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lunch beat

Bramwell's Lunch Beat: BDO Audit Woes, PCAOB Chair’s Future, IIA Request

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Sep 10th 2015
Staff Writer and Editor AccountingWEB
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SEC charges accounting firm BDO, others over deficient audits
Accounting giant BDO USA admitted on Wednesday that it missed red flags and issued false audit opinions about one of its client companies, and agreed to pay more than $2 million to settle the charges, the US Securities and Exchange Commission (SEC) said, wrote Sarah N. Lynch of Reuters. The SEC also charged five of the firm's partners for their role in issuing deficient audits of their client, the employment agency General Employment Enterprises Inc. In addition, the SEC charged two former chief executives of General Employment Enterprises, as well as its former chairman and majority shareholder, Stephen B. Pence, who is a former US attorney and former lieutenant governor of Kentucky. All of the executives settled the charges, except Pence, who is continuing to contest the case. In a statement, BDO said it is pleased to have the SEC's case resolved.

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SEC looking at outside candidates to lead audit regulator PCAOB
The SEC is looking at candidates to lead the Public Company Accounting Oversight Board (PCAOB) other than current Chairman James Doty, even though Doty has indicated he wants to be reappointed to another term, wrote Michael Rapoport and Andrew Ackerman of the Wall Street Journal. The SEC is “identifying interested and qualified candidates” to chair the PCAOB, SEC Chairman Mary Jo White told reporters on Wednesday at a meeting of a PCAOB investor advisory group. That raises the possibility that the SEC, which oversees the auditing panel and appoints its members, could select someone other than Doty to serve as chairman after his current term expires in October. Since becoming PCAOB chairman in 2011, Doty has emphasized efforts to require auditors to disclose more information to investors, but he has faced pushback from the accounting industry and, sometimes, questioning from SEC officials about the audit panel's approach.

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[ALSO: David Michaels of Bloombergreported on two possible candidates who could replace Doty as chairman of the PCAOB.]

Internal auditors press SEC to require their job
All companies need an internal audit function, at least according to the Institute of Internal Auditors (IIA), which made that argument to the SEC this week, wrote Emily Chasan of CFO Journal. The IIA asked the SEC to require all public companies maintain an internal audit function – or explain why they don't. “In the best interest of the investing public and continued efforts toward restoration of investor confidence, an independent, objective, and competent internal audit function is basic and fundamental to effective corporate governance,” the IIA said in a letter in response to the SEC's call for comments on audit committee disclosures.

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Yahoo shares show investors don't expect tax-free spinoff
The slump that's dragged down Yahoo! Inc. shares about 30 percent since May shows that investors are doubtful the company will be able to exit its Alibaba Group Holding Ltd. stake without incurring a multibillion-dollar tax bill, wrote Brian Womack and Richard Rubin of Bloomberg. Yahoo's stock decline began in mid-May, when the IRS raised red flags over spinoffs like the one Yahoo has been planning. The shares rose 2 percent to $31.52 at the close in New York on Wednesday, a day after Yahoo said the IRS wouldn't give it a preliminary green light to pursue the transaction. The IRS “was not ruling adversely on the request,” Yahoo said in a regulatory filing. Failure to get a decision by the IRS reinforced speculation that Yahoo CEO Marissa Mayer wouldn't be able to pursue her strategy of selling the $24 billion stake in a tax-efficient manner – potentially saving about $9 billion in US taxes.

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Quick Links

  • SEC charges father, son, friend with insider trading in GE deal (Reuters)
  • 5 new compliance headaches for advisors, broker-dealers (ThinkAdvisor)
  • Kit Digital ex-chief Tuzman charged with accounting fraud (Bloomberg)
  • Accounting rife with estimates haunted Toshiba (CFO)
  • Dewey defense: 15 reasons to doubt the prosecution's case (Wall Street Journal)
  • Yahoo's tax options: Bad or worse (Wall Street Journal)
  • Tax reform efforts show momentum, if nothing else (Morning Consult)
  • Private equity strikes back at Bush (The Hill)
  • Trump tax rhetoric stirs divide in GOP race (Boston Globe)
  • Chicago soda tax fizzles at City Council hearing (Chicago Tribune)
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