Auditing

Study Shows Consulting Does Affect Auditor Independence

Academics have found that the provision of consulting services to audit clients can have a serious effect on a firm's perceived independence.And the new SEC rules designed to counter audit independence violations could increase the pressure to provide non-audit services to clients to an increasingly competitive market.The study (pdf format), by the Stanford Graduate School of Business, showed that forecast earnings were more likely to be exceeded when the auditor was paid more for its c

Coopers Partner Charged With Fraud

A partner and two managers from Coopers & Lybrand, LLP (now, PricewaterhouseCoopers, LLP) have been charged with fraud by the Securities & Exchange Commission for their role in the audit of Allegheny Health, Education and Research Foundation (AHERF).William Buettner, Mark Kirstein, and Amy Frazier are alleged to have masked the deteriorating financial condition of AHERF by helping plan fraudulent transfers of reserves and then hiding this in the company's 1997 audit.The defendants issued an unqualified opin

Canadian Judge Upholds CAs Monopoly on Audits

NEWS RELEASEIn a decision handed down on July 25, 2001, Superior Court Judge Pierre J. Dalphond ruled that Section 24 of the Chartered Accountants Act does not violate the rights and freedoms guaranteed under the Canadian Charter of Human Rights and Freedoms and the Québec Charter of Human Rights and Freedoms.

Proposed Amendments to FAS 67

The Financial Accounting Standards Board (FASB) has proposed to amend Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to exclude from its scope the accounting for acquisition, development, and construction costs of real estate developed and used by an entity for subsequent rental activities.

AICPA Releases Statement on Auditing Standards

The American Institute of Certified Public Accountants (AICPA) has released an exposure draft on auditing standards that is significantly more detailed that the current SAS No. 41. The new statement, if approved, will replace SAS No. 41.The AICPA is soliciting public comments on the exposure draft now through August 27.

SEC Calls Andersen Case 'Smoking Gun'

In a speech this week to the Center For Professional Education, Inc., acting SEC chairman, Laura Unger voiced renewed concern over auditor independence issues, citing the recent Andersen/Waste Management fracas as a prime example of abuse."This is one very significant case that we can point to," said Ms.

New Audit Publications Provide Guidance

The International Federation of Accountants (IFAC) has released three documents that will provide guidance, clarification, and planning assistance for auditors.
Community News

E&Y Terminates Audit Relationship Before Being Fired

Big Five firm Ernst & Young participated in a Keystone Cops-type audit escapade with its client, Health Risk Management, Inc., before quitting the engagement abruptly, and apparently, just before being relieved of its duties.
A&A

Fraud Tales - The Case of the Shrinking Margins

When Timothy P. Anglim, CPA, CMA, founder of the Fraud Detectives, accepted an assignment as CFO for a struggling family-owned manufacturer in the early 90's, he expected to find a company that was in need of financial and operational discipline, given its known recent track record of operating deficits. And initially, the assignment focused on upgrading manual financial systems and consolidating several operating entities into one, to improve reporting visibility. Cash flow was negative.
Community News

PwC to Pay $55 Million in Class Action Suit

Big Five firm PricewaterhouseCoopers has been embroiled in a lawsuit with MicroStrategy Inc.
Community News

Cost-of-Quality Auditing For Your Firm

Have you ever wondered how much it is costing your firm when work is not done correctly the first time and has to be redone? Cost-of-quality auditing, or more specifically, cost-of-poor-quality auditing, answers this question.
Community News

Preventing Embezzlement -- Back to Basics

This article provided by Tim Anglim, CPA, CMA of the
Tax

CA Residents are Prime Targets for IRS Audits

For six years, Californians have been the most favored recipients of IRS audits, according to IRS statistics. Although audit rates have dropped nationwide over the last few years, California residents have not experienced the slow down.
Tax

The Streamlined Sales Tax System Project

The Streamlined Sales Tax Project is an effort created by state governments, with input from local governments and the private sector, to simplify and modernize sales and use tax collection and administration. The Project’s proposals will incorporate uniform definitions within tax bases, simplified audit and administrative procedures, and emerging technologies to substantially reduce the burdens of tax collection.

SEC: Bloodthirsty or Just Doing its Job?

At the core of a massive plan to scrutinize up to one fourth of the nation's public companies is a continuation of the SEC's role as financial watchdog.

The Impact of The Revised U.S. Accounting Standards

In a recent study, "No Accounting For... Goodwill," Merrill Lynch analysts identified some significant benefits of the proposed FASB changes to accounting standards. These benefits included an acceleration in merger and acquisition activity and a decline in price-to-earnings ratios (P/Es) for most industries.

Audit Independence 'a Function of Auditor Size,' say Researchers

Academics have found that larger audit firms are less likely to compromise their independence than smaller ones when providing non-audit services to their clients.And when the provision of non-audit services - and consequently the fee - is relatively high, these smaller firms find it hard to resist aggressive accounting by their clients.The Lancaster University study into non-audit services, auditor independence and earnings management found that the latter's proximity to analyst's forecasts varies according to the size of the fee for Big Five and non-Big Five firms.Pelham Gore, Peter
Community News

Arthur Andersen: New Woes in Arizona

As if a series of pending lawsuits regarding a controversial audit of the Baptist Foundation of Arizona weren't enough to keep the sunbelt accountants busy, now it seems the Big Five firm of Arthur Andersen has been the subject of yet another investigation.Andersen's 1994 audit of home builder UDC Homes, Inc. produced a clean bill of health for the company's financial statements.

SEC Orders KPMG to Cease and Desist

The Securities and Exchange Commission has issued a cease and desist order against KPMG, claiming the Big Five accounting firm had failed to apply rules of independence in its audit of Porta Systems, a Long Island company.At the time of the controversial audit, Porta Systems was being run by KPMG Baymark, a company affiliated with KPMG that specialized in corporate turnarounds. A portion of KPMG's fee was to be based on the profits of the company.
Community News

KPMG Faces Class Action Suit

Shareholders from Lernout & Hausie are to launch a class action suit against auditors from KPMG, according to a report in the Financial Times.The suit will claim that the auditors should have been aware of problems with the speech recognition software group's accounts.L&H filed for bankruptcy in November after restating results for 1998, 1999 and the first half of 2000.

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