How does the Securities and Exchange Commission (SEC) go about early identification of potential securities law violations involving financial reporting? In this video, hear from the SEC’s Margaret McGuire, Senior Counsel to the Director of Enforcement and Chief of the SEC’s Financial Reporting and Audit (FRAud) Group. McGuire discusses the objectives of the FRAud group, its extensive use of technology, and how cooperation, self-remediation, and self-reporting are key tenets of the SEC’s enforcement program.
This edition of the Center for Audit Quality’s “Profession in Focus” interview series features KPMG LLP Partner Timothy Hedley. KPMG’s Global Lead for Fraud Risk Management service offerings, Hedley discusses the keys to robust fraud deterrence and detection, the role of technology in anti-fraud efforts, and the importance of ethical corporate culture.
When fraud is identified or suspected in an organization, companies and their boards are not always aware of what steps to take. Should they conduct a thorough internal investigation, or should they alert the Division of Enforcement at the Securities and Exchange Commission (SEC) about a potential securities law violation? Are there tangible benefits to self-reporting to the SEC? The SEC’s Division of Enforcement’s formal Cooperation Program includes various measures designed to encourage individuals and companies to provide assistance to SEC investigators. Depending on the level of cooperation, benefits may accrue to those who are proactive. What questions should boards and company management be asking of their counsel, their chief compliance officers, chief audit executives, and external auditors? At what point should the SEC be informed of potential misconduct? What are the risks if a company does not self-report?
In this December 13, 2016 webcast from the Anti-Fraud Collaboration, Kara Brockmeyer, SEC Foreign Corrupt Practices Act Chief, shares information on the SEC Cooperation Program, including recent enforcement actions involving cooperation agreements, and how the Commission defines “cooperation.” Other panelists, including an attorney with extensive experience in representing clients who have cooperated with the SEC, a forensic auditor, and a board member, discuss factors for companies that are considering self-reporting a fraud, who needs to be involved, and the role of company management, the audit committee, the auditor, and legal counsel.
Goals for long-term value creation for a company’s investors may conflict with incentives that are introduced by short-term pressures, such as analysts’ expectations, internal profit targets, and compensation bonuses tied to short-term performance metrics. Emphasis on short-term results can increase the risk of financial reporting fraud if there isn’t alignment between the short-term goals and the long-term strategy.
In this July 7, 2016 webcast from the Anti-Fraud Collaboration, a panel of experts discussed what successful companies do to reinforce the alignment between potentially conflicting goals. They also provided actionable recommendations that each supply chain member can implement in their organizations.