Month: March 2005

Sarbanes-Oxley Yet Again

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The threat of an adverse opinion on a public company’s internal controls was not an idle one. According to Compliance Week, nearly 10% of the 10-K (annual report to the SEC) filings in January included an adverse opinion because of material weaknesses in their internal controls. There may be more coming, since companies with a December year-end have until March 16 to file.

I noticed a pattern to the adverse opinions: they are nearly coterminous with companies having restated their earnings for earlier quarters. This begins to make sense: if a company’s internal controls were well-designed and operating as intended, no restatement would have been necessary. Earnings restatements and accounting problems are often punished more severely than earnings or performance disappointments, and are easy targets for class-action lawsuits. When more data is available, it will be an interesting exercise to separate the effect on share prices of the adverse opinion from that of the restatement. Maybe someone with better math skills will attempt it.

Here is a partial list of companies that have had an adverse Sarbanes-Oxley opinion, but a clean opinion on their financial statements, from their auditors:

BearingPoint Inc. (ticker: BE; formerly KPMG Consulting)
Auditor: PricewaterhouseCoopers
Material weakness: Revenue recognition (preliminary only; filing due March 16,2005)

Calpine Corporation (ticker: CPN)
Auditor:PricewaterhouseCoopers
Material weakness: Provision for income taxes.

Eastman Kodak Company (ticker: EK)
Auditor: PricewaterhouseCoopers
Material weakness: Provision for income taxes.

Flowserve Corp. (ticker: FLS)
Auditor: KPMG
Material weakness: Provision for income taxes, intercompany accounts, consolidation, others.

Netbank Inc. (ticker: NTBK)
Auditor: Ernst & Young
Material weakness: Estimated fair market value for rate locks and hedges.

Sapient Corporation (ticker: SAPE)
Auditor: PricewaterhouseCoopers
Material weakness: Controls over health insurance accruals and lease accounting.

SunTrust Banks, Inc. (ticker: STI)
Auditor: PricewaterhouseCoopers
Material weakness: Internal controls at a recently-acquired subsidiary; loss provision errors.

I also checked MCI, formerly WorldCom, since it was one of the companies whose accounting problems led to the adoption of Sarbanes-Oxley, and since it may hold the world record for earnings restatements in prior years. MCI is getting a clean opinion. An interesting pattern, don’t you think?

This Most Ancient Privilege

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The word privilege means “private law.” In medieval times (in Europe), legal authorities were often a patchwork of jurisdictions. People in the countryside lived under the law dispensed by feudal lords, but cities often had the right to govern themselves and to dispense justice on their own authority. They had private law. The same concept applied to clerical properties as well.

Universities were also granted the right of private law. In many cases, they were under the jurisdiction of the Church but not always. Some centers of learning functioned as mini-states, owning land, having tenets and keeping their own military/police forces. The right to teach at the universities was often granted like a title of land in the feudal system. Each position came with a certain income with rights and responsibilities. In some cases, such positions were even hereditary. (This degree of security only applied to the upper tier of scholars. Most worked under conditions of great insecurity just like modern grad-students.)

The word “tenure” itself originally meant: to hold a piece of land within the context of a feudal grant. By 1599 it had come to also mean, “condition or fact of holding a status, position, or occupation.” Tellingly, however, the word was not applied to academic positions until the late 1950s. (1) Even so, it is clear that the modern academic tenure system is a direct, literal descendant of the medieval practice of granting academic offices.

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Some more on color photographies from the WW I era

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James had posted some links to French color photographies from World War I last week. I had found some of the many of the same photos even before that, but couldn’t find the index page, which seems to be different from that James had posted Anyway, even without the index page , a lot of pictures can be found by playing with these URLs:
http://www.culture.gouv.fr/Wave/image/memoire/0084/sap01_cvl00001_p.jpg (up to sap01_cvl00159_p.jpg)

http://www.culture.gouv.fr/Wave/image/memoire/0083/sap01_ca000002_p.jpg (up to sap01_ca000616_p.jpg).
(There are some gaps in between, though).

WWI era or not, what interests me most are the buildings, so I have put up those two images:

I had to reduce the resolution to get their sizes down to 40 kb each, the original images can be found
here and here.

I have linked here to some more images that I found interesting, in no particular order:

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Hello World

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Oh, wow…I’ve got the keys to ChicagoBoyz. Can I get it started…ran rough for a minute, but now it seems to be turning over nicely. What to write about…perhaps a rant in the classic style.

DEAR CELL PHONE FANATICS

What exactly is it that you’re talking about that is so overwhelmingly important? It must be very important indeed..

*More important than the lane change you’re doing at 70 mph
*More important than the attractive person sitting across from you at the restaurant
*More important than showing common courtesy to the clerk in the checkout line

The thing is…you talk so loud, it’s hard to avoid overhearing your conversations..and they usually don’t sound all that important. It’s not usually about getting that corporate acquisition done, or even about picking up little Jimmy at school to take him to the dentist. An awful lot of it seems to be …talking for the sake of talking.

When the telegraph was first introduced, a journalist remarked:

“This extraordinary discovery leaves…no elsewhere…it is all here.”

If wired communications reduced the sense of elsewhere, does the abuse of wireless communications reduce the sense of the here and now?