Audit & Accounting

TREASURY ISSUES ROTH 401(K) RULES

From Boston to Beijing, the accounting profession may soon have a new type of financial statement - one without net profit at the bottom line, with finance information separated from operations, tax information off to the side and cash flow reported separately.

The tax gap - the difference between the amount that taxpayers pay voluntarily and on time and what they should pay - continues to generate congressional hearings and legislative proposals. The most recent data from 46,000 returns examined under the National Research Program show a net gap of $290 billion for the year 2001.

The Treasury Department has created a committee to study problems in the accounting profession - and in something of an unexpected move, former Securities and Exchange Commission chair Arthur Levitt was selected to lead the effort, along with former SEC chief accountant Donald Nicolaisen.

Valuation for financial reporting has long befuddled accounting professionals. Differences among industrial sectors often lead to inconsistencies, and recent new requirements for fair-value reporting have made the process even more confusing.

Do consumers really understand what a fiduciary standards means in the financial services industry? And, perhaps more importantly, do they even care? A new survey from the National Association of Personal Financial Advisors (NAPFA) was unveiled recently at its annual convention in Chicago and it certainly answers those two questions.

Williams & Webster PS, a CPA and business advisory firm with offices in Seattle and Spokane, has been censured by the Public Company Accounting Oversight Board for violations stemming from a 2004 client audit.

Senators Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, chairman and ranking member of the Senate Finance Committee, respectively, have introduced legislation to give more than $550 million in tax relief for veterans, soldiers and their employers.

The Securities and Exchange Commission is preparing to fine telephone-equipment giant Nortel Networks as much as $100 million for accounting fraud, according to published reports. The reports also noted that SEC attorneys sought permission from the commissioners to inflict a fine of less than $100 million -- the first instance of a new policy that gives the politically appointed commissioners more say in corporate penalties. Previously, attorneys negotiated settlements without consulting the commissioners. Toronto-based Nortel inflated its earnings by $3.4 billion between 2001 and 2004, when the SEC began an investigation of the company's accounting. As an indicator of the scale of the possible fine, late in 2006, federal judges signed off on an estimated $2.4 billion payout by Nortel to settle a shareholder lawsuit.

The Public Company Accounting Oversight Board is currently accepting 15 member nominations and re-nominations for its Standing Advisory Group. The 31-member SAG is comprised of representatives from audit firms, public companies and the investment community. Appointments are for two-year terms. The audit overseer has also scheduled its next SAG meeting for June 21 in Washington. The focus of the meeting will center on interim standards and fair value. Both the SAG nomination forms and the Webcast for the June meeting can be accessed at www.pcaobus.org. In related PCAOB news, chairman Mark Olson told attendees at a governance and compliance conference late last week, that the simpler language found in Auditing Standard No. 5 on internal controls should help pare down the costs of 404 compliance. Olson said AS5, unlike its predecessor AS2, was written in English and not "audit-speak."