Tag Archives: auditing

New Governance Guidance Stretches Thinking on Ethics, Risk, and More

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​The King IV draft code has much to say about governance, risk management, compliance, and assurance. Click on the following link for the discussion by Norman Marks and see my comments below: iaonline.theiia.org

This article by Norman Marks discusses parts of the new King IV code that concentrate on culture, ethics and risk. It’s interesting for thought with respect to your own organization. It is and has been long well-known that all three corporate areas, culture, ethics and risk management, are instrumental to business performance and legal compliance.

And although these areas are discussed, and significant strides have been made in or discussed about risk management during the past couple of years, there still are no universally recognized standards or criteria to evaluate or audit how the business is doing in these areas.

I have long been surprised that the auditing professions, external and internal, have not jumped on these areas and also governance.

See also Tate’s Excellent Audit Committee Guide at CLICK HERE

Best, Dave Tate, Esq. (San Francisco and California), http://auditcommitteeupdate.com, http://californiaestatetrust.com, http://tateattorney.com

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

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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

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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 http://wp.me/p75iWX-q

Dave Tate, Esq., San Francisco and California, http://auditcommitteeupdate.com

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

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‘Internal audit is crucial to assessing impact of corporate culture’

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Internal audit’s mandate is much broader than external audit’s, says Richard Chambers of Institute of Internal Auditors

Click on the following link for the article: www.thehindubusinessline.com

Dave Tate, Esq. comment.

 

I’m going to disagree with Mr. Chambers on this one. I believe it is better for external audit to be auditing this issue – which is an issue that external audit already should be taking into consideration when designing the audit and the extent to which management and the accounting and internal control functions can be relied upon.

 

Although internal audit could be assigned a task or project relating to culture, on this topic I would keep the task or project very specific. Internal audit does also work and interact with management and executive management – assessing culture might detrimentally impact those relationships. I would however recommend that internal audit be more involved in risk management, which could involve culture but in a different context.

 

Audit committee, D&O, risk management, etc. blog: http://auditcommitteeupdate.com

Website: http://tateattorney.com

Trust, estate, conservatorship and elder abuse litigation blog: http://californiaestatetrust.com

 

 

Do You Have a Contrarian on Your Team?

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A divergent opinion can lead to more creative and better decisions.

Click on the following for the article: www.gsb.stanford.edu

Dave Tate, Esq. comments – good for thought – every board and management situation is different anyway – but also, did anyone say that there shouldn’t be or can’t be contrarian views on a board or committee? Look at the business judgment rule – there’s nothing there about all having to agree. One vote per person. My website: http://tateattorney.com.

Audit Committee 5 Lines of Defense

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

Making crisis simulations matter | Deloitte | Focus on | Crisis Management Services

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This issue of Focus on discusses the importance of crisis simulation and how to manage a maturity-based approach. It offers insights for getting started as well as examples of simulations in action.

Click on the following link for Deloitte’s discussion (I’m a Deloitte alum): www2.deloitte.com

Dave Tate, Esq. comments – I’m passing this along as food for thought. It is fairly basic, but I like the second paragraph, which you might want to use to help you consider simulations that might be useful from the audit committee, board, and management perspectives. And here is the link to my website which contains links to my two blogs (this blog, and the blog for trust, estate and elder abuse litigation): http://tateattorney.com.

Tate’s Excellent Audit Committee Guide – updated 1/3/2016 – 183 pages – read, use it, and pass it along

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Hello all. Tate’s Excellent Audit Committee Guide is updated – click on the following link for the pdf of the January 3, 2016, updated Tate’s Excellent Audit Committee Guide. Please read and use it, and pass it along to other people who would be interested,

Click to access tates-excellent-audit-committee-guide-01032016-with-appendix-a-final.pdf

Going forward, I have also made this blog, http://auditcommitteeupdate.com, my blog for audit committee, D&O, civil litigation, risk, compliance, business, etc. posts. My prior blog, http://directorofficernews.com, still exists, so you can still access that blog or the numerous past posts.

Dave Tate, Esq., and CPA in California (inactive), San Francisco and throughout California. My other blog for trust, estate, conservatorship and elder abuse litigation is http://californiaestatetrust.com

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Audit Committee Oversight of Derivatives – Not Just For Funds – Check Your Entity’s Oversight

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You may have seen this month news about new SEC rules relating to the use of derivatives by registered investment companies. Related to the derivatives topic, I found a Wall Street Journal article about restatements and Commissioner Luis A. Aguilar’s December 11, 2015, speech about derivatives interesting from an audit committee perspective.

In particular, I have pasted below a snapshot from the Wall Street Journal article discussing common causes of restatements – you will note that derivatives are listed (click on the snapshot to enlarge).

Frankly, although revenue recognition is well-known as the big cause of restatement, I had not considered the importance of derivatives as a top five cause. Every public entity is different of course, however, the Wall Street Journal statistics suggest that all audit committee members, not just those of registered investment companies take into consideration the extent to which their entity is involved in derivatives and related accounting, and consider whether oversight in the derivative area is appropriate, and whether each audit committee member is sufficiently knowledgeable about derivatives and their accounting, or needs some additional continuing education.

Accounting for derivatives is complicated – I myself have pulled the derivative accounting materials off the shelf for another refresher. I have also pasted below a snapshot from some of Commissioner’s speech which I found interesting.

Immediately below is the snapshot from the Wall Street Journal article listing accounting standards or areas most commonly involved in financial restatements for the recent period 2011-2012.

WSJ Major Causes of Restatements

The following is a snapshot from some of SEC Commissioner Aguilar’s December 11, 2015, speech about accounting for derivatives in the context of registered investment companies.

2015-12-29_7-09-19 from Aguilar derivatives speech

Commissioner Aguilar also commented about the extent of the global derivatives market: “Meanwhile, the global derivatives market remains huge, at an amount estimated in excess of $630 trillion in notional value worldwide.[4]” You can see Commissioner Aguilar’s speech at: 

http://www.sec.gov/news/statement/protecting-investors-through-proactive-regulation-derivatives.html

It would not surprise me if derivatives and accounting for derivatives take on greater importance for audit committee oversight in the future, for all companies that have significant derivative activities and not just for registered investment companies.

Enjoy, and onward.

Tate’s Excellent Audit Committee Guide (updated October 24, 2015, 172 pages) – click on the following link – please use and pass along to other people who would be interested – https://auditcommitteeupdate.files.wordpress.com/2015/10/tates-excellent-audit-committee-guide-10242015.pdf

Dave Tate, Esq. and California CPA (inactive), San Francisco and throughout California

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