Bramwell's Lunch Beat: Weil's Take on Auditor Rotation
Senate passes budget deal, focus shifts to spending
Following on the heels of the House of Representatives last week, the Senate on December 18 passed a two-year budget deal by a vote of sixty-four to thirty-six. The bipartisan budget pact will ease automatic spending cuts and reduce the risk of another federal government shutdown, Reuters reported.
The measure will now be sent to President Obama to sign into law – a major achievement for a divided Congress that has failed to agree on a budget since 2009.
What’s next? The House and Senate Appropriations committees will start to assemble a massive spending bill that implements the deal and “carves up the funding pie among thousands of government programs, from national parks to the military,” according to the article.
“Without the new spending authority, the federal government on January 15 could partially shut down, as it did for sixteen days last October,” the article noted.
Toothless term limits won’t improve auditing
Earlier this week, the European Union unveiled a new draft agreement with its member states that would require financial institutions and publicly traded companies to occasionally rotate their outside auditors.
The objective of the agreement, according to Jonathan Weil of Bloomberg, is to keep auditors and their clients from getting too cozy with each other. However, the problem, Weil wrote, is it still gives these companies a very long time to remain cozy – maybe as long as thirty years before some companies have to switch auditors.
The idea of putting term limits on outside auditors hasn’t gained traction in the United States, Weil noted. He believes Congress should remove the audit requirement from US securities laws and put the decisions about whether to hire auditors up for votes by shareholders.
“That way, to get hired, audit firms would have to demonstrate to the investing public that their services have value,” Weil wrote. “After so many audit failures over the past few decades, audits are widely viewed by investors as irrelevant. The firms’ opinion letters seldom are anything but useless boilerplate.”
Accidental tax break saves wealthiest Americans $100 billion
In another Bloomberg article, Zachary Mider wrote that billionaires like Sheldon Adelson, chairman and CEO of the Las Vegas Sands Corp., are exploiting a loophole in the estate or gift tax that Congress unintentionally created and the IRS unsuccessfully challenged.
Mider noted that by shuffling his company stock in and out of more than thirty trusts, Adelson has given at least $7.9 billion to his heirs while legally avoiding about $2.8 billion in US gift taxes since 2010, according to calculations based on data in Adelson’s US Securities and Exchange Commission (SEC) filings.
“Hundreds of executives have used the technique, SEC filings show,” the article stated. “These tax shelters may have cost the federal government more than $100 billion since 2000, says Richard Covey, the lawyer who pioneered the maneuver. That’s equivalent to about one-third of all estate and gift taxes the United States has collected since then.”
Target says data for forty million shoppers was stolen
Bad news for us Target shoppers: The company confirmed today it is investigating a security breach involving stolen credit card and debit card information for forty million of its retail customers, the New York Times reported.
According to the article, Target said that criminals gained access to its customer information on November 27 – the day before Thanksgiving – and maintained access through December 15.
“Target said that criminals had stolen customer names, credit or debit card numbers, expiration dates, and three-digit security codes for forty million customers who had shopped at its stores,” the article stated. “The company noted that online customers were not affected by the breach, which appeared to have been isolated to the point-of-sale systems in Target’s retail stores.”
Two reports highlight IRS problems
In one report from the Government Accountability Office (GAO) issued on December 18, despite efficiency gains from electronic return filing, the IRS was unable to keep up with the demand for telephone and correspondence services, according to an article in the Wall Street Journal by John McKinnon.
Only about 68 percent of callers were able to receive help on the IRS’s often-overloaded help lines in 2013, about the same as last year. The percentage of paper correspondence that was more than forty-five days old increased to 47 percent from 40 percent in 2012, the article noted.
In a separate report released on Wednesday by the Treasury Inspector General for Tax Administration (TIGTA), the IRS identified almost 580,000 returns claiming $3.6 billion in fraudulent refunds during the 2013 filing season.
“That total underscored the large scope of the fraud problem, which often hurts innocent taxpayers as well as the government,” McKinnon wrote. “The IRS said it prevented the issuance of about $3.5 billion in phony refunds, about 96 percent of the total. There is strong evidence that the IRS is doing a better job of identifying fraudulent returns. But some doubt remains about exactly how many of the claims the IRS is actually catching.”