Audit & Accounting

Several more 2007 Toyota models have been certified by the Internal Revenue Service to qualify for the hybrid tax credit enacted by the Energy Policy Act of 2005.

When the Auditing Standards Board met back in August, its discussions were appropriate for a mid-to-late summer session - relatively quiet, with no pronouncements issued, no exposure drafts, just some pensive ponderings on progress soon to come.While topics included communication, clarity and auditor reports, and although it did not reach any decisions, the board felt that the roundtables could eventually lead to broad and substantive changes in the nature and form of information relating to audits.

FOREST OIL TAPS E&Y: Denver-based Forest Oil Corp. dismissed its auditor, Big Four firm KPMG, and hired Ernst & Young as its new independent accountant. In a filing, the oil and gas exploration concern said that the decision to jettison KPMG was approved by its executive committee. KPMG's reports on Forest Oil's two most recent fiscal years ended Dec. 31, 2004 and 2005, did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.ENTRAVISION ENGAGES PWC: Spanish-language media concern Entravision Communications Corp. terminated McGladrey & Pullen as its independent accountant and named Big Four firm PricewaterhouseCoopers as its replacement.

Edward W. Trott, a member of the Financial Accounting Standards Board, said that he would step down from that position in June 2007, after eight years on the board of the standard-setter.Trott had accepted a second five-year term in July 2004, but at that time had advised the trustees of the Financial Accounting Foundation - the body responsible for the oversight, administration and finances of both FASB and its counterpart for state and local government, the Governmental Accounting Standards Board - that in 2006 he would re-evaluate his ability to complete that term. The foundation is also responsible for selecting the members of both the FASB and GASB boards. FASB's board is currently comprised of seven members.

In July, the Financial Accounting Standards Board announced that its agenda now includes a major project on lease accounting. As justification, the board cited encouragement from its own advisory councils and the Securities and Exchange Commission staff, all of which apparently concurred that "current lease standards fail to provide complete and transparent information."The announcement also stated that "lease arrangements have evolved considerably over the past 30 years and the standards are outdated." We're tempted to say, "Well, duh!" but we won't because of our great satisfaction that the board is preparing to throw out this example of WYWAP (Whatever You Want Accounting Principles) and POOP (Pitifully Old and Obsolete Principles).

I speak at numerous conventions and conferences, and attendees sometimes contact me for additional information about abusive tax shelters and Circular 230.Among other things, Circular 230 sets forth the requirements for disclosure of certain tax shelter transactions by tax professionals. Regulations also impose new obligations on tax professionals, and on taxpayers engaged in any kind of tax-avoidance transaction.

A surviving spouse who is the sole beneficiary of the balance remaining in their deceased spouse's traditional IRA may leave the account as it is, or roll over the decedent's IRA into their own IRA, or elect to treat the IRA as their own for all purposes, including the rules of IRC §72(t) as to the imposition of a 10 percent penalty tax if the amount in the IRA is withdrawn before age 59-1/2.Whether a rollover to the surviving spouse's own IRA or an election to treat the deceased spouse's IRA as their own should be made depends mainly on the surviving spouse's age.

Poor oversight and shaky internal controls on the use of government purchase cards to make relief transactions for victims of Hurricane Katrina led to widespread abuse and fraud, according to a report issued by the Government Accountability Office.

The threat by Sen. Max Baucus, D-Mont., to hold back the appointment of Eric Solomon as assistant secretary for tax policy at the Department of the Treasury is misplaced, according to observers.Baucus, the ranking member of the Senate Finance Committee, said that he would place a hold on President George W. Bush's nominee for the Treasury's top tax position unless the department details how it will close the tax gap.

The Securities and Exchange Commission and the Department of Justice formally supported the constitutionality of the Public Company Accounting Oversight Board with the filing of a 46-page legal brief just before Labor Day.The brief outlined the government's arguments in support of the PCAOB's constitutionality, and was submitted in the U.S. District Court for the District of Columbia in a case brought by the Free Enterprise Fund in February.