Survey Results - Final

After Enron: A Survey for Corporate Directors

How closely have you followed the Enron situation?

1 - How closely have you followed the Enron situation?
Choice	Count	Percentage Answered
1. Very closely	91	51.1%
2. Somewhat closely	84	47.2%
3. Did not follow the story closely	3	1.7%

Have you asked your internal and/or external auditors about risks similar to those discovered at Enron or asked for additional assurances about your organization because of the Enron situation?

2 - Have you asked your internal and/or external auditors about risks similar to those discovered at Enron or asked for additional assurances about your organization because of the Enron situation?
Choice	Count	Percentage Answered
1. Yes	97	54.8%
2. No	80	45.2%

If 'Yes' to question 2, on what topics did you inquire (check all that apply)?

3 - If 'Yes' to question 2, on what topics did you inquire (check all that apply)?
Choice	Count	Percentage Answered
Disclosures	62	63.3%
Off-balance sheet transactions, related party transactions, special purpose entities, or related partnership issues	64	65.3%
Derivatives or other complex financial transactions	33	33.7%
Risk management	40	40.8%
Independence of the external auditor	57	58.2%
Adequacy of external auditing	49	50.0%
Adequacy of internal auditing	46	46.9%
Ethics policies or practices	38	38.8%
Other (Please Specify)	10	10.2%

Sample Answering: 12 responses

Which of the following issues related to Enron do you plan to put on the next audit committee agenda (check all that apply)?

4 - Which of the following issues related to Enron do you plan to put on the next audit committee agenda (check all that apply)?
Choice	Count	Percentage Answered
Disclosures	84	49.4%
Off-balance sheet transactions, related party transactions, special purpose entities, or related partnership issues	86	50.6%
Derivatives or other complex financial transactions	38	22.4%
Risk management	69	40.6%
Independence of the external auditor	90	52.9%
Adequacy of external auditing	82	48.2%
Adequacy of internal auditing	71	41.8%
Ethics policies or practices	61	35.9%
Not sure	15	8.8%
Other (Please Specify)	16	9.4%

Sample Answering: 22 responses

Which of the following actions have you taken or planned as a result of the Enron situation (check all that apply)?

5 - Which of the following actions have you taken or planned as a result of the Enron situation (check all that apply)?
Choice	Count	Percentage Answered
Changes to format or content of financial disclosures	9	5.9%
Revising and/or re-circulating your code of ethics	25	16.4%
Changes to other board or audit committee policies or procedures	30	19.7%
Change in external auditing firm	9	5.9%
Change in provider of purchased (outsourced) internal audit services	9	5.9%
Change in provider of consulting services or other non-audit services	17	11.2%
Change in amount of non-audit services provided by external auditor	25	16.4%
Planning is not yet complete - considering various alternatives	115	75.7%

Which of the following steps does the board or audit committee take to monitor and assure the independence of the external auditors (Check all that apply)?

6 - Which of the following steps does the board or audit committee take to monitor and assure the independence of the external auditors (Check all that apply)?
Choice	Count	Percentage Answered
Review annual communication about independence from external auditors to audit committee	127	72.6%
Review amount/cost of non-audit services provided by the external auditor	116	66.3%
Review types of non-audit services provided by the external auditor	110	62.9%
Prohibit obtaining non-audit services from the external auditor	16	9.1%
Conduct a periodic assessment of external auditors' independence	76	43.4%
Establish policies on the selection and/or retention of external auditors	70	40.0%
Establish policies on hiring employees of the external auditing firm	18	10.3%
Require periodic rotation of external auditors	15	8.6%
Not sure	18	10.3%
Other (Please specify)	11	6.3%

Sample Answering: 14 responses

Does your organization have a formal Enterprise Risk Management process or other formal method of identifying risk?

7 - Does your organization have a formal Enterprise Risk Management process or other formal method of identifying risk?
Choice	Count	Percentage Answered
1. Yes	65	36.5%
2. No	80	44.9%
3. Not sure	33	18.5%

If 'Yes' to question 7, how are off-balance sheet transactions, related party transactions, special purpose entities, and related partnership issues viewed in terms of risk?

8 - If 'Yes' to question 7, how are off-balance sheet transactions, related party transactions, special purpose entities, and related partnership issues viewed in terms of risk?
Choice	Count	Percentage Answered
1. Generally high risk	26	32.1%
2. Generally medium risk	17	21.0%
3. Generally low risk	18	22.2%
4. Not included in risk management system	3	3.7%
5. Not sure	17	21.0%

How are you kept informed about significant risk issues at your organization (check all that apply)?

9 - How are you kept informed about significant risk issues at your organization (check all that apply)?
Choice	Count	Percentage Answered
Annual reports on risk from management	47	26.7%
Annual reports on risk from internal auditing or other review group	45	25.6%
Periodic reports on risk throughout the year from management	128	72.7%
Periodic reports on risk throughout the year from internal auditing or other review group	79	44.9%
Special reports on risks when significant new risks come to the attention of management	109	61.9%
Review of all internal audit reports	50	28.4%
Review of summary information from internal audit reports	66	37.5%
None of the above	9	5.1%
Other (please specify):	5	2.8%

Sample Answering: 8 responses

Does the board or audit committee charter give the board authority to engage independent counsel (other than the regular legal counsel for the organization)?

10 - Does the board or audit committee charter give the board authority to engage independent counsel (other than the regular legal counsel for the organization)?
Choice	Count	Percentage Answered
1. Yes	116	65.2%
2. No	19	10.7%
3. Not sure	43	24.2%

Who provides legal counsel to the audit committee?

11 - Who provides legal counsel to the audit committee?
Choice	Count	Percentage Answered
Corporate secretary	65	39.6%
Other corporate legal	72	43.9%
Other external legal (Please specify):	49	29.9%

Sample Answering: 36 responses

Have you asked any of the following groups for advice or information because of the Enron situation (check all that apply)?

12 - Have you asked any of the following groups for advice or information because of the Enron situation (check all that apply)?
Choice	Count	Percentage Answered
Management	73	68.9%
External auditors	66	62.3%
Internal audit staff	30	28.3%
Accounting staff	20	18.9%
Legal counsel	48	45.3%
Professional Association/Other (please specify):	3	2.8%

Sample Answering: 6 responses

Is your organization subject to SEC regulations?

13 - Is your organization subject to SEC regulations?
Choice	Count	Percentage Answered
1. Yes	100	56.5%
2. No	77	43.5%

How does your organization audit related-party transactions?

14 - How does your organization audit related-party transactions?
Choice	Count	Percentage Answered
1. Review by both internal and external auditors	49	28.3%
2. Review by external auditors only	28	16.2%
3. No related-party transactions	57	32.9%
4. Not sure	39	22.5%

How does your organization audit derivatives and other complex financial transactions?

15 - How does your organization audit derivatives and other complex financial transactions?
Choice	Count	Percentage Answered
1. Review by both internal and external auditors	42	24.6%
2. Review by external auditors only	20	11.7%
3. No complex financial transactions	89	52.0%
4. Not sure	20	11.7%

The internal auditing function at Enron relied partly upon Enron staff and partly on co-sourcing with the external auditor. Do you presently purchase internal audit services from your external auditor?

16 - The internal auditing function at Enron relied partly upon Enron staff and partly on co-sourcing with the external auditor. Do you presently purchase internal audit services from your external auditor?
Choice	Count	Percentage Answered
1. Yes	36	20.3%
2. No	126	71.2%
3. Not sure	15	8.5%

If 'Yes' to question 16, what percentage of total internal audit services (based on hours worked) is purchased from your external auditor?

17 - If 'Yes' to question 16, what percentage of total internal audit services (based on hours worked) is purchased from your external auditor?
Choice	Count	Percentage Answered
1. Less than 10%	11	23.9%
2. 10% - 25%	9	19.6%
3. 25% - 40%	4	8.7%
4. 40% - 75%	4	8.7%
5. 75% - 100%	6	13.0%
6. Not sure	12	26.1%

If 'Yes' to question 16, how are those services managed and monitored?

18 - If 'Yes' to question 16, how are those services managed and monitored?
Choice	Count	Percentage Answered
1. By a full-time, on-staff chief audit executive	27	69.2%
2. By the outside organization providing the internal auditing services	6	15.4%
3. Other (please specify):	6	15.4%

Sample Answering: 5 responses

To whom does your chief audit executive deliver audit reports?

19 - To whom does your chief audit executive deliver audit reports?
Choice	Count	Percentage Answered
1. Audit committee	104	61.2%
2. President or chief executive officer	21	12.4%
3. Chief financial officer	32	18.8%
4. Other (please specify):	13	7.6%

Sample Answering: 16 responses

Who is responsible for evaluating the performance of your chief audit executive?

20 - Who is responsible for evaluating the performance of your chief audit executive?
Choice	Count	Percentage Answered
1. Audit committee	88	52.4%
2. President or chief executive officer	34	20.2%
3. Chief financial officer	31	18.5%
4. Other (please specify):	15	8.9%

Sample Answering: 17 responses

Q.21 What new information or guidance from regulators or professional associations would be helpful to you regarding issues related to Enron?
• It may be possible for legislators and regulators to respond to what happened at Enron, but it is unlikely that they can constrain themselves and adopt regulations "just broad enough to keep the horse in the barn." More than likely, the political charge of this issue will result in regulations that are overly broad, implying that any company, left to its own devices, would do what Enron did. Certainly, we have all observed the power of group-think. It happens in all groups, large and small, public and private. When individuals work closely with one another, day-in and day-out, they develop an allegiance, to one another, and to the issues that bind them. They lose objectivity. In a business setting, the auditors are supposed to bring that element of objectivity. Enron clearly fell prey to group-think. Unfortunately, their auditors were part of the group. At its earliest stages, Enron's accounting methods were likely aggressive, but reasonable and lawful. At that point, the Company was likely poulated by well-intentioned managers whose activities were monitored by well-intentioned independant auditors. The erosion most likely occurred gradually and subtly, escaping notice. The magnitude of the transgressions grew like a cancer and became so common as to seem perfectly normal to those who on the inside. The impropriety could and would be obvious only to the independant outside observer. So where were the Auditors? Where was the Board? The auditors should have blown the whistle. They saw it, and they turned a blind eye because they, too, fell prey to the forces of greed. The accounting profession has demonstrated beyond all doubt that it cannot be left to regulate itself. New regulations should focus on ensuring the independence and competence the auditors. If such regualtions are adopted, there should be no need to impose yet more regulations on business. If the auditors do their job, Enron doesn't happen.

• discussion on rotation of external auditors

• Structure of ENRON's board and committees and frequency of board/committtee meetings. Also, did they have a governance (board matters) committee?

• Review of what Enron's Audit Committee was doing.

• Our company's practices are so far removed from those at Enron; we are so conservatively financially managed (and audited); and given the size of the company the board of directors are quite engaged and well-informed (and also ask a lot of questions); that I'm not sure if we are likely to be impacted by "issues related to Enron".

• Full disclosure of the chronoplogical events leading up to this debacle and all the decisions make by all parties relative to the review , evaluation and acceptance of the disclosures made.

• re definition of auditor's responsiblities

• 1. Treatment of off-balance sheet transactions. 2. Independence of auditing from consulting services 3. Ethical principles for external auditors

• Any and all information. We are interested in all matters related to Enron.

• Formal rules governing the independence of external auditors or accounting firms.

• The US needs to evaluate the responsibilities, authority, and EXPOSURE that individual members of BODs have. To date they have been operating without personal risk and liability (i.e., no personal responsibility for losses, etc). The primary rationale for the BOD is to protect the interests of individual stockholders. How are the Enron BOD members going to pay the individual legal price for their individual and collective failures???

• Read the filings

• Information on specific topics and areas for Audit Committees to be reviewing and guidance on allocation of Committee time for various topics.

• guidelines for the qualification and selection of audit committee members; guidelines on functions of audit committee and "best pratice" suggestions

• What authority can directors gain in taking control of outside auditors and information about outside auditors

• Due to the comparatively straight-forward nature of our business, which is domestic retailing, I am not looking for any such guidance, other than a reinforcement of the importance of directors' maintaining an independent posture at the same time that they support management's efforts to achieve the company's goals and business plans.

• Not clear. What I can determine, Enron seems to have deliberate fraud or head in the sand attitude by lots of responsible parties.Kinds of issues in Enron already part of my intense scrutiny as Chairman of Audit Committee.

• 1. Guidance relating to retention of audit records by outside auditors. 2. Experience relating to rotation of outside auditors. 3. Information relating to outside auditors income from clients for non-audit services. 4. Specific rules relating to disclosure of self-dealing of executives with their employers.

• Policies related to off balance sheet transactions Guidelines for the evaluation of the chief audit executive

• Guidelines of "best practices" regarding audit committees. Suggested system of internal controls that provide checks and balances between the Board and management.

• More pressure to make Auditors accountable only to the Board and Audit Committee. The practice continues to be management relates to the Auditors and the Audit Committee oversees the relationship. Too frequently there is a defacto understanding between the Auditors and the Managers to not let issues get to the Audit committee.

• 1 prohibition of internal audit by outside auditors 2.require plain english disclosure of spec purpose entities, debt concealment, etc

• Use of external auditor for non-audit purposes Employment of ex-external audit employees

• Accounting information on treatment of off balance sheet partnerships Board policies on disclosure of off balance sheet debt. Policy on internet chatroom discussion, internal or external, by corporate officers.

• a good summary of what happened at Enron.

• Assistance in keeping these matters in perspective. Very few entities have similar exposures as Enron and we needed adapt to the weakest link.

• A summary of what they did improperly and how to avoid those same mistakes

• Don't do a bunch of stupid, grandstanding stuff as a result of the feeding frenzy.

• none

• Clearer rules on auditor independence and on relaterd-party transactions.

• 1. In considering whether it makes sense to switch auditors (our size/complexity indicates should use one of the "big 5") it would be desirable to know: (A) Are there rising auditors that can provide the level of services as the "big 5" and how does one find them? (B) How can auditors be evaluated for reliability, how can they be compared, what is their history of performance whether they are "big 5" or auditors that are rising to such level? (C) What would be the process for changing auditors and what are the pitfalls to avoid? 2. Reportedly, two of the "big 5" did NOT lobby actively against Arthur Levit's proposals; would be interesting to know who they were and why they did not lobby against the proposals. 3. To reduce the reported conflict of interest between audit and consulting services, is there an effective way for the auditor to be organized so that such services are in separate divisions (with separated personnel evaluation and promotion arrangements) and/or would having audit fees coming from Board's budget help reduce the conflict of interest?

• Are there some simple guidelines to help Board members (who are not accountants) be aware when financials are not revealing the true status of a company?

• In my view, and almost completely ignored, a major part of the Enron problem is the Financial Accounting Standards Board. This group has lost site of reality and have been issuing accounting principles that cannot be interpreted or applied consistently by companies (e.g. FASB 133 on derivatives). Enron had smart people that interpreted these accounting principles to their own benefit, however the FASB has to go back to basics with accounting guidance. As a CPA and a current CFO I am highly critical of the FASB.

• REALISTIC GUIDELINES AND BEST PRACTICES FROM FORTUNE 500

• What advice and suggested recommendations all public companies should take to make sure there are no current issues and help prevent future issues from arrising... based on the Enron case (should go beyond just derivatives to include the fundamentals).

• How to prevent another "Enron"

• how much money is too much money to pay directors... what rules should apply to sales of stock by directors...

• An explanation of the facts rather than media speculation.

• A detail of the procedures and processes that Enron used that were inappropriate.

• The most blatant concern was Enron's waiving of the code of conduct. That needs to be automatically a note of materiality to the SEC.

• First would like to see measured response by regulators to Enron event and not overreaction. The role of professional associations in this regard is to act as a buffer against media hype and regulatory overreaction. Specific areas to address: (1)Reasonable rules and limitations on use of employer stock, especially ability to diversify. (2) Disclosure of related party transactions in financial statements (3)revenue recognition on complicated financial transactions, especially involving SPVs. (4) requiremetns/definitions of auditor indpedence

• About 9 months before the Enron scandal broke, we began to develop a formal risk management program. As Chair of our Audit Committee, I read whatever I could find on the subject but clearly, there could be more written which would be useful. While no one process will fit all companies, I am confident that there are enough similarities to merit development of common guidelines.

• A clear list of items that outline what to expect from the accounting firm. Historically, outside of the management letter, there is little feedback of a substantive nature relative to how our company stacks up relative to like firms in the risk assessment. There aught to be a value system to suggest on a relative basis where our company ranks in each specific area with respect to peer companies, e.g Rev recog., Business Risk assesment, Contract accounting, forecastng processes, investments in product development. Rather there is a uninformative discussion that relates to 'you're ok'.

• Identify potential conflict of interest situations involving external auditors which might contribute to unusual flexibility in their allowing (or condoning) certain marginal accounting practices. AA, for example, given the amount of its annual fee, might have felt pressure in going against management's wishes if that would mean the loss of Enron's business. Accordingly, then: Should a large company have more than one auditor? Should the audit be done by a committee of external auditors? What might be an appropriate set of safeguards against an EnronII in my company.

• What would and what would not constitute non-audit services which would not violate the independence issue.

• My concern is that future Government regulations will cause Corporations to cease their match of employee 401K contributions due to the filing and reporting requirements. This will hurt the non-highly compensated employees who need this program to supliment their retirement.

• white papers on specific issues - how they can be identified and addressed checklists seminars

• Conclusions from Congress

• ethics seems to be the basic issue for mgmt & external audit.

• The first and most glaring failure of the Audit Committee Management and the Board of Enron was to waive the conflict of interest restriction that allow the CFO to work both side of the fence. Secondly, the neglect of the Board the review new partnership after the first template was approved. It is clear the Board did not approve each and every subsequent partnership (numbering in the hundreds or more) that the CFO devised. It would appear the Board either directly or de facto allowed management to continue unimpeded after the first partnership template was approved.

• What general questions should an audit committe ask and of whom to insure they aren't missing something?

• NONE

• Information about the risks and how to manage them of having the external auditor provide consulting services ot management

Sample Answering: 53 responses

Do you believe that major changes are needed to U.S. accounting standards?

22 - Do you believe that major changes are needed to U.S. accounting standards?
Choice	Count	Percentage Answered
1. Yes	82	46.3%
2. No	53	29.9%
3. Not sure	42	23.7%

The SEC has proposed a new public oversight group for external auditing, not affiliated with the AICPA. Do you believe that a new public oversight group should be created to monitor external auditing?

23 - The SEC has proposed a new public oversight group for external auditing, not affiliated with the AICPA. Do you believe that a new public oversight group should be created to monitor external auditing?
Choice	Count	Percentage Answered
1. Yes	66	37.3%
2. No	66	37.3%
3. Not sure	45	25.4%

If 'Yes' to question 23, should the AICPA play a direct role in the oversight group?

24 - If 'Yes' to question 23, should the AICPA play a direct role in the oversight group?
Choice	Count	Percentage Answered
1. Yes	32	37.6%
2. No	28	32.9%
3. Not sure	25	29.4%

Which of the following positions do you hold (check all that apply)?

25 - Which of the following positions do you hold (check all that apply)?
Choice	Count	Percentage Answered
Board of directors	152	86.9%
Chairman of the board	28	16.0%
Member of audit committee	80	45.7%
Chairman of the audit committee	46	26.3%
Other board position (please specify):	33	18.9%

Sample Answering: 35 responses

What is your organization's primary industry (Choose the option that most closely describes your organization)?

26 - What is your organization's primary industry (Choose the option that most closely describes your organization)?
Choice	Count	Percentage Answered
1. Agriculture, Mining or Construction	6	3.4%
2. Banking or Finance	17	9.7%
3. Chemical or Drug	5	2.9%
4. Communications	10	5.7%
5. Educational Institutions	3	1.7%
6. Government	2	1.1%
7. Healthcare	14	8.0%
8. Insurance	9	5.1%
9. Manufacturing	54	30.9%
10. Petroleum	2	1.1%
11. Wholesale or Retail	11	6.3%
12. Services	30	17.1%
13. Transportation	5	2.9%
14. Utilities	7	4.0%

Sample Answering: 174 responses

Would you be willing to talk to an IIA editor about issues surrounding Enron or related situations (if yes, you must provide contact information in question 30)? Answer required to enable automatic response submission.

31 - Would you be willing to talk to an IIA editor about issues surrounding Enron or related situations (if yes, you must provide contact information in question 30)? Answer required to enable automatic response submission.
Choice	Count	Percentage Answered
1. Yes, please contact me. I have knowledge or expertise that I would like to share	9	5.1%
2. Yes, I am willing to discuss these issues if contacted	42	23.6%
3. No	127	71.3%

Sample Answering: 37 responses