Accounting standards

The Securities and Exchange Commission has charged two former in-house lawyers at Enron Corp. with securities fraud over a Brazilian scheme to move losses off the company’s balance sheet.

In a strategy designed to help modernize the business-reporting model, board members of the American Institute of CPAs’ recently restructured Center for Audit Quality will embark on a multi-city “listening tour."The aim of the tour is for members to engage investors, regulators, academics and business leaders and, subsequently, offer a series of recommendations.

The Securities and Exchange has censured Ernst & Young, ordering the Big Four firm to pay $1.6 million to settle charges of compromising its independence and contributing to faulty accounting by a client in 2001.As part of the settlement, E&Y neither admitted nor denied the agency’s allegations, made in connection with the firm’s audit work for Pittsburgh-based regional bank PNC Financial Services Group.

The Securities and Exchange Commission's Office of the Chief Accountant has selected four professional accounting fellows to serve two-year terms beginning this summer.

The Certified Financial Planner Board of Standards Inc. has released a second exposure draft of proposed changes to its, “Standards of Professional Conduct.”

Representatives from the Public Company Accounting Oversight Board meet with its Japanese, Korean and Chinese counterparts last week, as well as accepting an invitation to become a member of the newly-formed International Forum of Independent Audit Regulators.Chairman Mark Olson and board member Charles Niemeier participated in a meeting of the forum in Tokyo, where they discussed ways to foster cooperation between regulators responsible for the oversight of public company auditors. They also met privately with the PCAOB’s counterpart in Japan, the Certified Public Accountants and Auditing Oversight Board and the Japanese Financial Services Agency.

The Securities and Exchange Commission censured the American Stock Exchange last week, along with the exchange’s former chairman and chief executive, for failing to enforce securities laws and maintain proper records.

A federal judge has dismissed a lawsuit filed by a small Nevada audit firm challenging the constitutionality of the Public Company Accounting Oversight Board.

The main council that provides guidance to the Financial Accounting Standards Board doesn’t agree that the accounting profession’s rulemaking structure is in need of reshaping.

The latest compilations of international auditing, ethics and public sector accounting standards are available in print and electronic formats from the International Federation of Accountants.The 2007 “Handbook of International Auditing, Assurance and Ethics Pronouncements” contains all pronouncements of the International Auditing and Assurance Standards Board as of Dec. 31, including the first four standards on auditing, which were redrafted under the board’s new clarity drafting rules. The handbook also contains an updated, “Code of Ethics for Professional Accountants,” which was issued by the International Ethics Standards Board for Accountants in July.

One year down, three more to go.KPMG has approved San Diego’s financial statements for the city’s 2003 fiscal year, issuing a clean audit opinion letter last week. In the culmination of a three-year audit process, the Big Four firm issued 66 restatements -- covering wrongly recorded debt, property and investments -- that totaled nearly $1.8 billion.

At least one in five workers eligible for the Earned Income Tax Credit will leave that money on the table this tax season, and Congress is looking to accountants and other tax professionals to help address the problem.During hearings before the House Ways and Means Oversight Subcommittee, congressional leaders said that while 22 million low-income families and individuals claimed EITC wage subsidies last year, millions more who are eligible for the tax credits don't receive them.

The Internal Revenue Service has rolled out its annual list of the 12 most blatant tax return scams. Topping the "Dirty Dozen" are fraudulent claims for the one-time Telephone Excise Tax refund. Also new to the list this year are abuses pertaining to:* Roth IRAs. Taxpayers should be wary of advisors who encourage them to shift under-valued property to these IRAs. In one variation, a promoter has the taxpayer move under-valued common stock into a Roth IRA, circumventing the annual maximum contribution limit and allowing otherwise taxable income to go untaxed.

The measures to close the tax gap offered by President Bush in his 2008 budget are somewhat modest, according to observers.The president's $2.9 trillion budget contains a number of legislative proposals to close the gap in four areas: by expanding information reporting, improving compliance by businesses, strengthening tax administration and expanding penalties.

The International Accounting Standards Board has announced the membership of a new Employee Benefits Working Group.The board established the group to assist in a project on post-employment benefits by providing a variety of exert perspectives, including those of actuaries, auditors, preparers and users of financial statements, and regulators. The group consists of 16 senior professionals with extensive practical experience in the operation, management, valuation, financial reporting, auditing or regulation of a variety of post-employment benefit arrangements.

The Securities and Exchange Commission has settled improper accounting charges it brought against a trio of former financial officers of Raytheon Co.

In a filing with regulators, General Motors said that ineffective internal controls over financial reporting might make it difficult for the company to execute on its business plan.

Treasury Secretary Henry Paulson said that U.S. rulemakers should consider adopting "principles-based" regulations and accounting standards in a speech at the Capital Markets Competitiveness Conference.Paulson said that in particular, there should be a focus on three issues in the United States -- the country’s regulatory structure, its accounting industry and its legal and corporate governance environment.

Many of the same recommendations keep emerging from report after report -- no matter how nonpartisan or partisan the group.That happened just this week, on some level, with macro comments Treasury Secretary Henry Paulson made in opening a conference on international market competition, as well as with the six pointed recommendations the U.S. Chamber of Commerce offered to Congress and the investment community.

With great anticipation I was awaiting FASB Statement 159, "The Fair Value Option for Financial Assets and Financial Liabilities." I was a bit shocked by it when it came out. Two aspects really bothered me --one, that it is an option, and two, that to a great extent, it can be applied on an instrument-by-instrument basis. I will not go into a discussion of the standard, except for the narratives explaining the dissent of two members of the seven-member of the Financial Accounting Standards Board. Thomas Linsmeier dissents from its issuance because he believes a fair value option generally won’t result in financial reporting that achieves many of the expressed objectives for issuing FASB 159.