Audit & Accounting

During my extended stay in college, my idea of prudent financial planning was to put enough aside to order extra cheese at Pizza Hut on Friday nights. Several decades later, Friday is still pizza night for me, and I've upgraded a bit since then. Now, in a week without any unforeseen expenses like a brake job or a cut and highlights for my wife and daughters, I can splurge on a double order of garlic knots.My rather modest financial portfolio aside, I saw recently that financial planning perks have swelled among the chief executives of Fortune 100 companies. Last year, more than 74 percent of Fortune 100 companies disclosed that their CEO received financial planning-related perks, versus just under 30 percent in 2005.

IBC JETTISONS KPMGFinancial holding company International Bancshares Corp. said that its audit committee has dismissed KPMG as its auditor and replaced the Big Four firm with McGladrey & Pullen.

We are long-time critics of generally accepted accounting principles' historical cost tradition in financial reporting. We argue for providing market values to give users the up-to-date information they need to make rational investment and credit decisions.We have had some fun in the past describing the limitations in cost-based GAAP by offering other acronyms: PEAP (Politically Expedient Accounting Principles), WYWAP (Whatever You Want Accounting Principles) and POOP (Pitifully Old and Obsolete Principles). Despite the humorous undertone, our ultimate point is serious: The current financial reporting system needs to provide better support for the capital markets. After all, they are the foundation of our economy, and work best when market participants are quickly and fully informed.

As a young man, I was a crewmember of a 747 that crashed on takeoff in Kenya. The airline's emergency planning helped me keep cool, think rationally and help save the lives of 90 of the 149 passengers.Today, as principal of a financial advisory firm in Irvine, Calif., I regularly see people approach retirement planning like an airline flight, hoping the unthinkable won't happen. But while the chances of a crash are remote, the financial markets are considerably less predictable. Few are prepared for the transition from earnings income to portfolio income.

STUDY: RIAS NEED TO DIFFERENTIATEA study commissioned by Pershing Advisor Solutions projects that as the market for financial services becomes even more competitive, registered investment advisors need to "fine tune" their area of expertise and promote their reputations of specialized knowledge in a given niche. The report said that specialization is crucial, given that consumers who seek financial advice are becoming more sophisticated in their market knowledge, and thus are sparking a growing demand for qualified individuals.

The many practitioners who conduct valuations in the normal course of their practices will shortly be required to follow, for the first time, detailed standards, because the Consulting Services Executive Committee of the American Institute of CPAs has issued a comprehensive professional statement of standards - Statement on Standards for Valuation Services No. 1, Valuation of a Business, Business Ownership Interest, Security or Intangible Asset."The AICPA developed the valuation standard to improve the consistency and quality of practice among its members who perform engagements that estimate values for various reasons," said AICPA president and CEO Barry Melancon, in a statement. "Congress, government agencies and accounting regulators have recently focused their attention on appraisal issues - such activity shows the importance of valuation to the business community and individuals. The standard promotes greater transparency and provides our members with a set of guidelines in the unique context of a CPA practice."

The Internal Revenue Service has lost the first round in a much-anticipated test case against Textron Inc., in which it sought judicial approval for a new program seeking tax accrual workpapers during the examination of corporate clients.The IRS is interested in Textron's and others' workpapers, since they document what the company considers its questionable tax positions.

The Internal Revenue Service is not doing enough to match incorrect or missing identification numbers on income and wage statements with existing tax accounts, charged the Treasury Inspector General for Tax AdministrationThe TIGTA noted that in tax year 2004 alone, the IRS received about 3.8 million income statements reporting approximately $150 billion in earnings that could not be matched to a filed tax return because of missing or erroneous ID numbers. Compared to 2001, that represented a 63 percent increase.

In a vote that may have a wide-ranging effect on the accounting profession, House lawmakers voted 220-175 to overhaul patent rules and place a ban on tax-planning-method patents.HR 1908, the Patent Reform Act of 2007, primarily contains provisions that would make it harder to get patents and harder for companies to be sued for patent infringement. However, it also contains a provision that would protect accounting firms from lawsuits over tax-planning methods.

The deadline for compliance with final Section 409A regulations, scheduled for Dec. 31, 2007, should be extended for a year, according to 92 of the largest law firms in the nation.The new regulations, finalized in April, require deferred-compensation plans to be amended to comply with the Internal Revenue Code.