Our good friend Michael Littenberg, a leading legal expert on the SEC’s conflict minerals disclosures, was featured in today’s Wall Street Journal commenting on the Independent Private Sector Audit (IPSA) of CY2015 Conflict Minerals Reports (CMRs). The article quoted Michael as saying that issuers
are really grappling with how much time, effort, and cost to put into preparing for an audit, when there is still uncertainty about what the litigation means for the audit requirement for 2015.
Companies we work with have had enough uncertainty related to conflict minerals requirements, so most are moving ahead with IPSA planning as the original rule is written. They are currently screening auditors, budgeting funds and learning more about what they may need to do to prepare. We’ve mentioned numerous times that it is easier to free up previously allocated funds if they are not needed than it is to scramble to find funding at the last minute, so in many cases there isn’t much disincentive to plan for the IPSA.
At the same time, some issuers are shelling out tens of thousands of dollars for a third party to conduct audit preparation reviews and assessments. We don’t believe it is worth paying for such activities given the unique nature of the IPSA, the control issuers have over the audit effort and other low-cost options that are available (such as training and using your own Internal Audit staff).
As far as IPSA costs themselves, we continue to hear about significant overpricing so consider your options in selecting an auditor.