Demystifying Disclosure Controls: Understanding Them to Effectively Leverage Toward Objectives

Abstract

All organizations are subject to some degree of disclosure requirements, which are also commonly called external reporting requirements. They can be as simple as filing tax returns or as complex as meeting applicable rules and regulations of a governmental regulator, such as the U.S. Securities and Exchange Commission (SEC). No matter the extent, organizations are well advised to have robust disclosure controls in place to help ensure that external disclosures are prepared and delivered in accordance with the applicable external reporting requirements. While the article tackles disclosure controls mostly from SEC's definition, it also has ideas for entities not subject to SEC rules and regulations since this is a topic that applies to all types of organizations. It is essential to complete disclosures in an accurate, timely and complete manner to protect against adverse legal actions and to preserve the organization's reputation. The interests of stakeholder groups such as governments, creditors and regulators are essential to the success of any business and ignoring or under-resourcing their requirements is a recipe for disaster that can be averted through appropriate disclosure controls.

Notes

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

ii. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

iii. Per SEC Reg13A.T.Rule13a-15(e) and SEC Reg15D.T.Rule15d-15(e).

iv. Per SEC RegS-K.T.Item601.

v. Per SEC Reg13A.T.Rule13a-15(f) and SEC Reg15D.T.Rule15d-15(f).

vi. http://www.sec.gov/rules/final/2009/33-9089.pdf

vii. Item 9A of Form 10-K for hhgregg, Inc., filed with the SEC on May 20, 2014.

viii. http://www.coso.org/documents/990025P_Executive_Summary_final_may20_e.pdf

Additional information

Notes on contributors

Ronald Kral

Ronald Kral, MBA, CPA, CMA, CGMA is the Managing Partner of Candela Solutions LLC, a public accounting firm with a national focus on governance, SEC compliance, and internal auditing. He has worked with over two hundred clients as a Public Accountant, many through Big-4 firms. Ron is an educator, advisor, and independent internal auditor for boards and management teams.

Prior to forming Candela Solutions in 2003, Ron led a subsidiary of a multi-billion dollar company traded on the NYSE. Previously, he was a Principal Consultant with PricewaterhouseCoopers leading operational audits and internal control projects. He began his public accounting career with a California CPA firm as a Financial Auditor where he signed audit opinions upon becoming Managing Director of the firm’s Orange County office.

Ron teaches professional education courses on accounting matters, governance, regulatory compliance, risks, SEC disclosures, auditing standards, and ethics. He believes business activities need to be focused on creating and preserving shareholder value. Ron coauthored The Board of Directors and Audit Committee Guide to Fiduciary Responsibilities (AMACOM). He is a member of the AICPA, FEI, IIA, and IMA. Ron holds an MBA from Arizona State University and a BBA from the University of Wisconsin, Madison. Email Ron at [email protected].