Auditing

Ex-Peregrine Official Pleads Guilty to Fraud Charges

A former assistant treasurer at Peregrine, has admitted that she and other company officials conspired to disguise the company's financial condition. Earlier this year, Peregrine filed for bankruptcy protection and filed a lawsuit against Arthur Andersen, seeking to blame Andersen for failing to detect the fraud.According to press accounts, the former treasury official said she and others, including the chief financial officer, conspired to sell false and uncollectible receivables to Wells Fargo HSBC Trade Bank to improve the company's financial results.

SEC Proposes Innovative Auditor Independence Rules

The Securities and Exchange Commission has agreed to propose for comment significant changes to current practices and requirements for auditor independence. Some proposals contain innovative solutions that go beyond the mandates of the Sarbanes-Oxley Act. Comments from accounting firms will be especially critical on these rule proposals.

SEC Proposes Audit Workpaper Retention Rules

As required under the Sarbanes-Oxley Act, the Securities and Exchange Commission has developed proposed rules regarding the retention of audit documents, including e-mails and electronic records. Currently, audit records retention policies involve considerable judgment, and accounting firms vary in how long they keep records. The proposed rules would change this by:Specifying that certain types of audit documents must be retained by auditors for a five-year period subsequent to the completion of an audit or review of a registrant's financial statements.

PCAOB Hesitates to Endorse AICPA's Audit Standards

At its first meeting on November 13, 2002, the Public Company Accounting Oversight Board (PCAOB) stopped short of temporarily endorsing audit standards issued by the American Institute of CPAs (AICPA). The meeting was chaired by William Webster, even though he has already resigned from his position as Chairman on a permanent basis.Mr. Webster suggested the board consider adopting the existing standards on an interim basis.

Top 10 Mistakes in Working Capital Management

In a sluggish economy, working capital management is both a business necessity and a strategic tool.

Andersen's Berardino Offers Guidance to Profession

Speaking at an American Institute of Certified Public Accountants conference in Phoenix Tuesday, former Andersen CEO Joseph Berardino offered his insights as to the crisis troubling both the accounting profession and corporate America and made suggestions as to how such a crisis can be overcome.Mr. Berardino warned of a dangerous complacency on the part of the leaders of the remaining Big Four accounting firms, saying, "They think (what happened to Andersen) can't happen to them.

PCAOB Head Quits, Signaling New Ballgame for Accountants

Former FBI and CIA chief William Webster resigned as chairman of the Public Company Accounting Oversight Board (PCAOB), signaling the start of a whole new ballgame for the accounting profession. The profession is widely blamed by the media for the sequence of events leading to Mr. Webster's rushed appointment as a "moderate" chairman.

Growing Demand For Pre-Deal Audits Slows M&A Activity

In the aftermath of bad investments and troubled loans, both corporate buyers and their lenders are looking to accountants to do more upfront audits as part of pre-deal due diligence.

Federal Reserve Board Eyes Accounting Weaknesses

Speaking at a national industry conference sponsored by the American Institute of CPAs, Federal Reserve Board Governor Susan Bies said the Fed stands ready to challenge accounting practices it sees as too aggressive, and she gave examples of areas being eyed by the Fed in an effort to help overcome today's accounting weaknesses.
Community News

BDO Seidman Report Adds to Turmoil in Post-Pitt Era

Confidential documents released by BDO Seidman are fueling concerns about the future of accounting reform. The documents dispute statements made by William Webster, head of the Public Company Accounting Oversight Board (PCAOB).Mr. Webster chaired the audit committee of US Technologies, a company now facing fraud charges. He reportedly told the press the company fired BDO over a billing dispute. But BDO says it was an accounting dispute.

AICPA Releases New Fraud Standard For Auditors

The American Institute of CPAs (AICPA) released Statement on Auditing Standards No. 99 (SAS 99) on November 1, 2002. This statement is a bold step forward for the accounting profession. It equips auditors of financial statements with specific steps they should take to detect and report possible frauds. But auditors have one more hurdle to go.
Community News

E&Y Auditors May be Charged by SEC

The Securities and Exchange Commission (SEC) has issued Wells notices to three auditors from Big Four firm Ernst & Young. The notices advise the auditors that they are likely to be the subject of civil charges by the federal agency and give them an opportunity to explain their actions in an effort to show why they should not be so charged.The possible charges stem from an audit of CUC International, a company that merged with HFS Inc.

PCAOB Challenged, Chair Implicated in Fraud Case

The U.S. Securities and Exchange Commission (SEC) asked the agency's inspector general to review the selection process for the Public Company Accounting Oversight Board (PCAOB) following press reports that newly-appointed Chairman William Webster is implicated in a fraud case involving past corporate ties.The press reports raise questions about the extent to which the facts of the case were disclosed and appropriate inquiries made. Mr.

IFAC Forms Panel to Restore Accountants' Credibility

The International Federation of Accountants (IFAC) announced the formation of a global task force to help rebuild public confidence in financial reporting. The task force is chaired by John Crow, former governor of the Bank of Canada.The task force's mission is to identify and analyze the causes of the recent loss of credibility in financial reporting and consider ways to restore credibility.

Born of Bitter Debate, PCAOB Gets a Rocky Start

All five members of the new Public Company Accounting Oversight Board (PCAOB) were named, despite a bitter debate at an open meeting of the U.S. Securities and Exchange Commission (SEC). At the core of the controversy were concerns that the new board would start off in a "deep hole," faced with a steep learning curve that would slow the pace of badly needed reforms. The new board will consist of: William H. Webster, chairman for a five-year term expiring in 2007.
Practice

California Law Beefs Up Disclosure Requirements

Ground-breaking new state legislation will soon require certain corporations doing business in California to disclose more information, including the names of their independent auditors. The information will be made available for public viewing by the end of 2004 through an online system.

GAO Reports on Financial Restatements And Reforms

The U.S. General Accounting Office released a 262-page report on "Financial Statement Restatements, Trends, Market Impacts, Regulatory Responses, and Remaining Challenges." The report contains the results of an 8-month study. The findings confirm the concerns addressed by the Sarbanes-Oxley Act and underscore the sense of urgency in filling the oversight board with reform-minded individuals.Key findings:The number of restatements due to accounting irregularities has grown significantly.

New Oversight Board Has no Operating Capital

Congress has failed to authorize funds for the new Public Corporate Accounting Oversight Board (PCAOB) created by the Sarbanes-Oxley Act of 2002. The Securities and Exchange Commission has been given the task of staffing the board no later than October 28, 2002, but as yet there is no budget for the new organization.The SEC expects to meet its October 28 deadline for appointing the five-person staff to the PCAOB, but there are no funds for the board.
Community News

PwC Named in $100 Million Lawsuit

Big Four firm PricewaterhouseCoopers and co-defendant investment firm UBS Warburg LLC are being sued for $100 million by three Dallas business people who claim the accounting firm and the investment firm failed to detect and inform potential investors of fraudulent activity at San Jose, California-based HPL Technologies, Inc. Plaintiffs allege PwC failed to detect fraudulent accounting when giving clean certifications of financial statements for HPL. The financial statements in question cover the three-year period leading up to HPL's July 2001 initial public offering.
Community News

Deloitte Sued For Inflating Financial Statements

A civil suit against Big Four firm Deloitte & Touche was filed on Tuesday in Pennsylvania state court by the Pennsylvania Insurance Department. The suit alleges that D&T helped Reliance Insurance Company defraud investors by inflating the company's financial statements by $1 billion, filing misleading reports, and deflecting "regulatory scrutiny." The suit also names Jan A.

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