AccountingWEB Weekly News Wrap-Up - Issue 143
1. Judge Rules "Seriously Botched" Audit is Not Fraud
2. Andersen Proposes New Settlement to Justice Department
3. Supreme Court to Settle Tip Taxation Controversy
4. House Passes Accounting Reform Bill After Lively Debate
5. Consulting Spin-Offs Bring Ad Campaigns & Salary Cuts
6. Paul Volcker Likely to Step Aside at Andersen
7. Alert: Beware of Phony IRS Forms and Bank Letters
8. FASB Changes Chairman Amidst Turmoil and Criticism
9. SEC Pioneers Analytical Software to Spot Future Enrons
10.Robert Half to Acquire Andersen's Risk Consulting Group
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Despite a public clamor for tighter regulation of auditors, a U.S. Court of Appeals ruled on April 19 that a "seriously botched" audit that led to a plunge in stock prices is not grounds for a securities fraud lawsuit. In explaining his decision, the judge said that the complaint sets out a compelling case of negligence, perhaps even gross negligence. But negligence alone does not subject an accounting firm to liability for securities fraud.
With just eleven days to go before a scheduled May 6 trial date, Arthur Andersen LLP has made a new settlement offer to the U.S. Department of Justice in the pending matter of obstruction of justice charges. The settlement was delivered in a letter Wednesday afternoon.
The U.S. Supreme Court heard arguments Monday in a case that could change the way the government assesses Social Security taxes on tip income. This far-reaching case could affect restaurants, casinos, barber and beauty shops, hotels, and any other businesses where employees regularly receive tips from customers.
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On April 24, after several hours of lively debate, the House of Representatives passed H.R. 3763, the Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002 (CARTA). The bill, which was sponsored by Rep. Michael G. Oxley and passed by a vote of 334 to 90, is the one most supported by the accounting profession. But many lawmakers feel more stringent measures are needed.
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As several Big Five firms prepare to spin off their consulting units, a pattern of belt tightening seems to be emerging to accommodate the huge investments in advertising and public relations needed to choose new names and create new brands.
Appointed to be the "White Knight" to lead Andersen through its post-Enron restructuring just two months ago, former Federal Reserve Chairman Paul Volcker now will likely abandon his leadership position at the embattled firm, according to The Wall Street Journal. The newspaper reports that Mr. Volcker has repeatedly expressed frustration with the focus of Andersen management and partners securing their own exit strategy rather than making the Herculean efforts needed to save the firm.
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The Office of the Comptroller of the Currency has issued an alert to banks asking them to warn their customers about a new fraud scheme that uses fictitious IRS forms and bank correspondence in an attempt at identity theft.
The Financial Accounting Foundation, the organization that oversees the Financial Accounting Standards Board, announced a change in the head position of the FASB. Chairman Ed Jenkins will retire on June 30, 2002, and PricewaterhouseCoopers Partner Robert H. Herz will become the fifth chairman in FASB's 29-year history.
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Faced with a limited budget and committed to more frequent reviews of filings by large registrants, the Securities and Exchange Commission is developing new analytical software to help identify the reports most likely to contain accounting irregularities or other potential problems.
Arthur Andersen LLP has signed a letter of agreement with Robert Half International (RHI) arranging for the transfer to RHI of a "substantial majority" of the firm's partners and other employees of the firm's U.S. Business Risk Consulting Services group.
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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. Changing From Cash Basis to Accrual: A retail store with annual sales less than $1,000,000 moved to a larger location and inventory rose by 60%. They are considering changing to a cash method from accrual method to be able to take this increase as an expense. How should this change be executed?
2. Access to Accounting Records Subject to Subpoena: All the accounting records for a corporation and the shareholder 1040 client have been subpoenaed by the attorney of the client's wife. The couple is going through an acrimonious divorce. Is the accountant required to provide these records or can the accountant just grant access to the records and provide copies of specific items that they want for their files?
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