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SEC Forms a FRAT !

Yesterday, the SEC announced it has formed a number of specialized Enforcement task forces and initiatives, including a Financial Reporting and Audit Task Force. I wonder if they'll abbreviate it F.R.A.T.? (I hope all of you have read the disclaimer that appears on the right side of this blog!)

In all seriousness, the SEC's press release described the three new task forces and initiatives formed in the Division of Enforcement as: 

  • The Financial Reporting and Audit Task Force dedicated to detecting fraudulent or improper financial reporting, whose work will enhance the Division's ongoing enforcement efforts related to accounting and disclosure fraud.
  • The Microcap Fraud Task Force targeting abusive trading and fraudulent conduct in securities issued by microcap companies, especially those that do not regularly publicly report their financial results.
  • The Center for Risk and Quantitative Analytics employing quantitative data and analysis to profile high-risk behaviors and transactions and support initiatives to detect misconduct, increasing the Division's ability to investigate and prevent conduct that harms investors.

Further, as to what we informally referred to above as the "FRAT," the SEC states (reformatted to bullets for emphasis):

  • The Financial Reporting and Audit Task Force will concentrate on expanding and strengthening the Division's efforts to identify securities-law violations relating to
    •  the preparation of financial statements,
    • issuer reporting and disclosure, and
    • audit failures.
  • The principal goal of the Task Force will be
    • fraud detection and
    • increased prosecution of violations involving
      • false or misleading financial statements and disclosures.
  • The Task Force will focus on identifying and exploring areas susceptible to fraudulent financial reporting, including
    • on-going review of financial statement restatements and revisions,
    • analysis of performance trends by industry, and
    • use of technology-based tools such as the Accounting Quality Model.
  • It will include Enforcement attorneys and accountants from across the country,
    • working in close consultation with the Division's Office of the Chief Accountant,
    • the SEC's Office of the Chief Accountant,
    • the Division of Corporation Finance, and
    • the Division of Economic and Risk Analysis.
  • David Woodcock, Director of the Fort Worth Regional Office, will serve as Chairman of the Task Force, and Margaret McGuire, Senior Counsel to the Directors, will serve as Vice-Chair.
Read more about the other task forces and initiatives in the SEC's press release.

Looking for tools and resources to combat fraudulent financial reporting? Here's a couple websites to check out - FEI is a member of both groups listed below:



Posted: 7/3/2013 5:24:50 PM by Edith Orenstein | with 0 comments
Filed under: Financial Reporting and Audit Task Force,SEC Financial Reporting and Audit Task Force,SEC FRAT,SEC Microcap Fraud Task Force,Center for Risk and Quantitative Analysis

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