AccountingWEB Weekly News Wrap-Up - Issue 129
1. SEC Proposes End to Self-Regulation of the Accounting Profession
2. Andersen Dismisses Lead Auditor on Enron Job
3. First Pro Forma Case: SEC Faults 'Positive Spin'
4. Andersen Raised Concerns About Enron a Year Ago
5. Grant Thornton Case: Another Evidence Destruction Debacle?
6. IRS Overwhelmed by Customer Calls
7. Hollywood, The Beatles, the Super Bowl...and H&R Block?
8. SEC Censures KPMG, Orders Tighter Independence Controls
9. Senate Bill Would Restrict Investments in Company Stock
10.Change on Tax Form Lets Friends, Family Talk to IRS
The accounting profession has been a good and noble one for many, many years, yet in the last couple of weeks it has taken several very high profile punches. The reputation is a bit tarnished today, meaning the profession will face an even steeper uphill climb to attract the best and the brightest students into it. I would encourage all AccountingWEB members to help in the public relations effort by contacting your state CPA society and asking what you can do to assist in any student outreach programs that may be in place. Get involved. Let students in your community hear about your experiences, and let your passion for the profession come through now to those who need to hear it the most.
State society contacts can be found by following this link:
Michael Platt, CEO
Securities and Exchange Commission Chairman Harvey L. Pitt announced Thursday a plan to design new rules that could help protect investors from unexpected company failures. Part of this process includes development of a new regulatory body, independent of the accounting profession, focusing on two primary components - discipline and quality control. The AICPA, which has been responsible for discipline, would not have a role under the new plan.
Big Five firm Andersen has fired the partner who headed the Enron audit after learning the partner ordered the "rushed disposal" of documents relating to the audit. Meanwhile, a seven-page letter sent from an Enron vice president to Enron Chairman Kenneth Lay months before Enron's problems were made public includes the prophetic remark, "I am incredibly nervous that we will implode in a wave of accounting scandals."
Trump Hotels & Casino Resorts has the dubious distinction of being the target of the Securities and Exchange Commission's first enforcement case on pro forma earnings. The SEC said Trump's third-quarter 1999 earnings release cited pro forma figures to tout the company's purportedly positive results of operations but failed to disclose that those results were primarily attributable to an unusual one-time gain rather than to operations.
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The Washington Post has reported that an internal Andersen e-mail message prompted top management to consider dropping Enron as a client as early as February 2001 because of concerns about bookkeeping irregularities. Andersen insists that the conversation last February was "routine" and "consistent with our client engagement assessment policies."
In a $2.1 billion action against accounting firm Grant Thornton, a Baltimore Circuit Court is investigating a possible violation involving the withholding and willful destruction of audit records in a manner likened to the contemporary but more-publicized Enron case. A court action also alleges that a former director of risk management and senior partner of the firm, "willfully, knowingly and intentionally destroyed (client) documents with the full understanding that litigation was imminent."
Callers trying to reach the IRS to apply for an Employer Identification Number have been met with busy signals and recorded messages at the federal agency. Similarly, taxpayers attempting to fax Subchapter S elections in order to meet their impending deadline have not been able to get through to the IRS. What's happening with the IRS telephone and fax service? Too many calls taxing the system?
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On Sunday February 3, H&R Block will enter the elite ranks of American businesses that have selected the Super Bowl as the venue of choice to kick their advertising campaign into high gear. Block's first-ever Super Bowl foray, directed by Hollywood's Coen brothers, is the company's biggest advertising production ever.
Adding to the accounting profession's mounting credibility problems, the Securities and Exchange Commission has censured Big Five firm KPMG for purporting to serve as an independent accounting firm for a client while it held substantial investments in the client. As part of this enforcement action, the SEC has ordered KPMG to improve its system of controls over investments in audit clients.
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Democratic Senators have introduced a bill that would protect workers from complete financial devastation in situations like the Enron collapse, where a company goes under without warning. The Pension Protection and Diversification Act of 2001, would protect workers by ensuring that individual retirement account plans limit the amount of employer stock each worker may hold and encourage diversification of investment of plan assets.
This year, the IRS is providing taxpayers with the opportunity to designate any individual, not just a tax preparer, to discuss their tax return with the IRS. There is now a line labeled "Third Party Designee" that appears right above the signature area of the individual tax return. The new line includes an area where the taxpayer can enter the name of a designated person, the person's telephone number, and a personal identification number.
Visit our Q&A Forum to post your questions and share your ideas with the members of AccountingWEB! Simply click on the "Add Comments" option at the bottom of any question to add your response and comments.
Here is a sample of the questions that have been posted this week. Check out all the questions at our Q&A Forum and see if you can lend a hand.
1. Cost of Online Shop and Database - If you have an online shop and incurred costs to create a shopping cart and a database, can you treat these costs as an asset and amortize them?
2. Practice Structure - Principals to Workers: What structure do most firms find appropriate? I'd be interested in hearing about others' experiences. Or does it all relate to the amount of turnover generated by your business?
3. Rent to Own - Can someone help with the accounting of a rent to own business?
4. Cash Distributions from S Corporation - I heard that a couple of months ago a ruling came down indicating that all distributions to S Corporation shareholder-employees are now subject to social security and Medicare taxes. Is there any truth to this rumor?
5. Online Research Site - Does anyone have information on a good online accounting research site that will have FASB and GASB research material as well as EITF's?
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.