receive From Internal Audit – Not Enough Or Much – KPMG Survey

What insight to audit committees receive from IA

The above chart is from a new KPMG survey of audit committee chairs and CFOs. You can find the survey at

Click to access GM-OTS-1653_SeekingValueThrough_IAB_V1.pdf


The survey and the above chart identify ongoing challenges for internal audit to provide and prove enough value to audit committee members and CFOs. It is well-documented that these challenges have existed for years – basically forever. But let’s not over generalize – one size doesn’t fit all, and certainly there are internal audit functions that are up-to-speed and that are providing good value.

If there is a problem in this area, you must also ask the audit committee members, not just the audit committee chair but also the individual members who aren’t the chair, why they aren’t getting the information that they need from internal audit? There’s either a lack of common understanding, and that lack of understanding might also be the fault of the audit committee members if they are not expressing themselves sufficiently, or there is a problem with the internal audit function, or its funding, or the qualifications of its members. In theory, it also is possible that the audit committee or the CFO simply are asking internal audit to perform a task or to provide information that is unreasonable; however, that is like saying “I can’t do that for you,” which of course is a very bad approach.

You can also see Tate’s Excellent Audit Committee Guide (updated January 3, 2016), at

Dave Tate, Esq., San Francisco and California,

Audit Committee 5 Lines of Defense 02132016 David W. Tate, Esq.