Auditing

AICPA Masses Troops to Fight Auditor Reform

The Associated Press is reporting that the American Institute of CPAs is building a lobbying campaign against Enron-related reform proposals being discussed in Washington and demanded by the private sector.According to AICPA spokesman Joel Allegretti, an e-mail was distributed to 3000 federal key persons - AICPA members who have contact and/or access to lawmakers - urging their assistance in convincing lawmakers to temper the response to requests for reforms.Former SEC Chairman Arthur Levitt, who was the AIC
Community News

Andersen Suffers Additional Losses: Baptist Foundation, Merck

Big Five firm Andersen has agreed to pay $217 million to settle litigation stemming from the bankruptcy of the Baptist Foundation of Arizona.

The Case for Halting the Auditors' Revolving Door

Law-makers and businesses are taking steps to halt the "revolving door" between auditors and their clients. Adding fuel to a legislative proposal introduced last week, Business Week released the results of its survey of chief financial officers ("The CFOs Weigh in on Reform," March 11, 2002). A majority, 58%, favor imposing a two- to five-year waiting period during which auditors may not accept senior positions with audit clients.

Law-Makers Draft Toughest Accounting Reform Bill Yet

Differences of opinion between House Democrats and Republicans have resulted in the introduction of a second bill in the House Financial Services Committee. Known as the Comprehensive Investor Protection Act (CIPA), this new proposal is the toughest accounting reform bill yet.

AICPA Issues Proposed Standard On Fraud Detection

On February 28, 2002, the American Institute of CPAs (AICPA) released a draft of a revised audit standard on Consideration of Fraud in a Financial Statement Audit. If adopted, this updated standard will replace the current standard with the same name, (Statement on Auditing Standards No. 82).
Community News

Andersen's Oversight Board Sets Reform Agenda

At the first meeting of Arthur Andersen's Independent Oversight Board on February 27, 2002, Chairman Paul Volcker announced the formation of an Advisory Panel and established an agenda of priority issues. Priority IssuesThe priority issues to receive prompt attention include quality control, so-called "revolving door" policies, and the firm's incentive plans.
Community News

Andersen Puts a New Offer on the Table

Trying to nail down a commitment that will cover liabilities stemming from its involvement in Enron's financial woes, Andersen has proffered a new settlement amount. The Big Five firm is offering $750 million to cover all Enron-related lawsuits including a federal class action suit filed by investors, a lawsuit on behalf of Enron 401(k) retirees, and any enforcement action stemming from the Securities and Exchange Commission (SEC).

GAO Proposes Changes to Audit Standards

The U.S. General Accounting Office has released for comment an exposure draft of the 2002 revision of the Government Auditing Standards (GAGAS). This exposure draft excludes the standard for independence which is being revised separately. The proposed audit standards, which are known as the "yellow book," are organized into three sections: financial audits, attestation engagements and performance audits.
Community News

Andersen May Spin Off Audit Practice

AccountingWEB first reported rumors of a spin off of the consulting arm from Big Five firm Andersen, in the wake of Enron and in anticipation of further audit-consulting separation requirements to come from regulators and the profession.
Tax

PwC Sells Its Tax Lobbying Unit

In the midst of a growing controversy over tax-audit conflicts, PricewaterhouseCoopers (PwC) sold its federal tax lobbying group to Clark/Bardes, a NASDAQ company that plans to list on the New York Stock Exchange next month. PwC was believed to be the largest tax lobbying firm in the year 2000, when it earned approximately $9.5 million for tax lobbying. The tax lobbying group is led by Ken Kies, former Chief of Staff to the Joint Committee on Taxation of the U.S. Congress. One of Washington's best known and most outspoken tax lobbyists, Mr.

SEC To Host Roundtables on Accounting Reforms

On March 4, 2002, The Securities and Exchange Commission (SEC) will host a roundtable discussion in New York City to examine proposals for improvements in financial disclosure and auditor oversight. A similar roundtable will be held in Washington DC on March 6, 2002. The morning session (10:00 a.m. to noon) of each roundtable will focus on financial disclosure.

Europe Attacks GAAP, Bars Auditors' Legal Services

Europe’s highest court recently backed a Dutch ban on bundling auditing with legal services, thereby dampening the hopes of U.S. accounting firms who seek to provide legal services as part of "one-stop shopping" for clients. Separately, the head of the European Commission spoke out against U.S. accounting principles and said he will ask the Securities and Exchange Commission (SEC) to recognize International Accounting Standards (IAS) as an alternative to U.S.
Tax

Enron Reopens Pandora's Box of Tax-Audit Conflicts

Last month, as the post-Enron audit-reform talks escalated, Bernard Wolfman warned Harvey Pitt, chairman of the Securities and Exchange Commission (SEC), that a Pandora's box of potential conflicts of interest can arise when an accounting firm provides tax products or advice to an audit client. Bernard Wolfman is the Fessenden Professor of Law at Harvard Law School and one of the nation’s foremost experts on legal ethics in tax practice.
Community News

E&Y Subpoenaed in SEC Investigation Into PNC

The Securities and Exchange Commission (SEC) has expanded its investigation into the troubled PNC Financial Services Group and has sent subpoenas to the company's auditor, Big Five firm Ernst & Young.PNC, a Pittsburgh-based financial services group, is under investigation for possible transactions intended to remove bad loans from the company's books.

Disney To Split Audit and Consulting Firms, Despite Shareholder OK

In a landmark vote that was ordered by the Securities and Exchange Commission, Disney shareholders voted to reject the proposal that would have prohibited the company from using the same firm to provide auditing and consulting services.Shareholders voted 648.4 million against the proposal to 473.1 million for the proposal.
Practice Management

Financial Executives Review Audit Policies and Ethics

Phil Livingston, the president and CEO of Financial Executives International (FEI) said in the latest issue of the association’s e-newsletter, FEI Express, the FEI has been hearing from its members about the changes in corporate policies that companies are making to improve auditor independence. He encouraged companies to issue press releases indicating the changes they’ve made. He also asked for input on the FEI’s code of ethics.

Meet eSAC, IIA's New Model for Technology Audits

At Fidelity Investments, the internal auditors use a heat map to discuss concerns and issues related to information technology (IT). The heat map communicates priorities and potential consequences though a range of colors from gray or white (cool) through blue and green to yellow (caution)and orange or red (hot).

AICPA Readies Proposed Standard on Fraud Detection

In Congressional testimony on February 14, 2002, James G. Castellano, the chairman of the American Institute of CPAs (AICPA) said the Institute plans to release a draft of a new standard by the end of February. The objective of the new standard is to help auditors detect new types of management fraud. AICPA views the standard as mission-critical to the financial reporting world of the future -- a world in which companies make real-time disclosures over the Internet, and auditors provide contemporaneous assurance the information is reliable. Mr.

Legislators Unveil Corporate and Auditing Accountability Act

On February 13, 2002, law-makers introduced legislation to restore investor confidence in the accounting profession and capital markets in response to the Enron collapse.Known as the Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002 (CARTA), the proposed legislation would:Prohibit audit firms from offering certain types of consulting services.Create a public oversight board and Public Regulatory Organizations (PROs) to certify any auditor wishing
Education & Careers

Enron Trickles Into Accounting Classrooms

College accounting professors are returning to the podium this semester with a new topic: Accounting practices and Ethics in light of the Enron situation. "Suddenly accounting professors are aware that accounting is no longer accurate and reliable," said Michael Granof, professor of accounting at the University of Texas at Austin.Even before all the facts are known, accounting students are finding Enron is in use as a case study in the classroom.

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