From:Tammera McLin, CPA at Farmers Group Inc.
Re:CFO’s Resignation and Security and Exchange Commission’s (SEC) Investigation
On July 8, 2012, Arthur James, Farmers Group Inc.’s Chief Operation Officer (CFO), resigned from our company suddenly and with no explanation. The United States Securities and Exchange Commission (SEC) is investigation our company On July 8, 2012, Arthur James, Farmers Group Inc.’s Chief Operation Officer (CFO), resigned from our company suddenly and with no explanation. As a result of the SEC’s investing, we are obligated to issue a news release within 24 hours of a material announcement, to provide broad, non-exclusionary disclosure information to the public (Seitel, Chapter 7, 2011). “Among other requirements, Sarbanes-Oxley mandated all publicly traded companies to increase financial disclosure and submit an annual report of the effectiveness of their internal accounting controls to the SEC, with criminal and civil penalties for noncompliance” (Seitel, 2011, Chapter 7). It is imperative that the press release communicates the changes in our company immediately. “The first impression the public gets is usually the one that is most important” (Seitel, 2011, Chapter 7). We should hire an external auditing firm to examine our financial records and disclose this fact to the public. The audit can demonstrate Farmers’ good faith and decrease the negative impact of publicity incurred, due to the CFO’s resignation (White, Thomas, 2005). This auditing firm can propose adjustments and assist in the assembling or drafting of future financial statements, without establishing Farmers’ deficiency controls; since doing so could impair their independence (Clelland, 2008, para.3).
Public communication will be critical for Famers as we seek public or external stakeholders’ acceptance of the CFO’s resignation, understanding of our company’s current financial stability in the...