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7, 1998, at LEXIS, Nexis Library ( Our experience and those of other BIO member companies points to numerous examples where both clinical development and complex manufacturing issues were speedily resolved because of the scientific expertise within the Center for Biologics Evaluation and Research (CBER) ); see also Lewin Group, supra note 11, at 12 ( Regulation of the medical device industry by FDA has improved in recent years Improvements in FDA regulation are attributable to such main factors as the agency s reengineering efforts, collaboration with industry, and a commitment to the implementation of the FDA Modernization Act of 1997 (FDAMA) ) Interview with Donald Marlowe, Food and Drug Administration, January 2004 See Tufts Study: Staff Departures Will Slow FDA Operations, Jan 21, 2004, at http://wwwfdanewscom/pub/pcr/4_2/fda/20723-1html (subscription required) Lewin Group, supra note 11, at 26 FDA s Growing Responsibilities for the Year 2001 and Beyond, Dept.



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of Health & Human Servs, FDA, at http://wwwfdagov/oc/opacom/budgetbro/budgetbro html (last updated Jun 13, 2001)..

The board of directors of Doughcom Inc meets with its various advisers to determine how to raise the necessary capital to promote the development of Dough-Ware Every possible solution has its advocates Some directors want to raise the money through a private placement of securities from venture capital firms, believing that going public is too time consuming, involves too much expense (upward of 10% of the proceeds typically will be absorbed in selling commission and out-of-pocket expenses), and that the underwriters (the investment bankers who will sell the IPO to the public investors) will attempt to value the shares at less than their true value so that the public investors will see the price rise upon conclusion of the offering.





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These funds invest most of their assets outside the United States. Depending on the countries selected for investment, foreign funds can range from rela-

1 A joint venture is exempt from using the equity method or proportionate consolidation in certain circumstances Which of the following circumstances is not a legitimate reason for not using the equity method or proportionate consolidation (a) Where the interest is held for sale under IFRS 5 (b) Where the exception in IAS 27 applies regarding an entity not being required to present consolidated financial statements (c) Where the venturer is wholly owned, is not a publicly traded entity and does not intend to be, the ultimate parent produces consolidated accounts, and the owners do not object to the nonusage of the accounting methods (d) Where the joint venture s activities are dissimilar from those of the parent Answer: (d) 2 In the case of a jointly controlled operation, a venturer should account for its interest by (a) Using the equity method or proportionate consolidation.

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An investment banker on the board suggests that the shares could be privately placed by selling an additional 20% of the company s common stock for $40 million, effectively valuing the company as it sits today (a pre-money valuation) at $160 million The representative from Vulture Partners has yet another strategy He suggests that the company not raise the additional funds now, but push the current version of their product out the door and work on building volume and profitability for the next six months; then, the company can go public at a valuation which is 30 times the company s projected pretax earnings, which would value the company at $300 million pre-money In conjunction with the IPO, Vulture Partners then would sell half of its own original shares, realizing a multimillion dollar profit while still retaining a substantial equity position.

The survey produced further evidence of the closer working relationship between audit committees and the internal audit function. Just as access to the audit committee by the outside auditing firm has been strengthened, so too has access by the chief internal auditor. It is more common now for charters to require the committee to meet in private with the internal auditor (with no members of management present), or to state that the committee will be available to the internal auditor when necessary, or both. Another way companies support the independent status of the internal auditing function is to specify in writing that the audit committee must have a say or, at a minimum, must be consulted and thoroughly informed when there is to be a change in internal auditors. Some committees are also charged with monitoring the pay level of the head of internal auditing. These links give the internal auditor an ally in high places and presumably discourage management from trying to undermine or compromise his/her sense of independence.

(b) Recognizing the assets and liabilities, expenses and income that relate to its interest in the joint venture (c) Showing its share of the assets that it jointly controls, any liabilities incurred jointly or severally, and any income or expense relating to its interest in the joint venture (d) Using the purchase method of accounting Answer: (b) 3 In the case of jointly controlled assets, a venturer should account for its interest by (a) Using the equity method or proportionate consolidation (b) Recognizing the assets and liabilities, expenses and income that relate to its interest in the joint venture (c) Showing its share of the assets that it jointly controls, any liabilities incurred jointly or severally, and any income or expense relating to its interest in the joint venture (d) Using the purchase method of accounting Answer: (c) 4.

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