China units of Big Four firms appeal audit ban
As expected, the Chinese affiliates of the Big Four accounting firms on February 12 appealed a US Securities and Exchange Commission (SEC) administrative law judge’s ruling suspending them from auditing US-traded clients for six months, Michael Rapoport of the Wall Street Journal reported.
The appeal filed by PricewaterhouseCoopers, Deloitte Touche Tohmatsu, KPMG, and Ernst & Young will be heard by the five members of the SEC.
The SEC had requested documents from the accounting firms to aid in its investigation of some of the 130-plus US-traded Chinese companies that have encountered questions about their accounting or disclosure in recent years, the article stated. The firms say they could be harshly penalized if they cooperate with the SEC without approval from the Chinese government.
“In their appeal, the firms said the potential effects of a suspension are so sweeping and damaging that the commission itself should weigh in on the matter,” Rapoport wrote. “A suspension could leave dozens of US-traded Chinese companies without an auditor, and could complicate the audits of many US multinational companies that the Chinese audit firms assist with.”
FASB parent’s $3 million pledge to IASB’s parent raises concerns in rulemaking circles
Steve Burkholder of Bloomberg BNA reported that former members of the Financial Accounting Standards Board (FASB) and other close observers of accounting rulemaking have voiced concern about threats to the independence of the FASB and its parent organization, the Financial Accounting Foundation (FAF), in the wake of a $3 million pledge by the FAF to the London group that oversees the International Accounting Standards Board (IASB).
On January 28, the FAF said it would make a nonrecurring contribution to the IFRS Foundation – up to three payments of $1 million during 2014 – that is intended to support the IASB during the period it is completing work on the four joint accounting standards projects with the FASB.
Edward Trott, a former FASB board member, and others are questioning why the FAF would contribute money toward the work of another standard-setter, particularly one whose rules have not been adopted by the United States or incorporated into the public company financial reporting regime in this country, the article stated.
Ken Bishop, president of the National Association of State Boards of Accountancy (NASBA), also questioned the SEC’s role in securing the financial contribution. The FAF noted that its board of trustees made the decision after consulting with SEC senior officials.
“Information gleaned from Bloomberg BNA interviews suggests that top officials at the SEC, in proposing a path studied carefully by FAF trustees, were the source of the recent FAF funding idea,” Burkholder wrote. “Using that avenue, a substantial contribution to the IFRS Foundation on behalf of a US authority – albeit a private, nonprofit entity – was able to be made as an alternative to a direct contribution that the SEC itself could not make because of legal prohibitions.”
[Click here for AccountingWEB’s article about the FAF contribution to the IFRS Foundation.]
Camp expected to release tax reform plan
House Ways and Means Committee Chairman Dave Camp (R-MI) plans to release his long-delayed overhaul of the tax code in the next several weeks, according to someone close to tax reform discussions, Bernie Becker of The Hill reported yesterday.
It is not known exactly when Camp might release his rewrite of the code, but he is expected to put the plan out after the House returns from its current recess later this month.
“The person familiar with tax reform discussions said Camp will probably release his overhaul before [President] Obama releases his budget, and almost certainly won’t wait until the end of March,” Becker wrote. “The Obama budget is scheduled for March 4.”
Vulnerable Dems want IRS to step up
In another article by The Hill, Alexander Bolton wrote today that Senate Democrats, facing tough elections this year, want the IRS to play a more aggressive role in regulating outside groups expected to spend millions of dollars on their races.
“In the wake of the IRS targeting scandal, the Democrats are publicly prodding the agency instead of lobbying them directly,” the article stated. “They are also careful to say the IRS should treat conservative and liberal groups equally, but they’re concerned about an impending tidal wave of attack ads funded by GOP-allied organizations. Much of the funding for those groups is secret, in contrast to the donations lawmakers collect, which must be reported publicly.”
Behind the scenes of a dramatic debt vote
By a vote of fifty-five to forty-three, the Senate passed legislation on February 12 that would lift the debt ceiling into 2015 – but not without a little drama, as Manu Raju and Burgess Everett of Politico wrote yesterday.
IRS options after losing tax preparer regulation appeal
On Tuesday, a three-judge panel of the US Court of Appeals for the District of Columbia Circuit unanimously upheld a lower court's ruling that the IRS has no authority to force tax preparers to take continuing education courses and tests.
The judges determined that the IRS's interpretation of its statutory authority to regulate paid tax return preparers was unreasonable and an attempt to “unilaterally expand its authority.”
In her blog, Don’t Mess With Taxes, Kay Bell wrote the IRS essentially has four options to pursue after its latest legal setback.
[Click here for AccountingWEB’s article on the federal appeals court’s decision against the IRS.]
US SEC announces flurry of new hires throughout agency
The SEC now has a new head of its Office of International Affairs, a new head of its Office of the Investor Advocate, a new head accountant in its Enforcement Division, and a new associate director and chief council in its Division of Corporate Finance, Sarah Lynch of Reuters reported yesterday.