Changes in Regulatory Environment for Large Companies

1
Changes in Regulatory Environment for Large
Companies
Dick QuimbyPartner, PricewaterhouseCoopers
2
Changes in Regulatory Environment for Large
Companies

• What changed?
• Sarbanes Oxley Act of 2002 (SARBOX)
• New regulator, new rules new accountability and
  a new vocabulary

3
Changes in Regulatory Environment for Large
Companies

• Key Aspects of SARBOX Act
• Affects SEC registrants and their auditors
• Created new regulatory body, Public Company
  Accounting Oversight Board (PCAOB)
• With new regulatory body comes significant powers
  including violations of Act as criminal charges

4
Changes in Regulatory Environment for Large
Companies

• Changes for Public Companies and Auditors
• Financial Expertise and Independence on Audit
  Committee
• Certifications of financial statements by
  CEO/CFO
• Registration and Inspection of Accounting Firms
• Scope of services and audit partner rotation
• New auditing standard (PCAOB Standard No. 2)

5
Changes in Regulatory Environment for Large
Companies

• PCAOB No. 2, An Audit of Internal Control over
  Financial Reporting Performed in Conjunction with
  an Audit of Financial Statements
• Standard Requires
• An Integrated audit
• Reporting on financial statements, managements
  assessment of the effectiveness of internal
  controls and auditors opinion on operation of
  internal controls.

6
Changes in Regulatory Environment for Large
Companies

• Whats the result today?
• Significant costs to companies for
• Expanded Boards and governance processes
• Large scale documentation and testing of
  internal controls
• Significantly expanded audit scope
• Uncertainty of continued changing regulations
  by PCAOB and SEC

7
Changes in Regulatory Environment for Large
Companies

• What about non-public companies and
  not-for-profit?
• Spill over effect for private companies wanting
  to go public or to be sold to a public company.
• Not-for-profits have had increase in creating
  audit committees, greater dialogue with auditors
  and focus on internal controls as well as scope
  of auditor services.

8
Changes in Regulatory Environment for Large
Companies

• Where are we now?
• Still in the mix of massive change for companies
  to have testing complete for 2004.
• Many unanswered questions with the PCAOB and the
  SEC

9
Changes in Regulatory Environment for Large
Companies

• Real life experience
• Pat Buchenroth, Assistant Controller of
  MeadWestvaco Corporation in Dayton, Ohio
• Responsible for financial reporting and SEC
  compliance including Sarbanes Oxley Section 404
  compliance matters.