AccountingWEB Weekly News Wrap-Up - Issue 142
1. Andersen Will Not Plead Guilty - Firm Heads for Trial
2. Small Corporations Say Good-bye to Schedules L and M
3. Andersen U.S. Audit Practice May Splinter Into Pieces
4. Big Five Merger Will Create Canada's Largest Accountancy
5. IRS, States Begin Crackdown on Partners' Tax Returns
6. Deloitte Returns to New York Offices After Terrorist Attacks
7. IFAC Leads Auditors Into the Internet Age
8. GRI Issues Guidelines for Triple-Bottom-Line Reporting
9. Fortune Cites Creative Accounting, Blames the Auditor
10.SEC Releases Proposal to Modernize Reporting Rules
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Michael Platt, CEO
After weeks of discussions, Big Five firm Andersen walked away from the Department of Justice's negotiating table Thursday and headed for the courtroom. "We are no longer in talks with DOJ and nothing is planned in the immediate future," said Andersen lawyer Rusty Hardin. Andersen lawyers were unable to agree on acceptable settlement language and ultimately left the negotiations. Trial on the obstruction of justice charge is set for May 6.
The IRS announced last week that beginning with tax year 2002, companies with less than $250,000 in gross receipts and less than $250,000 in assets can bypass filling out the Schedules L, M-1, and M-2 on their corporate income tax returns. Corporations who file Form 1120-A and who are under the $250,000 threshold no longer have to prepare Parts III and IV of their 1120-A.
The hope of merging Andersen's U.S. practice as a unit into another Big Five firm has all but disappeared, scattering the firm into several pieces both in the U.S. and overseas. Andersen has reached a tentative agreement to turn over some of its U.S. audit practice to Big Five firm KPMG, and a spokesman for PricewaterhouseCoopers told the Washington Post that they are in discussions with Andersen to acquire particular territories in the United States.
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Big Five firms Deloitte & Touche and Andersen inked an agreement last Friday to combine operations in Canada, forming Canada's largest accounting firm. Currently, Deloitte & Touche is the country's second largest firm behind PricewaterhouseCoopers.
The New York Times reported last week that the Internal Revenue Service is sharing information to help state tax authorities crack down on underreporting of income by partners and other participants in pass-through tax entities. Some states are waiting until the IRS is geared up to handle the crackdown at the federal level. However, New York, New Jersey, Massachusetts, Wisconsin and nine other states now have the information needed to identify partners who underreport income.
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Undeterred by the acts of evil and violence that marked September 11, 2001 as a day of infamy, Deloitte & Touche has begun returning its partners and employees to refurbished offices in the lower Manhattan financial district. The offices at One World Financial Center that served as the firm's regional headquarters since 1993 were destroyed in the terrorist attacks.
Years ago, white collar criminals broke into computer files for such old-fashioned reasons as greed and misappropriation of funds. In those days, controls were as simple as putting a lock on the computer room door. Today, hackers may bring down a Web site just for the fun of it, and assessments of internal controls often require a unique combination of technological and cross-border expertise. These changing dynamics add a whole new dimension of risk to audits of financial statements, and it is precisely these risks that are addressed in a new practice statement issued by the International Federation of Accountants.
Members of The Association for Corporate Growth anticipate greater availability of credit in the second half of '02. At the annual Intergrowth conference meeting in Orlando, it was reported that the business credit markets will likely be more favorable because of the improving general economic outlook, a build-up of cash among banks and institutional lenders and the formation of new lending groups.
To learn more about who these new sources are and how to help your clients improve profitability and maximize value, plan to attend the SuperConference for CPAs on July 17-19 in Chicago. Learn more today
While some in the profession may question the long-term viability of audit-only accounting firms, proposed guidelines issued recently by the Global Reporting Initiative may help make the vision more feasible. The GRI's guidelines for "triple-bottom-line reporting" would broaden financial reporting into a three-dimensional model for economic, social and environmental reporting.
When Fortune magazine published its listing of the 500 largest U.S. companies this year, it listed Enron as No. 5 based on nine-month revenue figures. Next to Enron's name were a question mark, exclamation point, and a cross-reference to a separate article about the Revenue Games People (like Enron) Play. "No question about it," the article concludes, "the creativity of corporate accounting knows no bounds." But corporate accountants didn't catch the brunt of the magazine's criticism. Auditors did.
95% of respondents agree that criminal penalties should be levied against corporate directors who deliberately mislead auditors. What's your view? Take AccountingWEB's survey "The Impact of Enron: How Far Will It Go."
Last week, the Securities and Exchange Commission approved the release for public comment of proposed rules that would modernize and improve the timeliness of its system of corporate disclosures. The proposed changes recognize the importance of the Internet and move companies closer to real-time reporting. Some see these changes as long overdue. Despite widespread improvements in information technology, the shorter filing deadlines proposed by the Commission would represent the first change in more than 30 years.
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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. Post your own questions or see if you can lend a hand to others looking for help.
1. Depreciation 30% Stimulus Package: If building improvements such as renovating a façade or lobby on a residential rental building are made after 9/11/01, is the owner entitled to a 30% reduction under the new rules?
2. NOLs: Must an NOL be carried back for five years, or can it be carried back for three years?
3. Employer-Provided Living Accommodation for Inpatriates: Are tax savings possible in the U.S. for company provided accommodation where an inpatriate goes to the US on assignment for a few years?
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.