Compliance Resources to Help you Stay Current

When Congress enacted the Occupational Safety and Health Act of 1970, it authorized a national standards and inspection program administered by OSHA, but provided for approved state OSHA plans, which potentially can be quite independent. There are 27 state programs (5 are limited to governmental employees), but only 1 – California – is dramatically different from federal OSHA. This article describes the major differences between the Federal and California OSHA requirements.

The U.S. Food and Drug Administration (FDA) with its mission to promote and protect the health of the people has joined hands with the HHS and has prepared a strategic planning document ensuring provision of safe and nutritious food and improve infrastructure, modernize regulatory processes and strong workforce.

On October 13, 2010, President Obama signed S 3397, the Secure and Responsible Drug Disposal Act of 2010. S. 3397 was considered on the House floor on September 29, 2010, under a suspension of the rules, requiring a two-thirds majority vote to pass. The Act was introduced by Sen. Klobuchar (D-MN) on May 24, 2010, and it passed the Senate by unanimous consent on August 3, 2010.   

With the mission to recover erroneous Medicare payments paid to the healthcare providers under Free-for-Service Medicare plans, the Recovery Audit Contractor program was launched through the Medicare Modernization Act of 2003. However, this program became permanent for all states in Jan 1, 2010 by the United Department of Health and Human Services (DHHS).

The purpose of this report is to evaluate the RAC demonstration and to share with all interested parties information about the demonstration. Congress authorized the RAC demonstration for the purpose of identifying underpayments and overpayments and recouping overpayments under part A or B of the Medicare program.

Critics of SOX point out several drawbacks of the rule of which the most prominent one is the cost of complying with SOX. SOX is undoubtedly a costly affair for the small public companies as it is comprised of a significant fixed cost. In 2004, large U.S. companies which had revenues more than $5 billion spent only 0.06% of their revenue to be SOX compliant, while small public companies which had revenues less than $100 million, spent 2.55% of the same.

This disproportion called for an immediate SEC and U.S. Senate action. PCAOB also issued further guidance, Auditing Standard No. 5 for public accounting firms on July 25, 2007, which helped companies to alleviate the cost by scaling “the assessment based on the size and complexity of the company”.

AS 5 of 2007 superseded the initial guidance, Auditing Standard 2 of 2004. With the issuance of the new guidance, management and the external auditor both became responsible for performing their evaluation in the context of a top-down risk assessment, which provided the management a wider discretion in its assessment approach. AS2 together with AS5 require the management to -
 

• Assess entity-level controls

• To be aware of the flow of transactions so that any misstatement can be tracked

• Avoid material misstatement by assessing both the design and operating effectiveness of selected internal controls and its accounts and relevant assertions

• Management also need to review the system of controls created to prevent or detect fraud and in order to detect and prevent fraudulence, perform a fraud risk assessment

• Assess the period-end financial reporting process

In order to decrease the cost associated with SOX compliance, it is suggested that companies should centralize and automate their financial reporting systems as findings show that automation help the small private companies to dramatically reduce the cost of complying with SOX.


 

Of all the prevailing sections of the SOX act, the most debatable and significant is Section 404. As per this section, management and external auditors are required to submit report on the adequacy of the company's internal control over financial reporting (ICFR).

Section 404 requires management to generate an “internal control report” as part of each annual Exchange Act report, which must affirm “the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting” and also “contain an assessment, as of the end of the most recent fiscal year of the Company, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.”

The new and revised rules of SOX, which came into being in 2007, removed the need of external auditors for assessing the system of ICFR. Instead, the responsibility of assessing ICFR was given to the managers. Additionally, the managers are responsible for revising the definitions of significant deficiency and material weakness.

As per the SEC rules and PCAOB standard requirement, management was supposed to perform formal assessment of its controls over financial reporting, which includes tests that confirm the design and operating effectiveness of the controls. The external auditors also are required to provide two opinions as part of a single integrated audit of the company – an independent opinion about the efficiency and effectiveness of the OCFR system and also to provide a traditional opinion about the financial statement of the audited company.
 

They “require a company’s annual report to include an internal control report of management that contains:

• A statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting for the company.

• A statement identifying the framework used by management to conduct the required evaluation of the effectiveness of the company’s internal control over financial reporting.

• 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, including a statement as to whether or not the company’s internal control over financial reporting is effective. The assessment must include disclosure of any “material weaknesses” in the company’s internal control over financial reporting identified by management. Management is not permitted to conclude that the company’s internal control over financial reporting is effective if there are one or more material weaknesses in the company’s internal control over financial reporting.

• A statement that the registered public accounting firm that audited the financial statements included in the annual report has issued an attestation report on management’s assessment of the registrant’s internal control over financial reporting.”

The “final rules also require a company to file, as part of the company’s annual report, the attestation report of the registered public accounting firm that audited the company’s financial statements.”

Source: www.sec.gov/rules/final/33-8238.htm

 

Non compliance to SOX fetches lawsuits and negative publicity for a company. Below the list of sections and associated penalties are described in detail:

SEC. 801 ‘‘Corporate and Criminal Fraud Accountability Act of 2002’’.

SEC. 802 CRIMINAL PENALTIES FOR ALTERING DOCUMENTS

(a) IN GENERAL.—Chapter 73 of title 18, United States Code,is amended by adding at the end the following:

§ 1519. Destruction, Alteration, or Falsification of Records in Federal Investigations and Bankruptcy

as per the Act, whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.

§ 1520. Destruction of corporate audit records

(a)(1) Any accountant who conducts an audit of an issuer of securities to which section 10A(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78j–1(a)) applies, shall maintain all audit or review workpapers for a period of 5 years from the end of the fiscal period in which the audit or review was concluded.

(2) The Securities and Exchange Commission shall promulgate, within 180 days, after adequate notice and an opportunity for comment, such rules and regulations, as are reasonably necessary, relating to the retention of relevant records such as workpapers, documents that form the basis of an audit or review, memoranda, correspondence, communications, other documents, and records (including electronic records) which are created, sent, or received in connection with an audit or review and contain conclusions, opinions, analyses, or financial data relating to such an audit or review, which is conducted by any accountant who conducts an audit of an issuer of securities to which section 10A(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78j–1(a)) applies. The Commission may, from time to time, amend or supplement the rules and regulations that it is required to promulgate under this section, after adequate notice and an opportunity for comment, in order to ensure that such rules and regulations adequately comp
ort with the purposes of this section.

‘‘(b) Whoever knowingly and willfully violates subsection (a)(1), or any rule or regulation promulgated by the Securities and Exchange Commission under subsection (a)(2), shall be fined under this title, imprisoned not more than 10 years, or both.

‘‘(c) Nothing in this section shall be deemed to diminish or relieve any person of any other duty or obligation imposed by Federal or State law or regulation to maintain, or refrain from destroying, any document.’’.


SECTION 906: CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS

(a) IN GENERAL.—Chapter 63 of title 18, United States Code, is amended by inserting after section 1349, as created by this Act, the following:

§ 1350. Failure of Corporate Officers to Certify Financial Reports

(a) CERTIFICATION OF PERIODIC FINANCIAL REPORTS —Each periodic report containing financial statements filed by an issuer with the Securities Exchange Commission pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) shall be accompanied by a written statement by the chief executive officer and chief financial officer (or equivalent thereof) of the issuer.

(b) CONTENT —The statement required under subsection (a) shall certify that the periodic report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o (d)) and that information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

(c) CRIMINAL PENALTIES.—Whoever—

(1) certifies any statement as set forth in subsections (a) and (b) of this section knowing that the periodic report accompanying the   statement does not comport with all the requirements set forth in this section shall be fined not more than $1,000,000 or imprisoned   not more than 10 years, or both; or

(2) willfully certifies any statement as set forth in subsections (a) and (b) of this section knowing that the periodic report   accompanying the statement does not comport with all the requirements set forth in this section shall be fined not more than   $5,000,000, or imprisoned not more than 20 years, or both.

However, SOX places a great responsibility on the shoulder of the CEOs and CFO and, and they are responsible to ensure that the below mentioned points are taken care of as OSX leaves no place for ignorance or irresponsibility:

1) Financial statements should accurately reflect the financial condition of the company.

2) CEOs and CFOs are personally responsible for setting up and maintaining systems that make sure that they actually know the truth about what is going on in the company.

Also, CEO and CFO Must Certify
 

• That the financial report is true and not Misleading
• That they know that it is true because they have set up effective controls
• That these controls must have been evaluated within the last 90 days
• That any possible deficiencies in the controls have been highlighted

SOX or the Sarbanes Oxley Act was passed in 2002. The Act can best be described as a sincere repercussion of high profile financial scandals that stormed the U.S. economy that time and as a result of which U.S. almost lost its investors’ faith.

The aim, with which the Act was introduced, was to “protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws." With this objective, the Act became able to bring significant positive legislative changes to U.S. financial practices and also corporate governance regulation got changed in a better way.

The Sarbanes-Oxley Act has 11 titles which deal with a variety of issues starting from additional Corporate Board responsibilities to criminal penalties provisions. However, amongst all the provisions, sections 101, 302, 404, 409, and 906 are the pivotal ones.

In 2002 the Sarbanes Oxley Act was introduced to revive the lost faith of the investors in the U.S. securities market which was in a pitiable condition due to some high profile financial scandals that took place during that time in the U.S. economy.

The Act brought a few revolutionary changes mostly in four key financial areas - corporate responsibility, accounting regulations, new criminal penalties, and new protections. However, while the advantages of the SOX are yet to be seen, disadvantages of the act are already surfacing and fetching some serious concerns of finance pundits.
 
Disadvantages of SOX

Disadvantages of the SOX act are:

SOX – An Expensive Act

The most common disadvantage of SOX is that, for a small size industry, being compliant to SOX is an extremely expensive affair. Due to this act, companies with$100 million revenue spend almost 2.55% of their revenue in ensuring Sarbanes Oxley Act compliance which has negatively affected the flow of funds in these small companies.

Multiple Interpretations

According to finance experts, SOX RCM guidance gives rise to multiple interpretations. As a result, outcome of one audit firm differs from the other which increases confusion of the audited company.

Major Burden on Management and Auditors

Another major disadvantage of the Act is that it, needlessly, encourages a bureaucratic burden on the management and on the auditors. The excessive pressure on the management to prepare, certify and file reports has put an undesired burden on the management and incidentally slows down the function of the management.

Additionally, the Act has cornered the auditors by introducing a number of new responsibilities and parameters which the auditors are not known of and by making people question the auditors about their objectivity.

A Stop Gap Measure

Looking at the wide range of disadvantages, people now have started to believe that SOX was just a stop gap measure created to solve the financial problems for the time being.  As the industries were not given enough time or prior preparation to understand and then implement the new changes, the Act has nothing but augmented confusion and problems across the industries. To make things more difficult, the period of compliance was kept very short and the companies had to start action on a war footing again fueling the confusion related with the Act.

However, even after accepting the disadvantages of SOX are well known, the act still has been considered to be the most comprehensive act in recent times.


 

The Sarbanes-Oxley Act of 2002, popularly known as SOX, was born to combat financial massacre in the public companies in U.S. This Act was a reaction to the infamous Enron and WorldCom financial scandals. Administered by the U.S. Securities and Exchange Commission (SEC), protecting shareholders and the general public from accounting errors and fraudulent practices in the enterprise had become the guiding rules of the Act.

Providing equivalent legislative measures to the U.S. SOX, the Ontario legislative bill known as Bill 198 provide regulation of securities protecting investors by improving the accuracy and reliability of corporate disclosures. As the legislation acts same as the U.S. SOX, it is also known as the Canadian SOX Act.

The Provincial Government of Ontario, Canada in 2002 introduced an omnibus bill entitled "Keeping the Promise for a Strong Economy Act (Budget Measures), 2002". The bill was enacted as Chapter 22 of the Statutes of Ontario, 2002 and received Royal Assent on December 9, 2002.

With the introduction of Bill 198, a much more rigorous financial disclosure and corporate disclosure requirements were introduced. As per Bill 198, companies are required to review and document their internal controls in order to support the certifications by the CEO and CFO. Moreover, some severe penalties are also there for breaching the law. Some of the notable sections of Bill 198 are:
    
Section 180 – As per this section, public companies, without delay, are needed to report any material changes since their last filing to the Ontario Securities Commission.

Section 181 – This section says about penalizing directors and officers of a company that provide deceptive or false information in any report filed with the OSC, including financial statements. Their fine can reach up to $5 million and they can be imprisoned for up to 5 years.

Section 183 – As per the OSC rule, companies and executives can be forced to return any gains resulting from a breach.

Section 184 – looking at the gravity of the breach, OSC can fine the director and officers for up to $1 million and can also force them to resign. Additionally, the wrong doer would be prohibited from serving as a director or officer of any public company.

Section 185 – In case of issuing misleading documents such as any wrong financial statements, making false oral statements, or not making timely disclosures, investors can sue companies as well as individual directors.


 

Back in 2002, SOX or Sarbanes Oxley had brought a revolutionary change in the corporate governance and disclosure obligations of publicly traded companies in U.S. markets. That revolutionary change, later on had forced the Canadian government to adopt and implement a similar kind of provision in order to maintain competitiveness and compatibility with the U.S. markets. And that is the time when the CSOX was born and re-established investor confidence in Canadian securities.

Assuring the safety and safe use of medical devices in the home is becoming an increasingly important public health issue. The U.S. Food and Drug Administration (FDA) recognizes the importance of safe, high-quality home healthcare and medical devices that are capable of meeting patients’ needs in the home.

This document announces the launch of FDA’s Medical Device Home Use Initiative. Through this initiative, FDA will take the following actions to support the safety and safe use of medical devices in the home:

1. Establish guidelines for manufacturers of home use devices;
2. Develop a home use device labeling repository;
3. Partner with home health accrediting bodies to support safe use;
4. Enhance postmarket oversight; and
5. Increase public awareness and education.

These steps will help address the challenges associated with the use of medical devices in the home and provide greater protections for patients receiving home healthcare.

Quality of Chinese equipments, day-by-day, is becoming a serious concern for the Indian government. A few recent incidents that went against the Chinese product qualities are also fueling the doubt.

In power equipments, the Indian government feels that Chinese equipment fails to attain its optimum result when fired with Indian coal. And their feeling turned into belief when the turbine blades of the MW Sagardighi project of West Bengal Power Development Corporation, supplied by the Chinese manufacturing company Dongfang, failed miserably. As a result of this failure, the apex power sector planning body, the Central Electricity Authority (CEA) initiated a technical audit of Chinese equipments.

CEA during its audit in BHEL observed, quality wise the Chinese products are at par with the Indian ones but, when an India based top business house, Indiabulls cancelled its order placed with China and placed the same order from BHEL, the controversy about the quality of the Chinese products got aggravated.

Bharat Heavy Electrical Ltd or commonly known as BHEL is the largest manufacturer of power equipment in the country. Recently the company has shown its concern regarding the quality of the power generation equipments supplied by the Chinese manufacturers. And, BHEL has also claimed that the performance of its equipment has been constantly 2% higher than other available equipments and its operating availability is also higher.

However, not only Dongfang Electric, Harbin Power Equipment Company and Sepco are also among the big players that have bagged big-ticket orders from Indian market.

Of all the mentioned news, the most controversial and significant one that recently shocked the Indian government is perhaps the Chinese mobile equipments controversy. It is to be believed that the Chinese mobile equipments are carrying spyware or malware capable of infringing Indian security system by providing security information to foreign intelligence agencies through telecom networks. Accepting the seriousness of the news, government has officially banned importing any equipment manufactured by Chinese vendors, including Huawei and ZTE. Though government announcement on limiting the usage of Chinese mobile equipments is not taking place for the first time in India however this is the first time the ban is announced as official.

Earlier, the Indian government banned the import of Chinese headsets that comes without IMEI number. The government’s decision of banning Chinese mobile equipments is undoubtedly going to give a huge blow to companies like ZTE and Huawei that have big betting on the Indian mobile phone market. Also, with the banning decision Indian vendors are going to be affected as well as they mostly bank upon the attractive schemes provided by the Chinese companies. However, the European and U.S. based mobile companies are assumed to be the biggest gainer of the ban.

Source:

http://businesstoday.intoday.in/index.php?issueid=81&id=7744&option=com_content&task=view

http://www.thehindubusinessline.com/2010/04/29/stories/2010042952880100.htm

To protect the reliability of the nation’s transmission grid, the Federal Energy Regulatory Commission on March 18, 2010 directed the North American Electric Reliability Corp. to modify the procedures it uses to develop mandatory bulk electric system reliability standards.

The Federal Energy Regulatory Commission (FERC or Commission) on March 18, 2010 has issued a policy statement and new civil penalty guidelines (Penalty Guidelines) in order to bring fairness, consistency and transparency to future civil penalty determinations.

Keeping in mind the safety of the passengers on board, the Federal Aviation Administration (FAA) has urged the air carrier operators to create and enforce a rule to limit distractions of the pilots in the cockpit.

The guidance on limiting pilot’s distraction in the cockpit has been proposed by the FAA this Monday after an incident of negligence that took place in October 2009 in which two Northwest Airlines pilots missed the Minneapolis airport and over-flew by 150 miles. Investigation revealed that the two pilots were busy figuring out a newly introduced complicated crew-scheduling process on their laptop computers.

Comprehending the importance of passenger safety, the Transportation Secretary Ray LaHood announced “There is no room for distraction when your job is to get people safely to their destinations,” as he believes that “The traveling public expects professional pilots to focus on flying and on safety at all times.”

To prohibit the crewmembers and air carriers form doing anything that can “constitute a safety risk”, the Information for Operators (InFO) asks them to limit activities including the use of any personal electronic device for non-work related activities during the
fly. Moreover, the agency is planning to address the issue of cockpit distraction by launching strict and specific rule, improved crew training programs and by creating safety culture amongst the crew members and carriers.

The existing Sterile Cockpit Rule prohibits pilots from any type of distracting behavior during critical phases of flight, including take-off and landing but with the advancement of technology, laptops and other electronic devices are becoming inevitable tools for pilots to use in their routine duties.  However, the new rule attempts to ensure the tools are only be used in the cockpit if they help pilots in safe operation of an aircraft.
 

Source:

http://www.faa.gov/other_visit/aviation...

http://abcnews.go.com/Business/wireStory?id=10477877

 

Sony Corporation, one of the world's largest media conglomerates has announced its new mantra ‘Road to Zero’ which the company is going to follow for the next forty years.

“Road to Zero”, as described by the CEO Sir Howard Stringer, is a green model which not only Sony will follow for the coming years but will inspire other companies to follow for achieving a zero environmental footprint by 2050. With a backcasting method to set specific mid-term environmental targets for the next five years in line, Sony aspires to neutralize carbon emission, stop producing waste and end using virgin materials. To achieve the goal, a first mid-term targets, starting from fiscal year 2011 to end of fiscal year 2015, will be put into practice globally across the Sony Group. In the first five years tenure, the company strives to achieve:

Improving E-health records is needed in order to improve the quality of service and safety of the patients. And to improve the E-health records, the Health IT Policy Committee’s certification workgroup is planning to come up with a new certification course in association with FDA.