PLI's Guide to the Sarbanes-Oxley Act for Business Professionals: Directors, Officers, Accountants, Financial Advisors, Lawyers:Bostelman, John T.:9781402404801:eCampus.com

About the Author

vii

Acknowledgement

Table of Chapters

Table of Compliance Checklists

xiii

Introduction

(8)

Purpose of This Book

(1)

Scope of the Sarbanes-Oxley Act

(1)

Entities That Are Issuers

(1)

Entities That Are Not Issuers

(1)

Philosophy of the Sarbanes-Oxley Act

(1)

Background: Twelve Months Leading Up to the Sarbanes-Oxley Act

(5)

Enron

(1)

Enron's Financial Collapse

(1)

Some Identified Issues at Enron

(1)

Arthur Andersen's Document Destruction and Indictment

(1)

Other Corporate Accounting Scandals

(1)

Regulatory Responses

(1)

Enactment of the Sarbanes-Oxley Act

(1)

Management Certifications

(16)

Overview

(1)

Scope of Certification Rules

(2)

Companies Covered

(1)

Filings Covered

(1)

Content of Certification

(5)

Paragraph 1---Review

(1)

Paragraph 2---Material Accuracy

(1)

Paragraph 3---Fair Presentation of Financial Information

(1)

Paragraphs 4(a) and 4(c)---Evaluation of Disclosure Controls and Procedures

(1)

Paragraphs 4 (b), 4(d) and 5---Internal Control Over Financial Reporting

(1)

Meaning of ``Internal Control Over Financial Reporting''

(1)

Paragraphs 4 (b) and 4 (d)

(1)

Paragraph 5

(1)

Disclosure About Evaluation and Changes

(2)

Certification Paragraph 4(c) Disclosure About Evaluation of Disclosure Controls

(1)

Certification Paragraph 4(d) Disclosure About Changes to Internal Control Over Financial Reporting

(1)

Mechanics of Certification

(1)

Form

(1)

Signatures

(1)

Location and Submission

(1)

Certification Required by Section 906 of the Sarbanes-Oxley Act

(3)

Reports Covered

(1)

Content of Certification

(1)

Submission Method

(1)

Penalties

(1)

NYSE CEO Certification

(1)

References

(2)

Disclosure Procedures and Financial Controls

(14)

Overview

(1)

Disclosure Procedures

(5)

Description of Required Procedures

(1)

Management Evaluation and Related Disclosure

(1)

Suggested Approach to Develop Procedures

(1)

Document Current Procedures

(1)

Information-Gathering Procedures

(1)

Oversight/Disclosure Management

(1)

Verification

(1)

Coordination with Internal Financial Controls and Financial Reporting

(1)

Financial Controls

(5)

Internal Control Over Financial Reporting

(1)

Annual Internal Control Reports

(1)

Management's Report on Internal Control

(1)

Audit Report on Internal Control

(1)

Material Weakness and Significant Deficiency

(2)

Quarterly Evaluation and Disclosure of Internal Control

(1)

Relationship of Disclosure Procedures and Financial Controls

(1)

References

(3)

Financial Disclosure: Management's Discussion and Analysis

(10)

Overview

(1)

SEC's 2003 Guidance Regarding MD&A Disclosure

(6)

Overall Presentation of MD&A

(1)

Executive-Level Overview

(1)

Layered Approach

(1)

Tabular Presentation

(1)

Headings

(1)

No Duplicative Disclosure

(1)

Focus and Content of MD&A

(1)

Liquidity and Capital Resources

(1)

Cash Requirements

(1)

Sources and Uses of Cash

(1)

Debt Instruments, Guarantees and Related Covenants

(1)

Cash Management

(1)

Critical Accounting Estimates

(1)

Additional General MD&A Recommendations

(1)

Off-Balance-Sheet Disclosures

(1)

Critical Accounting Policies

(1)

References

(1)

Disclosure of Non-GAAP Financial Measures

(12)

Overview

(1)

Required Reconciliation in Public Announcements---Regulation G

(2)

Definition of a ``Non-GAAP Financial Measure''

(1)

Required GAAP Reconciliation

(1)

Expanded Disclosure of Non-GAAP Information for SEC Filings

(3)

Required Disclosures in SEC Filings

(1)

Prohibited Disclosures in SEC Filings

(2)

Form 8-K Furnishing of Earnings Releases by U.S. Public Companies

(2)

Announcements That Are Covered

(1)

Relationship of 8-K Requirement to Other Non-GAAP Rules

(1)

Forty-Eight-Hour Exception

(1)

Limited Exceptions for Business Combinations and Non-U.S. Public Companies

(1)

Business Combinations

(1)

Non-U.S. Public Companies

(1)

References

(1)

Compliance Checklist: Non-GAAP Financial Measures

(2)

Real-Time Disclosures

(12)

Overview

(1)

Expanded Form 8-K Disclosure Requirements

(6)

Overview

(2)

Entry into a Material Definitive Agreement

(1)

Termination of a Material Definitive Agreement

(1)

Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance-Sheet Arrangement

(1)

Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation Under an Off-Balance-Sheet Arrangement

(1)

Costs Associated with Exit or Disposal Activities

(1)

Material Impairments

(1)

Notice of Delisting or Failure to Satisfy Listing Standards; Transfers of Listings

(1)

Unregistered Sales of Equity Securities

(1)

Material Modification to Rights of Security Holders

(1)

Restatement of Previously Issued Financial Statements

(1)

A Director Departs or Declines to Stand for Reelection

(1)

Principal Officers Retire, Resign or Are Terminated

(1)

A New Director Is Elected or New Principal Officer Is Appointed

(1)

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

(1)

Other 8-K Requirements

(1)

Shortened Deadlines for 10-K and 10-Q

(1)

Four-Year Phase-In Period

(1)

Enhanced Disclosure Regarding Website Access to Periodic and Current Reports

(1)

Increased SEC Review of Public Filings

(2)

Mandatory Three-Year Review

(1)

Special SEC Review in 2002 of Fortune 500 Companies

(1)

Public Release of Comment and Response Letters

(1)

References

(2)

Governance: Board of Directors

(14)

Overview

(1)

Director Independence

(5)

NYSE Director Independence Rules

(1)

Covered NYSE Companies

(1)

Majority-Independent Board

(1)

Executive Sessions of Non-Management Directors

(1)

Bright-Line NYSE Director Independence Tests

(1)

Affirmative Independence Determinations

(1)

Disclosure of Categorical Standards

(1)

Nasdaq Director Independence Rules

(1)

Covered Nasdaq Companies

(1)

Majority-Independent Board

(1)

Executive Sessions of Independent Directors

(1)

Bright-Line Nasdaq Director Independence Tests

(1)

Affirmative Independence Determinations

(1)

Audit Committee

(1)

Nominating/Corporate Governance Committee

(2)

NYSE Requirements

(1)

Nasdaq Requirements

(1)

Proxy Statement Disclosure Regarding Nominating Committee Functions and Communications Between Security Holders and Boards of Directors

(1)

Shareholder Communications with the Board

(1)

Corporate Governance Guidelines

(1)

Compensation Committee

(1)

NYSE Requirements

(1)

Nasdaq Requirements

(1)

Proposed SEC Rules on Direct Shareholder Access to Company Proxy Materials to Nominate Directors

(1)

References

(1)

Compliance Checklist: Bright-Line NYSE and Nasdaq Independence Tests for Board of Directors of U.S. Listed Company

(2)

Governance: Audit Committee

(14)

Overview

(1)

SEC Audit Committee Requirements

(3)

Companies Covered

(1)

SEC Audit Committee Independence

(1)

Prohibition on Compensatory Fees from the Company

(1)

Affiliated Person

(1)

Limited Exemptions from Independence Requirements

(1)

SEC Audit Committee Authority and Responsibilities

(1)

Selection and Oversight of Outside Auditors

(1)

Complaint Procedures

(1)

Authority to Engage Advisors

(1)

Adequate Funding

(1)

Selection and Oversight of Accounting Firms Other Than the Outside Auditors

(1)

Disclosure Requirements

(1)

SEC Audit Committee Financial Expert Disclosure

(2)

Required Disclosure

(1)

Definition of Audit Committee Financial Expert

(1)

Additional NYSE Requirements

(1)

NYSE Independence and Other Qualifications

(1)

NYSE Audit Committee Authority and Responsibilities

(1)

Additional Nasdaq Requirements

(1)

Nasdaq Independence and Other Qualifications

(1)

Nasdaq Audit Committee Authority and Responsibilities

(1)

Approval of Related Party Transactions

(1)

Required Auditor Communications with Audit Committee

(1)

References

(2)

Compliance Checklist: Audit Committee of the Board of Directors

(3)

Compliance Checklist: Audit Committee Financial Expert

100

(1)

Other Director Governance Matters

101

(10)

Codes of Ethics

102

(2)

SEC Code of Ethics Requirement

102

(1)

Required Disclosure

102

(1)

Scope of the Code of Ethics

102

(1)

Public Availability

102

(1)

Amendments and Waivers

103

(1)

NYSE Code of Ethics Requirement

103

(1)

Nasdaq Code of Conduct Requirement

103

(1)

Shareholder Approval of Equity Compensation Plans

104

(2)

NYSE Rule on Shareholder Approval of Equity Compensation Plans

104

(1)

Nasdaq Rule on Shareholder Approval of Equity Compensation Plans

105

(1)

Disclosure of Equity Compensation Plan Information

105

(1)

Other NYSE Corporate Governance Rules

106

(1)

NYSE CEO Certification and Notice of Noncompliance

106

(1)

NYSE Public Reprimand Letters

106

(1)

Other Nasdaq Corporate Governance Rules

106

(1)

Nasdaq Notice of Noncompliance

106

(1)

Nasdaq Disclosure of Going Concern Qualifications

107

(1)

References

107

(1)

Compliance Checklist: SEC, NYSE and Nasdaq Code of Ethics Requirements

108

(3)

Governance: Executive Officers and Directors

111

(8)

Overview

111

(1)

Shorter Deadlines for Ownership Reports by Insiders of U.S. Public Companies

112

(1)

Shorter Deadlines

112

(1)

Mandatory Electronic Filing and Website Posting

113

(1)

Prohibition on Loans to Officers and Directors

113

(1)

Benefit Plan Blackouts

114

(2)

Prohibited Insider Trades During a Blackout Period

114

(1)

Department of Labor Advance Notice Rule

115

(1)

Notice of a Blackout Period to Insiders and the SEC

115

(1)

Disgorgement for Restatements

116

(1)

Improper Influence on Conduct of Audits

116

(1)

SEC Temporary Freeze on Bonus and Special Payments

117

(1)

References

117

(2)

Auditor Independence and Safeguards Against Auditor Conflicts

119

(18)

Overview

120

(1)

General Auditor Independence Principles

120

(2)

Evolution of Current Independence Rules

122

(1)

Prohibited Non-Audit Services

123

(3)

Bookkeeping and Related Services

123

(1)

Financial Information Systems Design and Implementation

123

(1)

Appraisal or Valuation Services, Fairness Opinions or Contribution-in-Kind Reports

124

(1)

Actuarial Services

124

(1)

Internal Audit Outsourcing

124

(1)

Management Functions

124

(1)

Human Resources

125

(1)

Broker-Dealer, Investment Adviser and Investment Banking Services

125

(1)

Legal Services

125

(1)

Expert Services

125

(1)

Tax Services

125

(1)

Audit Committee Pre-Approval

126

(1)

Financial, Business and Payment Relationships

127

(1)

Audit Partner Rotation

127

(1)

Employment Relationships

128

(1)

Prohibition on Audit Partner Compensation for Cross-Selling Non-Audit Services

128

(1)

Enhanced Disclosure

128

(1)

Consequences of Impaired Auditor Independence

129

(1)

Required Auditor Communications with the Audit Committee

130

(1)

Material Correcting Adjustments

130

(1)

Retention of Audit Work Papers

131

(1)

Improper Influence on Conduct of Audits

131

(1)

SEC Authority to Censure Accountants

131

(1)

References

132

(1)

Compliance Checklist: Auditor Independence Requirements, Including Prohibited Services and Relationships

133

(4)

Public Company Accounting Oversight Board

137

(6)

Overview

137

(1)

Auditor Registration

138

(1)

Auditing, Quality Control and Independence Standards

138

(2)

Inspections of Registered Public Accounting Firms

140

(1)

Investigations and Disciplinary Proceedings

140

(1)

Non-U.S. Public Accounting Firms

141

(1)

Organization and SEC Oversight of PCAOB

141

(1)

Funding of PCAOB and FASB

141

(1)

References

142

(1)

Attorney Professional Responsibility

143

(10)

Overview

143

(1)

Covered Attorneys

144

(1)

Reporting Trigger

145

(1)

Reporting Procedures

146

(3)

Obligations of Chief Legal Officer

147

(1)

Further Reporting

147

(1)

Qualified Legal Compliance Committee

148

(1)

Reporting Obligations of Investigatory and Defense Counsel

148

(1)

Permissive Reporting Beyond the Public Company

149

(1)

Noisy Withdrawal Proposals

149

(1)

References

150

(1)

Compliance Checklist: Attorney Up-the-Ladder Reporting

151

(2)

Employee Whistleblower Protection

153

(4)

Overview

153

(1)

Procedure

154

(1)

Remedies

154

(1)

Related Criminal Whistleblower Provision

154

(1)

Considerations for All Affected Employers

155

(1)

References

155

(2)

Investment Bank Research Analysts

157

(6)

Overview

157

(1)

NASD and NYSE Rules

158

(2)

Research Department Separation

158

(1)

Prohibition on Research Soliciting Investment Banking Business

158

(1)

Analyst Compensation

159

(1)

Blackout on Research and Public Appearances in Connection with Offerings

159

(1)

Research Blackout When ``Lock-Ups'' Expire

159

(1)

Termination of Coverage

159

(1)

Analyst Trading Restrictions

159

(1)

Disclosure Requirement

160

(1)

Analyst Exams

160

(1)

Supervisory Procedures

160

(1)

SEC's Analyst Certification Rules

160

(1)

Global Research Analyst Settlement

161

(1)

References

162

(1)

Record Keeping

163

(2)

Document Preservation---Obstruction of Justice

163

(1)

Retention of Audit Work Papers

164

(1)

References

164

(1)

Remedies and Penalties

165

(4)

Officer and Director Bars

165

(1)

Civil Liability

166

(1)

Extended Statute of Limitations for Securities Fraud

166

(1)

Nondischargeable Debts for Securities Fraud

166

(1)

Establishment of Disgorgement Fund

166

(1)

Criminal Penalties

166

(1)

References

167

(2)

Index

169


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