Bramwell’s Lunch Beat: SEC in ‘Tough Spot’ With Alibaba IPO
US could lose $3 billion as budget forces fewer tax audits – IRS chief
During a hearing yesterday of the House Ways and Means Oversight Subcommittee, IRS Commissioner John Koskinen said the federal government could lose almost $3 billion in revenue during the current fiscal year because budget cuts are forcing the agency to audit fewer people, Patrick Temple-West of Reuters reported.
Koskinen said the IRS will audit 100,000 fewer individuals this year as part of congressionally mandated cuts to the tax agency’s budget. Audits of high-wealth individuals, businesses, and partnerships will also decline, he added.
“This fiscal year, the IRS’s key enforcement programs will operate well below historical levels,” said Koskinen, who was speaking to the subcommittee about the tax season that concluded on April 15, according to the article.
Temple-West noted that Congress in January cut the IRS’s budget by $526 million, or 4 percent, to $11.9 billion for the current fiscal year.
Does the SEC have the guts to tank Alibaba’s IPO?
On Tuesday, Alibaba Group Holding Ltd., China's largest online retailer, filed the registration statement for its initial public offering (IPO). One of the risk factors it cited is the possibility that the US Securities and Exchange Commission (SEC) may suspend the mainland Chinese affiliate of its outside auditor, PricewaterhouseCoopers of Hong Kong, Bloomberg View columnist Jonathan Weil noted yesterday.
Back in January, an SEC administrative law judge ruled that the China-based affiliates of PricewaterhouseCoopers and the other Big Four accounting firms should be barred from performing audit work for US-listed companies for six months. The SEC's enforcement division had sent the firms subpoenas for records related to their audits at a spate of Chinese companies under investigation for accounting fraud. The firms refused to comply, claiming that Chinese law prohibited their cooperation, Weil wrote.
Since the judge's ruling, the firms have appealed to the full commission, and it isn't at all clear whether the SEC will decide the case on the merits – or make any decision at all.
But if the SEC does go forth with the suspension, it could trigger all sorts of potential calamities, including the delisting or deregistration of Alibaba’s stock in the United States, the article stated.
“I seriously doubt that will happen,” Weil wrote. “But the backstory here shows that the US government has as much of a problem with enforcing the law against large accounting firms as it does huge banks. It also shows what a tough spot the SEC is in.”
PCAOB announces settled disciplinary actions against two audit firms and four individuals
The Public Company Accounting Oversight Board (PCAOB) on Wednesday announced settled disciplinary orders against two audit firms and four individuals for violations of the federal securities laws and PCAOB rules and auditing standards relating to auditor independence, quality control, and audit documentation.
Charges in the disciplinary orders also include instances of noncooperation in a board inspection and a board investigation, and the auditor committing fraud by issuing an audit report falsely stating that the audit had been conducted in accordance with PCAOB rules and standard, according to a PCAOB release.
Each of the respondents offered to settle the charges and, in each settlement, agreed to the imposition of certain sanctions. The respondents neither admitted nor denied the PCAOB’s findings.
The sanctions imposed on the audit firms and auditors are:
- Berman W. Martinez y Asociados and Berman W. Martinez, both of Managua, Nicaragua: The PCAOB permanently revoked the firm's registration and permanently barred Martinez from associating with a registered public accounting firm.
- Jeffrey & Company and Robert G. Jeffrey, CPA, both of Wayne, New Jersey: The PCAOB revoked the firm's registration and barred Jeffrey from associating with a registered firm. After three years, Jeffrey may file a petition for board consent to associate with a registered firm and the firm may reapply for registration.
- Paul W. Marchant, CPA, of Wayne, New Jersey: The PCAOB barred Marchant, who was associated with Jeffrey & Company, from associating with a registered firm. He may file a petition for board consent to associate with a registered firm after three years.
- Henry Mendoza, CPA, of San Clemente, California: The PCAOB barred Mendoza from associating with a registered firm. Mendoza may file a petition for board consent to associate with a registered firm after five years.
Additionally, both firms and all individuals were censured, according to the PCAOB.
6 Dems vote for Lerner contempt resolution
As noted in AccountingWEB’s article on the House vote yesterday to hold former IRS official Lois Lerner in contempt of Congress, six Democrats were among the 231 lawmakers who backed the contempt citation.
They included representatives Ron Barber of Arizona, John Barrow of Georgia, Collin Peterson of Minnesota, Mike McIntyre of North Carolina, Nick Rahall of West Virginia, and Patrick Murphy of Florida.
Cristina Marcos of The Hill wrote yesterday evening that most of the six Democrats face tough re-election battles this year.
[What does the contempt of Congress vote really mean? The Christian Science Monitor explains here.]
FASB proposes clean up for newly acquired entities
Tammy Whitehouse of Compliance Week reported on May 6 that the Financial Accounting Standards Board (FASB) has provided more specific guidance on when an acquired entity would use “pushdown accounting.”
The FASB has issued an exposure draft to spell out some new requirements for pushdown accounting, or the establishment of a new accounting basis for a target company after an acquisition when the acquired company will continue to publish its own financial statements.
According to Whitehouse, the FASB's proposed update would give the acquired entity an option to apply pushdown accounting in its separate financial statements when specific events occur that give the acquiring entity control over the acquired entity. The proposed guidance tells companies to apply existing business combinations guidance to the individual assets and liabilities in its separate financial statements if it elects pushdown accounting. If the entity elects not to apply pushdown accounting, it still would be required to reflect how the accounting would look if it had elected pushdown accounting. The proposal also explains how to address any goodwill that would result from applying business combinations guidance, the article stated.
Secret Service: Motorist who followed motorcade onto White House grounds made a mistake
Matthew Goldstein, an IRS IT specialist, was driving his gray Honda Civic along 17th Street NW in Washington, DC, on Tuesday afternoon when he inadvertently followed the motorcade carrying President Obama’s daughters into the secure perimeter for the presidential compound.
According to a May 7 Washington Post article, Goldstein, who is charged with a misdemeanor and was released after a brief appearance in DC Superior Court on Wednesday, told law enforcement officials that he had made a mistake and was not familiar with the roads around the White House.
“He was at a function downtown with colleagues and said he was just checked out mentally and confused,” said an official familiar with the incident, according to the article. “It seems to be bad luck on his part.”
In the courtroom Wednesday, Magistrate Judge Karen Howze released Goldstein pending a hearing May 21. The misdemeanor charge of unlawful entry carries a maximum of 180 days in jail and a fine of as much as $1,000. The judge ordered Goldstein to stay away from the White House and its grounds, the article stated.
- The Rothstein Kass/KPMG merger is most definitely on and happening soon, says this (Going Concern)
- Cutting taxes without paying for it: Our view (USA Today)
- Tax break for corporate research: Is House GOP plan fiscally responsible? (Christian Science Monitor)
- R&D tax fight turns into a partisan brawl (MSNBC)
- Pfizer case stirs unease at UK tax haven charges (Financial Times)
- UK wants more commitments from Pfizer on AstraZeneca deal (Wall Street Journal)
- Wind-power tax credits need to be blown away (Wall Street Journal)
- Move on tax reform before companies move (The Hill)
- SEC issues warning about bitcoin investments (Journal of Accountancy)
- Cleveland voters approve 20-year sin tax to benefit pro sports (Don’t Mess With Taxes)