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When you receive this Manatt Mirror, it will be
September. Summer will be gone with the days
getting shorter and the nights a little cooler.
Kids will be back in school and for most parents
none to soon. Personally this is my favorite
time of the year but from a business perspective
it’s crunch time.
Why? On one hand, kids are back on a daily
routine seeing their friends and at least for
the first couple months of school, we (parents)
don’t hear “I’m bored or there’s nothing to
do!” The main reason is their extra circular
activities are taking the place of sitting on
the couch and watching TV. Life is sweet. But
then you look at our business, Mother Nature is
already hinting of what’s to come with a
reprieve from the heat we had this summer.
Project managers and their respective owners
know time is getting short and the push is on.
This is even true in the office but it’s called
our annual audit.
I’ve mentioned before the complexities that have
arisen from the financial scandals and the
resulting collapse of Arthur Anderson, WorldCom
and Enron to the accounting profession. It was
called Sarbanes Oxley. This legislation
targeted publicly held companies and made senior
management all the way down to the entry-level
employees more accountable to the ultimate owner
or their “shareholders”. It doubled the cost
of the annual audit and limited what the
accounting firm could and could not do without
prior approval from the board of directors or
audit committee.
Was it necessary? Probably due to the fact a
few bad apples had tarnished the accounting
professional to the point that something drastic
had to be done to gain back the confidence we
once had with the public. Fortunately, it has
worked with little impact on private companies
but that’s going to be change. When reading one
of the accounting magazines I receive on a
monthly basis, I came upon an article talking
about 10 new auditing standards that
specifically targeted private entities in the
same manner that Sarbanes Oxley did to publicly
traded companies.
Now wait a minute, aren’t the owners of these
entities the shareholders or in our case Brad,
Tony and Jo-Ann. Why the fuss? Even though
that is a correct statement, we’ve been under
pressure from outside sources (banks, insurance
and bonding companies) with the introduction of
Sarbanes Oxley. These outside entities provide
a great deal of services to companies like
Manatt's, Inc. on information we provide to
them. However, the “rules” to provide this
information were being applied inconsistently
and resolution needed to happen.
Consequently, the AICPA’s Auditing Standards
Board (ASB) issued 8 new Statements on Auditing
Standards (SAS 104 thru 111) relating to the
assessment of risk in an audit of the financial
statements. Which in layman terms means
everything that has been done in the last 30
years by the majority of the audit firms has
changed. Now isn’t that just kick in the pants.
So what does this mean for our future audits?
Well it will result in more defined and
documented internal controls plus several
conversations with our accounting firm, Clifton
Gunderson in making sure were in compliance.
It’s what is required in doing business today
and into the future and I’ve seen the start of
this when we had our benefit audits (401k, Flex
and Health Insurance). In the past, auditors
would ask for a list of documents to be prepared
prior to their arrival. It assisted each of
us. We could get most of this documentation as
time allowed and when the auditors arrived they
were busy shifting through all this information
and asking for additional information as
needed. Now they will ask for a few items with
most of the documents being produced when they
here. Why? It deals with “manufacturing”
documentation or having a document state exactly
what you want even though it is totally
worthless.
I want to make one thing perfectly clear this is
not the result of anything we’ve done. As
mentioned above this is the result of a few bad
apples at the “public” level of doing business
that has taking several years to work itself
down to the “private” level of doing business.
I’m giving you a heads up because the next
article won’t be written and read until after
the audit is finished and I realize that many of
you don’t like surprises like myself.
So in closing the push is on from all sides to
finish out the 2006 construction year. To date,
we’ve had a good year. Let’s keep it up and
have a fantastically safe one, too. |
