Category Archives: Sarbanes-Oxley

Failed Financial Bailout and The Responsibility of Business Owners and Executives

You already know the failure of the $700 billion bailout bill triggered a 777 point drop on the DOW.  CNN reports that the markets lost  $1.3 trillion dollars of value in one day.  I didn’t double check their math.  Let’s just say it was a big decline.

There will be plenty of advice on this situation.  Unnamed top consultants cited in Forbes today already advised: “cut costs and grab the low hanging fruit”.  Thank you for that clear direction.  There will be  a lot more of similarly “valuable” advice in the coming weeks and months.

This is not a “what happened ” report or “who should take the blame” report. This is simply a Wake Up Call To Say – Stop Living A Life of Illusions!  Accept responsibility for your business.  Do the following today. In fact, implement these right now:

  • Take focused action to grow profits and sales every day.  Do not blame outside factors.  Every business works in the same marketplace. Define the five “A” areas of your business that drive profitable sales and spend 80% of your time on those.   That is four out of five days.
  • Treat your support network with respect and help them grow faster than your business since your business will follow the growth of your skills.  Your support network should be selected based on your personal weaknesses not your strengths.  Don’t go for clones.
  • Optimize all your assets including, people, receivables, inventory, fixed assets. Each one of these assets replace cash.  You need cash to grow.
  • Evaluate, decide then act.  You don’t need a two year study to enter a new market or even a new country. You can test it beginning now.  This is the “bias for action mindset”.
  • Treat all the same as you would like to be treated.  When someone does not treat you well ask yourself what you are doing to attract that behavior.  Yes that is exactly what I meant to write.

Each of these areas takes work to implement.  If you need help, Email Me (Steve Pohlit)  or call me at 727-587-7871

Consider This:

Some members of Congress  stood ground and said “it is not the government’s job”   or ” I am in favor of a solution, but this plan is not good for America.”  I don’t know their personal situation, but most likely some of them have personal money in mutual funds and stocks that got clobbered today by their vote.  How would you vote if you know your net worth would tank by your no vote?  Would you be able to vote your belief.  Actually I respect all who voted their belief system regardless of the vote.

Politically there are big issues on the agenda and people are lining up for what the government should do on a number of social issues.  The bigger question is whether the government should be involved in any of these social issues in the first place. It seems  to me our country was founded on the principle of independence – life, liberty and the pursuit of happiness. I don’t recall anything that says that if we pursue happiness and experience unhappiness,  the government should bail us out.

If you don’t remember Enron, Google it.  Out of Enron came Sarbanes-Oxley.  That was the legislation designed to prevent another Enron.  I can show you Power Point slide where I pointed out that this was useless legislation. There already were laws for corporate governance in place. I was one of the few in the accounting and legal professions arguing against it.  It passed and the cost has exceeded the bailout that failed today.  That cost was paid for by consumers where the price of products and services had to absorb the cost of implementing Sarbanes-Oxley.  History teaches us a lot if we pay attention.  When I work with business consulting clients  I help them implement what I know to work from experience as adapted for the the individual differences of the client.  It works when the client pays attention and acts as guided.

Sarbanes-Oxley was designed to prevent a bailout from even having to be considered.  It didn’t and government legislation will never prevent transactions with little or no economic substance.  But we continue to live in an illusion that government can solve all of these issues.  It can’t and nor should it, because that is not the intention for our government.  ” We The People” are responsible.

Sending all my readers the energy of wellness, peace and abundance

Steve Pohlit,  www.StevePohlit.com

Network with me on Facebook: LinkedIn: Follow me on Twitter

Steve is the President of International Business Consulting Resources. His firm specializes in guiding companies to rapid increases in revenue and profits with a sustainable growth rate. Don’t miss my FREE Report: How To Make More Money With Your Business Now and Long Term I am building my practice and welcome new client inquiries. Call me for a fee consultation at 727-587-7871

Google Buzz

How To Build Business Profits Today With Just This One Action

There are two parts to this article. The first part offers people in business a reminder of what can and must be done right now for your business. The second part offers my point of view on who is responsible for the less than exciting economic news headlines that seem to be part of our daily routine.

The Number One Action Step You Can Take To Grow Your Business In Difficult Economic Times and In Booming Economic Times.

Spend 50% of your time finding out how you can provide more value to your existing customers. As you find out then deliver that value.  Spend 30 % of your time developing new customers.  In summary, spend 80% of your time marketing.  That’s it. If you are not growing your business, you are killing your business.

Who Is Responsible For The Negative Economic Events We Hear About Daily?

Do you remember there are rules and regulations already in place governing the banking system?  Really doing a good job right?

Do you remember Sarbanes-Oxley?  This was and is the law in response to the Enron fiasco and a number of other business situations awhile back.  The idea was to prevent similar disasters from recurring.  People seemed to forget  there has been a professional internal controls standard already in place along with public company rules and regulations  governed by the SEC. So with well founded governing policy already in place we enacted a law that has cost taxpayers billions of dollars and what is the result?

We have huge losses. The financial markets are in turmoil and so what is the conclusion?  Our elected officials say we need more regulation. Where is it in the founding principles of our government does it say “we the people want the government to stick its nose everywhere we live and do business.”

Obviously I am a major advocate of very little federal government regulation and so a fair question is what are the alternatives?

I always look to what works for answers. In the history of our economy there are plenty of examples that provide guidance. When businesses provide value equal to or more than the price charged, people buy what is offered. When a business comes along and offers a competitive alternative that is superior to what is available people vote with their wallets.  If what is offered by a business is not profitable for the business it ultimately fails.  One example of this is the train wreck that occurred in the Internet Industry a number of years ago.  Companies  had a great story and were funded by private investors, but had no substantive product that was in demand by the market place or at least at a price the market was willing to pay. The economics of supply and demand worked perfectly.  Companies failed and private investors got smarter. Where there was abuse, people went to Club Fed.  Basic governance worked.

This portion of this article started with the question of who is responsible for the economic mess we seem to be in right now?  Here is the answer……look in the mirror.  We have allowed our governments to grow out of control and the ripple effect is an economic mess across this country that extends to international markets.

It is my belief I am totally responsible for everything that happens in my life. It took me a long time to understand that. Once I did, I can point to a noticeable improvement.  Extending that to our economy and even beyond our borders, I know that when each person stops looking to others for a solution and delivers the message to people in public office that we have had enough with the regulations that don’t work, we as a country will grow stronger. We have the right to live our intentions in freedom and peace and we are sitting back and allowing others to weaken that right. It is time to say no more.

Sending all my readers the energy of wellness, peace and abundance.

Steve Pohlit
http://www.stevereports.com

Don’t Miss These Free Reports from my new business consulting site:

The Top 10 Action Stops That Will Make Your Business At Least 50% More Money in 90 Days or Less While You Spending Less Time Working Click Here For The Free Report

The Key Issues That Must Be Addressed Before You Buy Any Business of Any Size. Click Here For The Free Report

Steve is the President of International Business Consulting Resources. His firm specializes in guiding companies to rapid increases in revenue and profits with a sustainable growth rate. Don’t miss my FREE Report: How To Make More Money With Your Business Now and Long Term I am building my practice and welcome new client inquiries. Call me for a fee consultation at 727-587-7871 Remember many of my business building articles can be found at Steve Reports and my prosperity building tool (best tool ever for helping you manifest your goals and dreams) is The Prosperity Tool Chest and guiding articles posted very often at Prosperity Tip

Google Buzz

The General Motors Financial Staff Skipped Accounting 101

Don’t Worry, The Multi-millions Spent On Accounting and Board of Director Leadership Are Undoubtedly Well Spent. I can’t wait for The New York Times Best Selling Book in the fiction category titled “How General Motors Did Not Know They Were Screwing Up Their Numbers” This began, according to the press, in 2000. What about a sequel: “Our Latest Late Filing With The SEC Where We Explain Nothing” . Maybe FOX will pick it up as a reality TV show Titled “The Accounting Apprentice”

But wait, surely there Is a mistake. After all, we now have Sarbanes Oxley. Our political leaders spent hundreds of millions of dollars to protect the investors in public companies with this legislation. Wait there’s more…remember there are the outside experts hired to make sure the Sarbanes Oxley Act is followed and the numbers are materially correct. Certainly there can be no mistake here because they have been paid millions upon millions.

Do you think there is an adequate explanation? Do you think this is an ordinary part of doing business? I think this is another disgrace to the process of accounting for business. It really is not that hard to account for business transactions, no matter how large the company.

Sarbanes-Oxley is now about three years old. The accounting and legal firms particularly since the passage of that law have been put on notice regarding their responsibility for “signing off” off on management’s responsibility for a sound system of internal controls. How did they come to their conclusions everything was fine?

The mistake in accounting for a certain company’s earnings which is owned by General Motors is symptomatic of a material weakness in internal accounting controls. This is a direct violation of accounting 101 and Sarbanes Oxley. This is further exacerbated by the disclosure of other accounting errors dating back to 2000 and the entire five year period from 2000 to 2005.

Accurate reporting the results of operations cannot be legislated. If one of the largest companies in the world can have a system in place that results in the material misstatement of results, then that is proof positive misstatements can and will happen anywhere. Let the buyer beware.

Steve Pohlit
Business Development Consulting
www.StevePohlit.com

PS. Do you think this mess stated in 2000? I am thinking it goes back a lot furher

Steve Pohlit is a CPA has his MBA and has been the CFO of several major domestic and international companies. Today Steve is an expert business consultant focused on helping companies improve their business performance including growing profits, revenues and customers. For a FREE 6 week mini course where you will receive 10 easy to implement action steps guaranteed to increase business revenue in profits by at least 30% in the next 90 days, please visit www.StevePohlit.com All articles published by Steve unless specifically restricted may be freely published with this resource box in tact.

Google Buzz

Section 404 of Sarbanes-Oxley Should Not Be Exempt For Smaller Companies

Section 404 of Sarbanes-Oxley Should Not Be Exempt For Smaller Companies

Section 404 should be expanded to include privately held companies with bank debt.

Section 4040 should be modified for smaller companies to delete the requirement for external auditors to attest to management’s report.

Background: What Is Section 404?
From the SEC’s Final Report: “SUMMARY: As directed by Section 404 of the Sarbanes-Oxley Act of 2002, we are adopting rules requiring companies subject to the reporting requirements of the Securities Exchange Act of 1934, other than registered investment companies, to include in their annual reports a report of management on the company’s internal control over financial reporting. The internal control report must include: a statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting for the company; management’s assessment of the effectiveness of the company’s internal control over financial reporting as of the end of the company’s most recent fiscal year; a statement identifying the framework used by management to evaluate the effectiveness of the company’s internal control over financial reporting; and a statement that the registered public accounting firm that audited the company’s financial statements included in the annual report has issued an attestation report on management’s assessment of the company’s internal control over financial reporting….”

When I was studying internal controls first for the Certified Internal Auditors exam and then for the CPA exam (both certificates earned) I learned the fundamental principles of internal control. One of the key tenants of an effective system of internal controls is management’s (owner’s) attitude toward how business is to be conducted. I also learned that if two or more people colluded, most systems of internal control could be successfully violated.

Bob Greifield, president of Nasdaq, in an editorial published in the Wall Street Journal on Monday March 6, 2006, discussing the anguish continuing over the burden of complying with SOX. He states:” when it comes to SOX, …the burden of compliance is onerous, the cost is significant and it falls disproportionately on smaller companies that are least able to pay.”

Mr. Greifield does not advocate abandoning SOX but agrees their should be and exemption for smaller companies. I completely disagree with any movement to allow and exemption. The core reason for an escalating cost of SOX compliance is the interpretation of outside experts including accounting firms and lawyers as to what is required to support their attestation opinion. Now before the public accountants and lawyers conclude that I am saying the cost of SOX is their fault, I am not at all. The accountants and lawyers are responding appropriately in a best effort to avoid litigation. Remove their responsibilities for Section 404 and place sole responsibility for the report with management where it belongs.

SOX legislation is fundamental internal controls practice. It is unfortunate that our government had to implement this legislation. From a practical point of view it has no choice considering the corporate scandals and huge financial losses from those scandals. However I have maintained for years that SOX should be a contributor to increased profits and not increased costs. Few agree but that is OK. Now I go further and advocate the expansion of SOX to privately held companies with material third party debt. I advocate SOX be amended to remove the outside auditor’s and outside lawyer’s responsibility for attestation for companies below a certain size if they are public.

Steve Pohlit is a CPA has his MBA and has been the CFO of several major domestic and international companies. Today Steve is an expert business consultant focused on helping companies improve their business performance including growing profits, revenues and customers. For a FREE 6 week mini course where you will receive 10 easy to implement action steps guaranteed to increase business revenue in profits by at least 30% in the next 90 days, please visit www.StevePohlit.com All articles published by Steve unless specifically restricted may be freely published with this resource box in tact.

Google Buzz