AccountingWEB Weekly News Wrap-Up - Issue 135
1. Andersen May Spin Off Audit Practice
2. GAO Proposes Changes to Audit Standards
3. Enron Reopens Pandora's Box of Tax-Audit Conflicts
4. E&Y-Giuliani Program May Help Prevent Future Enrons
5. IRS to Review Employment Tax Compliance Programs
6. SEC to Host Roundtables on Accounting Reforms
7. Audit Committees Face Actions by SEC and Investors
8. PwC Sells its Tax Lobbying Unit
9. U.S. GAAP Under International Attack
10.IRS Computers May Land in Afghanistan
Reports this week of a radical proposal to spin off Andersen’s auditing arm from the rest of the company may foreshadow the way that accounting firms operate in the future. Will the "core" business be the element that is chopped off, or will the ancillary consulting services be the ones separated from the core? If the public is demanding a separation of consulting from auditing to preserve independence, is the accounting "profession" still just one profession? Or is it two? Or even three?
We are at a critical junction for this profession, and we encourage the leadership of the AICPA and other regulatory bodies to do the right thing. One AccountingWEB member offers "Ten Ideas the AICPA Can Use to Help the Profession." What are your views?
Michael Platt, CEO
Reports this week describe details of a plan at Big Five firm Andersen to spin off its auditing practice into a separate entity, beginning in the United States and spreading internationally. Andersen's audit practice would become a stand-alone firm, providing audit and related services. No information has been provided as to whether the firm would continue to use the name, Andersen.
The U.S. General Accounting Office has released for comment an exposure draft of the 2002 revision of the Government Auditing Standards. This exposure draft excludes the standard for independence, which is being revised separately.
Last month, as the post-Enron audit-reform talks escalated, Bernard Wolfman warned Harvey Pitt, chairman of the Securities and Exchange Commission, 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. "There are broad and pervasive issues that the SEC needs to deal with," explains Professor Wolfman.
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In an interview with CNN on February 27, former New York City Mayor Rudy Giuliani provided a glimpse into the services his newly-formed consulting firm is offering its corporate clients. Mr. Giuliani is chairman and CEO of Giuliani Partners, a strategic alliance with Ernst & Young. Among other products and services, his firm plans to make available a computer-driven program that may help prevent future Enrons.
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A General Accounting Office report, "IRS's Efforts to Improve Compliance with Employment Tax Requirements Should Be Evaluated," takes the Internal Revenue Service to task over the agency's follow through procedures for helping businesses pay their employment taxes in a timely fashion. The GAO is encouraging the IRS to evaluate its programs for notifying and educating employers.
On March 4, 2002, The Securities and Exchange Commission 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. Find out what will be included in the discussions and how you can participate.
Although the Securities and Exchange Commission has never in the past brought an enforcement action against an audit committee or a member of an audit committee, recent remarks by SEC commissioners and staff indicate this may change in the future. SEC Director of Enforcement Stephen Cutler said, "An audit committee or audit committee member can not insulate herself or himself from liability by burying his or her head in the sand. In every financial reporting matter we investigate, we will look at the audit committee."
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In the midst of a growing controversy over tax-audit conflicts, Big Five firm PricewaterhouseCoopers has 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.
U.S. GAAP is under attack on the world stage, and the case for acceptance of international accounting standards is gaining momentum. Will the U.S. lose its authority over how foreign firms file financial statements for the U.S. market? What's happening and why?
Last month, AccountingWEB reported on some inventory control issues at the IRS that led to congressional calls to halt the IRS budget until they are found. Now, the Bush administration is proposing to take 1,000 of the IRS's two-year-old laptops and desktop computers and ship them to Afghanistan to help the new government in its modernization efforts.
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. Cancellation of Debt and Inclusion in Income: A creditor of a closely held corporation includes a provision in her will canceling the debt the corporation owes her upon her death. An individual can exclude COD from income if received by bequest or gift, but is the same true for a corporation?
2. Firefighter's Meals: Can full time firefighters deduct meals while on 24 hour duty?
3. Accelerated Amortization of Master Lease Purchase: How is the $200,000 up-front cost of an 82-year lease amortized?