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SEC Fines EY, More Auditor Independence Cases to Come

The U.S. Securities and Exchange Commission (SEC) fined an overseas office of Ernst & Young (EY) $400,000 for lack of independence in the audits of Baan Company, N.V., a business software company headquartered in the Netherlands. An SEC official indicated that other auditor independence cases might soon follow.The SEC charges that joint business relationships between Baan and EY's overseas office resulted in an impairment of auditor independence.

SEC Sticks to Auditor Oversight Plan Despite Public Outcry

In an open meeting on June 20, 2002, the Securities and Exchange Commission (SEC) voted to expose for public comment its proposal for a private-sector body to oversee audits of public companies. The proposal met with a public outcry after details were provided to the media. Much of the meeting was devoted to defending the plan against those who don't see it as much of an improvement.
Community News

AICPA Will Monitor Remaining Andersen Audits

In light of Andersen's obstruction of justice conviction last week, the American Institute of Certified Public Accountants (AICPA) has accepted Andersen's resignation from the organization's Securities and Exchange Commission practice section (SECPS) effective August 31. In addition, the AICPA will closely monitor all remaining audits of public companies through August 31.

PwC Chief Recommends Adoption of Global Accounting Standards

PricewaterhouseCoopers's chief executive, Samuel DiPiazza, has gone public with his recommendation for a global principles-based set of accounting rules that would replace the current Generally Accepted Accounting Principles (GAAP) in use in the U.S.In a speech before the National Press Club this week, Mr.

GAO Releases Report on The Accounting Profession

On June 19, 2002, the General Accounting Office (GAO) released to the public its "Report on the Accounting Profession." The document was prepared at the request of Representative John Dingell, the ranking minority member of the House Energy Committee. He asked for a report during post-Enron Congressional hearings. The purpose of the GAO's report was to determine the status of recommendations made in 2000 by the Panel on Audit Effectiveness. The panel was appointed by the Public Oversight Board in 1998 in response to a request from the Securities and Exchange Commission (SEC).

Senate Panel Approves Bill to Tighten Audit Standards

On June 18, 2002, the Senate Banking Committee voted 17-4 to approve a bill to tighten oversight of the audits of publicly-held companies. The approval came despite a strong lobbying effort by the American Institute of CPAs (AICPA) and some of the larger accounting firms who opposed the measure. The approved bill incorporated several last-minute compromises. Full details are not yet available on the Web.

Adelphia Misses Payment Date, Hires New Auditor

Cable operator Adelphia Communications Corp. has missed a $51.25 million interest payment, a move which may bring the company one step closer to a bankruptcy filing. "It's highly unlikely they can avoid bankruptcy at this point," said Sean Egan, managing director of Egan-Jones Ratings, a Philadelphia-based investment ratings company.

SEC Poised to Release Proposal on Oversight Board

On the eve on the mark-up of the Senate accounting reform bill, the Securities and Exchange Commission (SEC) announced it, too, will take up the issue of oversight of the auditing profession this week. The SEC has scheduled an open meeting on Thursday, June 20, 2002 to consider the issues. It plans to vote at that time on the release of proposed rules that would create the framework for a new private-sector regulatory scheme.
Community News

Andersen Found Guilty

Big Five Firm Arthur Andersen, LLP has been found guilty of obstruction of justice in the U.S. District Court in Houston. The charge stems from Andersen's destruction of thousands of documents and e-mail messages relating to work performed for the now bankrupt energy giant, Enron. The court found that Andersen illegally destroyed the documents with the intent of thwarting an investigation by the U.S. Securities and Exchange Commission.
Community News

Andersen to Cease Auditing Publicly-Held Companies

After 89 years of doing business, Big Five firm Arthur Andersen LLP has informed the Securities and Exchange Commission (SEC) that it will cease practicing before the Commission by August 31, 2002. Andersen was found guilty of the federal crime of obstruction of justice in the U.S. District Court in Houston on Saturday, June 15. An SEC rule prevents any firm convicted of a felony from signing off on financial statements of companies that are registered with the SEC.
Community News

Andersen to Appeal Unusual Trial And Jury Verdict

Arthur Andersen announced it will appeal the decision in its obstruction-of-justice case. Andersen's attorneys said the jury's thinking was unusually narrow, and the decision could affect scores of other firms and clients. In reaching their decision, the jurors excused the wider issue involving shredding of documents and ignored the guilty plea of former Enron audit partner David Duncan. Instead, the jury found the firm guilty because Mr.

Senate Reform Bill Slated For Mark-up June 18, 2002

Senator Paul Sarbanes has announced that the Senate Banking Committee will meet on June 18, 2002 to mark up the "Public Company Accounting Reform and Investor Protection Act of 2002." The American Institute of CPAs (AICPA) called this bill a "de facto government takeover of the accounting profession." The AICPA and some of the large accounting firms have been working through Sen.
Community News

Adelphia Communications Fires Deloitte, Restates Earnings

Adelphia Communications Corp., the nation's sixth-largest cable television company, has announced it has fired its auditor, Big Five firm Deloitte & Touche, in the midst of a firestorm of publicity surrounding a necessary restatement of earnings for 2000 and 2001. The firm has said it plans to hire a new accounting firm, but no firm has yet been named.Adelphia is currently under investigation by the Securities and Exchange Commission (SEC) as well as two federal grand juries since disclosing deals involving off-the-books loans to the family of company founder, John J.

Auditing Standards Board Issues SAS95, Critics Want More

Like accounting standards, auditing standards have "grown like topsy" over the past few decades. To help practitioners come to grips with this expanding and increasingly complex body of literature, the Auditing Standards Board (ASB) of the American Institute of CPAs (AICPA) recently crafted a layered-approach to understanding generally accepted auditing standards (GAAS). But critics still aren't satisfied - some say the limits of GAAS are as hard to understand as the layers.
Community News

Jury is Deadlocked in Andersen Trial

Five weeks of trial and seven days of jury deliberations have finally come down to a deadlocked jury in the Department of Justice v. Arthur Andersen LLP obstruction of justice trial in Houston. Late Wednesday afternoon the 9-man, 3-woman jury sent a note to U.S. District Judge Melinda Harmon that read: "We are not able to reach a unanimous decision."Judge Harmon refused to accept the jury's statement as a final decision and instead instructed the jury to return to their hotel rooms where they have been sequestered for over a month and resume deliberations on Thursday, June 13.
Community News

Andersen Jury Continues to Deliberate

Four days of deliberations have yet to produce a verdict in the U.S. Department of Justice v. Arthur Andersen LLP obstruction of justice trial that ended in Houston last week. The jury continued deliberations through the weekend, with no verdict as of Sunday night.On Friday, jurors were granted permission to rehear the testimony of former Andersen partner, David Duncan, who testified for the prosecution. Portions of Mr. Duncan's testimony were read to the jury after attorneys from both sides reached agreement about what was to be read. Mr.

A Tale of Two Cities: AccountingWEB Andersen/Enron Survey Results

AccountingWEB, in conjunction with Sommella Market Strategies recently surveyed over 300 accounting professionals through an AccountingWEB Survey entitled, "The Impact of Enron: How Far Will It Go?" The survey, conducted during April/May 2002, was designed to determine attitudes towards the profession and reforms, uncover activities of CPA firms in the after effects of the Enron affair, and better understand how the changes will impact firm management and marketing efforts in the future. I.
Community News

Two Firms Await Results of Document-Destruction Cases

The destruction of documents related to the Enron audit has received the lion's share of media attention. But Andersen is not the only major accounting firm awaiting a decision in a case alleging improper document destruction. It is joined by middle-market specialist Grant Thornton. On May 31 2002, just a few days before the Houston jury was handed the Andersen obstruction-of-justice case, Special Master Juliet A.
Community News

Andersen Trial Closes With Yet More Twists and Turns

Even in a trial of twists and turns, the closing arguments in the Andersen obstruction-of-justice trial were something of a surprise.

Ex-Andersen CEO Speaks Out on Audit Fees, Reforms

On June 4, 2002, as defense attorneys called their final witness in the Andersen trial, former Andersen Chief Executive Officer (CEO) Joseph Berandino spoke out at the Commonwealth Club in Palo Alto on why auditors should not bear the whole burden of disasters such as the Enron debacle.In his first public appearance since his resignation in March, Mr. Berardino said he was "amazed" at the low auditing fees former Andersen clients have negotiated with their new auditors.


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