Audit & Accounting

In a three-year-old legal fray that resulted in a mistrial in March, a jury here has found global audit firm BDO Seidman guilty for its failure to detect audit fraud that prompted a Florida financial services company to declare bankruptcy. The verdict stems from a suit filed in 2004 by Banco Espirito Santo SA, a Portuguese bank that charged BDO with failing to uncover some $170 million of fraud at financial services firm E.S. Bankest, a former partner of the bank.

The Treasury is seeking nominations for its previously announced strategy to establish an Advisory Committee on the Auditing Profession -- a committee charged with studying the accounting profession and ways to keep the auditing profession vibrant and the U.S. capital markets competitive. Last month, Treasury selected former Securities and Exchange Commission Chairman Arthur Levitt and former SEC chief accountant Donald Nicholaisen to help lead the effort. The committee is expected to take about a year to study topics such as the concentration of the Big Four and their exposure to potentially crippling shareholder lawsuits. The panel is scheduled to begin its work in the fall. Nominations should be sent to ACAPmembership@do.treas.gov or Advisory Committee on the Auditing Profession Membership, Office of Financial Institutions Policy, Department of the Treasury, Main Treasury Building, Room 1418, 1500 Pennsylvania Avenue, NW., Washington, D.C. 20220. Nominations must be received on or before July 11, 2007.

One month after four employees of Big Four firm Ernst & Young were charged with conspiracy to commit tax fraud, a former employee of the audit firm has pled guilty to similar charges. Dallas-based E&Y employee Belle Six entered her plea in Federal District Court in Manhattan. Six, who worked in the firm's Viper Group that created and sold tax shelters, will, according to her agreement, forfeit some $13 million she received as compensation.

E&Y DECLINES RE-ELECTION AT TELETECH

Recently, Accounting Today printed both an article by Joel Jameson (March 19-April 1, 2007, page 14) and a letter from Alfred King (April 16-May 6, 2007, page 8) that rebutted our long-espoused view that financial reporting should be based on market values.

When it comes to retirement planning, there are a number of different choices. Two of the most commonly used are tax-deferred retirement plans - such as IRAs or 401(k)s - and cash-value life insurance.

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.