AccountingWEB Weekly News Wrap-Up - Issue 130
1. States May Revoke Andersen's License to Practice
2. IRS to Simplify Accounting for Intangibles
3. Public Oversight Board Agrees to Close its Doors
4. Andersen's Duncan Won't Testify; Enron's Lay Resigns
5. New IRS Practitioner Hotline Available
6. Bush Appoints Two SEC Commissioners, Calls for Reforms
7. Only Three More Paper & Pencil CPA Exams Remain
8. E&Y and the Battle of Bull Run
9. Plante & Moran Scores Big on Fortune's "Best Companies" List
10.IRS Announces Plans for Random Audits in 2002
After years of nightly television glamorizing the professions with shows like "LA Law" and "ER," Americans got a chance this week to rush home from work, turn on their televisions, and finally watch the accounting profession have its turn in the spotlight. Unfortunately the setting was a Congressional committee, and regrettably the first words uttered from David Duncan, ex-Andersen partner and the first real prime time accountant on television, were "on the advice of my counsel I respectfully decline to answer the question based on the protection afforded to me under the Constitution of the United States."
What's next? The SEC reacted to the scandal last week by announcing that professional regulation would be taken out of the hands of the profession. The Public Oversight Board responded by declaring itself out of business. Andersen CEO Joseph Berardino reacted to the fallout by going on "Meet the Press" and recasting the whole problem as "a bad business model." And at least two state licensing authorities responded to Andersen's mishandling of documents by exploring whether to revoke the firm's license to practice. And this is just the beginning...
Connecticut and New York CPA licensing authorities are looking into the possibility of revoking Big Five firm Andersen's right to practice in their respective states in light of the firm's admitted mishandling of documents in the Enron affair. Regulators are attempting to determine if Andersen broke laws in their states.
Tax practitioners are cheering the IRS plans to simplify the tax rules of IRC section 263(a) that apply to capitalization of intangibles. In an advance notice of proposed rulemaking released on January 17, the IRS announced its intent to propose new rules that would provide descriptions of the specific types of expenditures that must be capitalized, along with broad-based rules for exceptions.
In a surprise response to last week’s SEC announcement, the Public Oversight Board, the independent body that oversees the self-regulatory function for auditors of companies registered with the Securities & Exchange Commission, passed a resolution stating its intent to close its doors no later than March 31, 2002.
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Fired Andersen partner David Duncan, the lead auditor on the Enron engagement, has invoked the Fifth Amendment and refused to testify because he has not been given immunity. Kenneth Lay, chairman and chief executive officer of the battered Enron Corp. has announced his resignation from the company. And the Citizens for Tax Justice, a watchdog group, has released information from Enron's income tax returns from the past five years showing that, although Enron was profitable in all of the past five years, the company received a net tax rebate of $381 million for those five years, including $278 million in 2000.
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The IRS has launched a new service especially for tax practitioners - a nationwide telephone hotline that will take the place of local practitioner hotline services that have been available in the past. IRS personnel who are specially trained to handle practitioners' account related questions will staff the new toll-free service.
President Bush has appointed two SEC Commissioners - Cynthia Glassman, a Republican and principal at Ernst & Young, and Isaac C. Hunt Jr., a Democrat who was appointed to the SEC by former President Clinton in 1996 and whose term recently expired. Some see the fast-track appointments as an indication of the government’s commitment to creating and enforcing financial disclosure reform.
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Beginning November 2003, CPA candidates will go to Prometric Computer Testing Centers (formerly Sylvan) and take computer-administered tests. Find out why at least one insider believes all candidates should plan to finish the CPA exam prior to the changeover.
Big Five firm Ernst & Young has been hit with a lawsuit by Bull Run Corp., a company that provides, among other things, marketing and event management services to universities, athletic conferences, associations, and corporations. The lawsuit alleges that E&Y failed to discover material errors in its audit of a company that Bull Run acquired in late 1999.
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Leading the small group of CPA firms that made the latest annual Fortune 100 "Best Companies to Work For" list is Michigan-based Plante & Moran, once again breaking into the top ten on the prestigious list. Only two other accounting firms made the list this year. The list captures the top workplaces in the country for 2001 that have been in business for at least seven years and that have at least 500 employees.
The IRS has developed a new program, the National Research Program, which is designed to gather current information on the nation's taxpayers for purposes of judging the level of taxpayer compliance. The program, which will begin in 2002, will include random audits of approximately 50,000 taxpayers. The audits will be broken down into groups with four degrees of invasiveness.
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. Day Traders: Can a person amend a tax return to elect day trader status?
2. Owner Bank Statement Review Checklist: Does anyone have a checklist for use by a business owner to review bank statements prior to giving to bookkeeper?
3. Lease Accounting: Help is needed to determine the journal entries necessary to record certain lease transactions.
4. TAASC Force Income Tax Support: Does anyone know where one can obtain technical support on this program? Intuit has discontinued support.
5. Form 1096 Printing: Does Form 1096 still need to be printed on "red" machine-readable paper or can it be laser printed for tax year 2001?
A big THANK YOU to the many people who responded to Jen Hill’s request last week for ideas on how to study for the CPA exam. AccountingWEB readers were generous with their insight and advice. See their responses.