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://http://www.iso.org/iso/home/standards/management-standards/iso37001.htm .

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):

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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

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Disparate Impact – U.S. Supreme Court – Texas Dept. of Hous. & Cmty. Affairs – Plaintiff Must Establish Causation

This is a bit of a side topic for this blog, but not entirely as it deals with a disparate impact claim, typically made in the context of employment or housing discrimination litigation, but possibly relevant in other areas also. It is useful to keep in mind that in Texas Dept. of Hous & Cmty. Affairs v. Inclusive Communities Project the U.S. Supreme Court held that the plaintiff must establish causation. Relevant wording from the Court is as follows:

Disparate Impact - Texas Dept. Hous. & Cmty. Affairs, - U.S. Supreme Court

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

Tate’s Excellent Audit Committee Guide, updated January 3, 2016, CLICK HERE FOR THE PDF LINK.

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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 http://californiaestatetrust.com

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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,

https://wsandco.com/do-notebook/startup-insurance/

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

TATE’S EXCELLENT AUDIT COMMITTEE GUIDE updated January 2016, click on the following link, http://wp.me/p75iWX-q

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Top Ten Mistakes Startups Make – And How To Avoid Them – Royse Law Firm – You’ll Like This Webinar Video

The following is a link to a webinar by the Royse Law Firm about the top 10 mistakes that startups make and how to avoid them. This is an excellent webinar, full of useful information. I view the webinar from a risk management perspective, and from a litigation perspective as mistakes do tend to lead to litigation. Enjoy. Click on the following arrow for the webinar video:

 

Dave Tate, Esq. San Francisco and California. See also Tate’s Excellent Audit Committee Guide updated January 2016, Tate’s Excellent Audit Committee Guide 01032016 with Appendix A Final

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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

Jail for Officers’ Alleged Failure to Ensure Food Product Safety

The new Eighth Circuit decision in U.S. v. DeCoster, discussing the responsible corporate officer doctrine, is an important case for corporate officers, managing agents and board members as the Eighth Circuit upheld jail time for the corporate officers’ alleged failure to ensure the safety of food that was sold to the public (i.e., egg safety, and salmonella).

In addition to typical criminal wrongdoing, for some time corporate and corporate officer criminal punishment, including jail time, has been expanded to include situations of environmental contamination (representing potentially an injury to the environment and also to public health).

The DeCoster case reflects a continuing march toward expanding possible corporate and corporate officer criminal punishment, including jail time, for injury to public physical health (in this case, food safety), even when there is a lack of evidence of the corporate officer’s actual and direct wrongdoing. In summary, in these cases the criminal wrongdoing arises from the corporate officer’s executive or managing agent status or standing and authority, and his or her alleged failure to sufficiently ensure the safety of the product (food) that is sold by the corporation or business to the general public. The following is a link to a good discussion of the case on the D & O Diary, CLICK HERE.  Obviously the implications are important for general public product and service providers, particularly those that offer products or services that could cause or involve a resulting injury to the physical health of the public.

Best, Dave Tate, Esq. (San Francisco)