Replies to post #944 on Being scammed SUCKS!!!!!!

[scion]

CEO and CFO Certification of SEC Filings: An FAQ for the Perplexed
(Revised to Reflect New SEC Certification Rules)
by Boris Feldman*

CEO's and CFO's of public companies have recently become subject to new Federal requirements that they certify the accuracy of their SEC filings. Several of the certification requirements have already taken effect; others are on the way. The objective of these requirements is to restore investor confidence in light of recent accounting scandals. The certification provisions substantially enhance the personal exposure -- civil and criminal, private and governmental -- of senior executives. This FAQ addresses questions from CEO's and CFO's about how they should comply with the various certification requirements.
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What other steps can I take to keep my company out of trouble?

Public companies might consider three other actions to ensure the accuracy of their SEC filings. First, if a company does not have a robust internal audit group, it should establish one. This will go part of the way toward satisfying the internal-controls provisions addressed by Section 302 and the implementing SEC regulation. Moreover, the internal auditor can be an important source on which the CEO and CFO can rely in signing their certifications. Companies that have declined to create an internal audit function because of its cost need to reprioritize in light of the new governmental requirements. Companies that formally have an internal audit group, but have not staffed or funded it at meaningful levels, need to do so now.

Second, companies should consider having an audit performed of their internal control mechanisms. The normal quarterly review or annual audit by the outside accountants typically does not include a detailed review of control mechanisms. Such a controls audit can lead to changes that enhance the integrity of the company's financial statements. Moreover, a clean bill of health from such an audit can provide a basis for certification of the integrity of the internal controls.

Third, if companies intend to rely on outside corporate counsel to confirm the adequacy of their disclosures in periodic reports, they must involve those counsel in a meaningful way in the review of the quarter and in the drafting of those disclosures. The common practice of preparing the reports internally, and then shipping them out for cursory review on the eve of hitting the "send" button, will provide little comfort for the certifying executive.

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In my opinion, the operative watchword for the new certifications will be "good faith." Although CEO's and CFO's are understandably nervous about having to sign the certifications -- particularly in the current anti-corporate climate -- I do not believe that a CEO or CFO who has pursued the certification process responsibly, and in good faith, will be subject to an enforcement action, even if facts subsequently emerge that lead to amendment of covered filings.

*Copyright 2002. Boris Feldman is a member of Wilson Sonsini Goodrich & Rosati, in Palo Alto. This article reflects his views, not his firm's. Revised, August 29, 2002.
http://www.borisfeldman.com/certification.html