Internal Controls

SOME CONSUMERS religiously balance their checkbooks, adding and subtracting deposits and withdrawals, and then comparing their figures to the penny with what the bank statement says. Even those less conscientious will at least scan statements, perhaps doing some mental math to see if the numbers appear to add up. Companies have their own system to assure the accuracy of their financial reporting, which includes earnings statements. These checks and balances are called "internal controls."

The Maryland Lottery approved the operations license for the Maryland Live casino late Monday, allowing the slots facility to open its first phase at 10 p.m. Wednesday as scheduled. Stephen Martino, lottery director, signed the license for the casino, owned by the Baltimore-based Cordish Cos., lottery officials said. "The Maryland Lottery has reviewed thoroughly the operations of Maryland Live!, the training and quality of its staff, and their adherence to internal controls and policies," Martino said.

WASHINGTON -- Sen. Paul S. Sarbanes said yesterday that the corporate accounting law he co-authored helped avert a crisis in U.S. securities markets, and that critics pushing to ease some of its regulations have forgotten the recent spate of corporate scandals. In remarks to a group of consumer advocates, Sarbanes said the bill fixed "systemic and structural defects" in overseeing company conduct. Critics have "short" memories of the accounting troubles that drove Enron Corp., WorldCom Inc. and other companies into bankruptcy.

An audit has discovered two problems associated with the Maryland Division of Racing's compliance and internal controls. According to the state audit released Tuesday, the Maryland Department of Labor, Licensing and Regulations' racing unit did not ensure that some funds from the state's racetracks, including wagering taxes, were received within the legal time frame during fiscal years 2010 and 2011. The audit also found that the racing division miscalculated a refund due racetracks for excess lab fees for drug testing of horses collected in 2010.

Responding to complaints from corporate America, federal regulators moved yesterday to try to ease the costly burdens of a federal law requiring companies to attest to the quality of their internal controls. The Securities and Exchange Commission and new accounting oversight board stressed the importance of the new law, while issuing guidance that allows auditors to take a more measured approach when conducting the internal controls reviews required by Section 404 of the Sarbanes-Oxley Act. `Cost too much' "It is clear to us that the internal control assessment and audit process has the potential to significantly improve the quality and reliability of financial reporting," said William J. McDonough, head of the Public Company Accounting Oversight Board.

They parked in the company lot. They wore suits. They drank coffee. They looked at the company books. They closed the door when they talked. They were the auditors. And when they finished, they issued an auditor's report because, well, that's what auditors did. "We really did look at these financial statements, even though company management is responsible for what's in them," seemed to be the gist of most reports. "We pretty much followed each and every audit rule, so in our opinion these statements fairly represent the company's position."

When President Bush signed the Sarbanes-Oxley Act into law in July 2002, the problems at WorldCom Inc. were fresh on everyone's mind because the telecommunications giant had sought bankruptcy protection just nine days earlier. Nearly three years later, WorldCom's former chief executive has been found guilty of fraud and could face a maximum prison term of 85 years, potentially one of the stiffest sentences yet in a parade of white-collar criminals. But many businesses remain disgruntled about the government's remedy to corporate corruption.

In strong moves to reduce the burden of securities regulations, the Securities and Exchange Commission proposed rules yesterday to make it easier for foreign companies to get out from under such regulations, and an advisory panel proposed guidelines that would exempt 80 percent of American companies from having to fully comply with the Sarbanes-Oxley Act. The moves sent a signal that regulators were worried about complaints made by many companies regarding...

The Maryland Lottery approved the operations license for the Maryland Live casino late Monday, allowing the slots facility to open its first phase at 10 p.m. Wednesday as scheduled. Stephen Martino, lottery director, signed the license for the casino, owned by the Baltimore-based Cordish Cos., lottery officials said. "The Maryland Lottery has reviewed thoroughly the operations of Maryland Live!, the training and quality of its staff, and their adherence to internal controls and policies," Martino said.

A new state legislative audit of the Carroll County school system's financial management listed 22 recommendations to tighten controls and increase oversight, calling for immediate attention and reforms to certain practices. The audit comes just weeks after two Carroll financial secretaries were found guilty of stealing more than $220,000 from school accounts. Released this month, the report included among more urgent areas the need for adequate, effective internal controls systemwide, as well as greater oversight and monitoring of student-activity funds, transportation services, credit-card spending and contracts.

State lawmakers are planning formal hearings on Maryland State Police efforts to spy on peace activists and death penalty protesters, potentially paving the way for a thorny debate in the next General Assembly session over whether to restrict the law enforcement agency's authority. Sen. Brian E. Frosh, chairman of the Judicial Proceedings Committee, said yesterday that he plans to hold hearings, possibly in September, to question state officials about the infiltration of activist groups by covert agents.

A new state legislative audit of the Carroll County school system's financial management listed 22 recommendations to tighten controls and increase oversight, calling for immediate attention and reforms to certain practices. The audit comes just weeks after two Carroll financial secretaries were found guilty of stealing more than $220,000 from school accounts. Released this month, the report included among more urgent areas the need for adequate, effective internal controls systemwide, as well as greater oversight and monitoring of student-activity funds, transportation services, credit-card spending and contracts.

MOSCOW -- The United States, Russia and other key industrialized countries yesterday increased the pressure on Iran over its nuclear program, declaring that Tehran's intentions will be judged based on its response next week to a proposal intended to put the effort under international control. Iran's chief nuclear negotiator, Ali Larijani, is scheduled to meet Wednesday with Javier Solana, the European Union's foreign policy chief, and senior diplomats from Russia, Britain, France and Germany, to discuss the offer.

WASHINGTON -- Sen. Paul S. Sarbanes said yesterday that the corporate accounting law he co-authored helped avert a crisis in U.S. securities markets, and that critics pushing to ease some of its regulations have forgotten the recent spate of corporate scandals. In remarks to a group of consumer advocates, Sarbanes said the bill fixed "systemic and structural defects" in overseeing company conduct. Critics have "short" memories of the accounting troubles that drove Enron Corp., WorldCom Inc. and other companies into bankruptcy.

In strong moves to reduce the burden of securities regulations, the Securities and Exchange Commission proposed rules yesterday to make it easier for foreign companies to get out from under such regulations, and an advisory panel proposed guidelines that would exempt 80 percent of American companies from having to fully comply with the Sarbanes-Oxley Act. The moves sent a signal that regulators were worried about complaints made by many companies regarding...

The Baltimore school system will not have to repay $18 million that state auditors found was misused. But to keep the money, under the terms of a settlement agreement, the system must improve its internal controls and spend $10.5 million on extra tutoring and programs for the needy children the $18 million was meant to serve. The deal, announced yesterday, was worked out in federal mediation by the school system and the Maryland State Department of Education. School system officials maintain that they did not misuse the money, but they agreed to repay all or part of it if they do not uphold their end of the deal in the years ahead.

Hundreds of companies racing to comply with a federal law requiring a thorough review of their internal controls got more time yesterday as regulators pushed back their deadline. The Securities and Exchange Commission said it had extended by 45 days the cutoff for companies with less than $700 million in market capitalization to attest to the quality of their internal controls, which include security and asset protection, and ensuring accurate financial reporting. Under Section 404 of the Sarbanes-Oxley law, the deadline for most public companies had been the e first annual report for companies whose fiscal years ended after Nov. 15. That meant those on a calendar-year cycle typically would have until mid-March to file.

Frank P. Bramble, chairman of Allfirst Financial Inc., which lost $691.2 million in a currency trading scandal, will receive a lump-sum payment of $2.9 million in connection with his retirement, according to a document filed with a federal regulatory agency. Bramble, 53, will step down as Allfirst's chairman after its annual meeting April 30. He will also retire from the company June 1, four months after the bank revealed huge trading losses that rocked the Baltimore-based institution and its Irish parent, Allied Irish Banks PLC. An Allfirst spokesman said the payment is a restructuring of Bramble's pension.

They parked in the company lot. They wore suits. They drank coffee. They looked at the company books. They closed the door when they talked. They were the auditors. And when they finished, they issued an auditor's report because, well, that's what auditors did. "We really did look at these financial statements, even though company management is responsible for what's in them," seemed to be the gist of most reports. "We pretty much followed each and every audit rule, so in our opinion these statements fairly represent the company's position."

Responding to complaints from corporate America, federal regulators moved yesterday to try to ease the costly burdens of a federal law requiring companies to attest to the quality of their internal controls. The Securities and Exchange Commission and new accounting oversight board stressed the importance of the new law, while issuing guidance that allows auditors to take a more measured approach when conducting the internal controls reviews required by Section 404 of the Sarbanes-Oxley Act. `Cost too much' "It is clear to us that the internal control assessment and audit process has the potential to significantly improve the quality and reliability of financial reporting," said William J. McDonough, head of the Public Company Accounting Oversight Board.