SEC

Community News

KPMG Prepares For SEC Charges Over Xerox Audit

In preparation for charges expected to be filed by the U.S. Securities and Exchange Commission, accounting firm KPMG released a statement to the media explaining the facts about its audits of Xerox Corporation. Last April, the SEC charged Xerox with use of fraudulent accounting tactics designed to accelerate the recognition of revenue, resulting in a $6.4 billion restatement that is believed to be one of the largest in history. The SEC blames KPMG for approving these tactics.
Community News

Investigation Shows SEC Prone to Avoiding Big Four Action

An investigation by The Washington Post has revealed that despite the fact that the Big Four audit the majority of publicly traded companies, the SEC is much more likely to discipline auditors from smaller firms, rather than individuals from the Big Four.SEC insiders indicate that the large firms remain "difficult targets" for the SEC.

Scandal Sheet Keeps Track of Corporate Accounting Blunders

Forbes online has created a Corporate Scandal Sheet to help all of us keep track of major corporate accounting scandals. The scandal sheet, which Forbes promises to update often, includes a summary of each accounting scandal, organized alphabetically by company.
Tax

Concerns Mount Over Proposed Curbs on Tax Services

Concerns are mounting among both accounting firms and consumer groups over the rules proposed by the Securities and Exchange Commission to limit the tax services provided by auditors. SEC's proposed rules represent a cautious compromise, saying auditors can still provide tax services so long as the services are pre-approved by audit committees and don't involve the firm acting as an advocate for the client or auditing its own work. Apparently, this is a compromise that no one likes.

SEC Finalizes Reg G on Non-GAAP Financial Measures

The Securities and Exchange Commission voted on January 15, 2003 to adopt Regulation G.
Practice Management

SEC Expands Definition of 'Financial Expert'

Accountants and retired audit partners looking for seats on boards of directors may be disappointed to hear the Securities and Exchange Commission has expanded its proposed definition of "financial expert." This definition has proven to be one the most controversial aspects of the Sarbanes-Oxley Act.Under the Sarbanes-Oxley Act, companies are required to disclose whether or not they have a "financial expert" on the audit committee of their board of directors.

AICPA Responds to SEC's Proposed Independence Rules

The AICPA has submitted a 60-page comment letter to the Securities and Exchange Commission in response to the auditor independence rules that the SEC proposed in November, 2002.Highlights of comments on key provisions include:Audit Partner Rotation: The AICPA supports audit partner rotation but has requested an exemption for smaller firms because of the undue hardship it would bring in trying to comply.Conflicts of Interest Resulting from Employment Relationships: The AICPA believes that there are safeguards already in place to pr

Niemeier Named Acting Head of Accounting Oversight Board

The Public Company Accounting Oversight Board (PCAOB) held its first official meeting on Thursday with Charles Niemeier at the helm as the acting chairman. Mr. Niemeier, already one of the members of the board, will continue in the position of acting head until a permanent chairman is selected. He is the former chief accountant for the Securities and Exchange Commission's enforcement division.The new board agreed on salaries for board members at its Thursday meeting - $452,000 per year for board members and $556,000 per year for the chairman.

SEC Proposes New Audit Committee Requirements

The U.S. Securities and Exchange Commission voted on January 8th to publish for comment new proposals that would set the rules for oversight of auditors by audit committees -- and it agreed to put real teeth into the new rules. Any U.S. public company that doesn't follow the rules will be delisted. Limited exceptions were agreed upon for non-U.S. companies.

GAO Says SEC Could Take a Lesson From FASB

The General Accounting Office (GAO) has released a report on "Actions Needed to Improve Public Company Accounting Oversight Board Selection Process." At the top of list are improved communications and other lessons that can be learned from the Financial Accounting Standards Board (FASB).

AICPA Asks SEC to Clarify Pro Formas Are Unaudited

In its comment letter on the Securities and Exchange Commission's proposed Regulation G, the American Institute of CPAs (AICPA) asked for clarification of the auditor's role with respect to pro forma data and reconciliations."We believe," reads the letter signed by AICPA Chair William Ezzell and AICPA CEO Barry Melancon, "that many investors and readers of pro forma data are under the impression that the auditor is associated with such pro forma data and has, in some way, approved the pro forma adjustment

SEC's Cutler Warns Firms of Tougher Penalties

Stephen Cutler, Director of the Enforcement Division of the Securities and Exchange Commission (SEC), warned accounting firms of tougher penalties ahead for audit failures. He also provided practical advice on how to avoid the penalties.Speaking at an AICPA conference on December 12, Mr. Cutler said, "It's time to adopt a new enforcement model," under which the SEC would start bringing enforcement actions for audit misconduct against entire firms, in addition to individual auditors.

GAO Report Expected to Clear SEC's Harvey Pitt

The U.S. General Accounting Office (GAO) is expected to release a report next week on the events leading up to the appointment - and subsequent resignation - of William Webster as Chairman of the Public Company Accounting Oversight Board. The report is expected to clear outgoing SEC Chairman Harvey Pitt of most responsibility for the incident. Chairman Pitt resigned on Election Day after being widely blamed for forcing the other SEC Commissioners to vote on Mr. Webster's candidacy without knowing vital information about his background.
Community News

Bush Nominates William Donaldson to Chair SEC

President Bush nominated William Donaldson, a senior Wall Street investment banker, to be the new chairman of the U.S. Securities and Exchange Commission.Mr. Donaldson heads his own firm, Donaldson Enterprises, based in New York. He previously co-founded the investment banking firm Donaldson Lufkin & Jenrette and served as its chairman and chief executive. Earlier in his career, Mr.

SEC to Host Roundtables on Global Impact of Rule Proposals

The U.S. Securities and Exchange Commission will host two interactive roundtable meetings to discuss the international impact of proposed rules on auditor independence and attorney conduct.Both meetings will be held on Tuesday, December 17th and will be webcast from the SEC's headquarters in Washington DC. The auditor independence session will start at 9 am, while the session on attorney conduct will start at 2 pm.

President to Nominate New SEC Chief in Two Weeks

The Wall Street Journal has reported that the Bush administration has begun background checks on its choices to replace Harvey Pitt as Chairman of the Securities and Exchange Commission. The President is expected to name the nominee within two weeks. The incoming chairman will still need to be confirmed by the Senate.Names of those rumored to be on the short list now include: Stephen Hammerman, deputy commissioner of legal matters at the New York Police Department and former vice chairman and general counsel at Merrill Lynch & Co.T.
Tax

SEC's Independence Plan Closes Door, Opens Window

The U.S. Securities and Exchange Commission (SEC) has exposed for comment a lengthy and innovative auditor independence proposal. This proposal will result in lower revenues for some firms because it closes the door on some tax services. But it also opens a window in the sense that other provisions could open up new opportunities that bring in more revenues.
Community News

WorldCom Reaches Settlement: 'Accounting 101' Trainers Needed

WorldCom, in the midst of the largest fraud case in U.S. history, has reached a partial settlement with the SEC that will allow it to sidestep any fines or penalties for the time being. The partial settlement includes a permanent injunction barring any other securities violations, and government oversight of the telecommunications giant.
Practice

SEC Settles First Cases Involving Fair Disclosure

The U.S. Securities and Exchange Commission announced the results of three test cases involving illegal selective disclosures of material information to analysts or institutional investors. Under Regulation Fair Disclosure (Reg FD), which took effect two years ago, companies are required to release information to the public at the same time they provide it to securities professionals.Highlights of the three test cases and their resolution:Siebel Systems paid a $250,000 fine.

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.

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