California board sanctions E&Y
The California Board of Accountancy has sanctioned Ernst & Young over the firm's independence in its audit of former client PeopleSoft. The CBA said that its action was based on an earlier order by the Securities and Exchange Commission, which sanctioned E&Y in April for not being independent in its audits of PeopleSoft's financial statements for fiscal years 1994 through 1999.
The CBA slapped E&Y with a 30-day stayed suspension and placed the firm's license on probation for three years. Under the sanction, E&Y must comply with the SEC order, "fully communicate with the board or its designees concerning compliance," and hire a third-party reviewer to conduct a practice investigation and report to the board. In addition, E&Y has to provide resources for the board to host an educational program of at least eight hours of continuing education on topics chosen by the board, which all of the firm's attest personnel licensed in California must attend. E&Y will also reimburse the board for up to $100,000 for investigation and prosecution costs.
Lawmakers OK tax cut extensions
Legislation that extends soon-to-expire provisions of last year's tax cuts for families - at a cost of about $146 billion over 10 years - easily sailed through Congress in late September. The House of Representatives approved the measure by a 339-65 margin, the Senate by 92-3.
The bill extends several individual cuts set to expire at the end of this year, including the $1,000 child tax credit, which would have dropped to $700; tax breaks to reduce the marriage penalty; and expanding the lowest tax bracket to cover more taxpayers. Business also got a boost with the addition of $13 billion in what have been termed "business extenders." The measure was sent on to President Bush.
SEC worried by Big 4 client-dropping
A trend among the nation's four largest firms of dropping small audit clients reportedly has the Securities and Exchange Commission's chief accountant concerned. The Big Four have dropped at least eight U.S. audit clients in the past two months, saying that they are overworked helping their biggest and most profitable clients meet a Nov. 15 Sarbanes-Oxley deadline to improve financial reporting systems.
"I've expressed my view to the CEOs of the big firms that I think it is their responsibility not to run away from the marketplace," SEC chief accountant Donald Nicolaisen was quoted as saying. The requirements in the 2002 law "should not be a convenient tool for them to manage their business. They do have a responsibility in the public trust."
