Audit & Accounting

Distilling the nation's complex tax code is the key to reducing the $290 billion tax gap, the American Institute of CPAs told lawmakers. In a hearing before the House Small Business Committee, James Brennan, chair of the AICPA's IRS Practice and Procedures Committee, said simplification should be the foundation to begin stripping away the mammoth deficit.

If XBRL is going to evolve to the financial reporting standard of the future, the accounting profession is going to have to step up its communication efforts on the tagging language, according to a survey of CFOs and controllers by global CPA firm Grant Thornton. According to the GT poll, roughly 85 percent of the survey participants indicated that the profession was not effectively communicating the benefits of using XBRL or Extensible Business Reporting Language for either internal or external financial reporting.

Maintaining that auditor concentration and litigation issues erect barriers to better pricing and service, Grant Thornton chief executive Ed Nusbaum called for the U.S. to undertake a comprehensive study on the domestic audit sector. More specifically, Nusbaum said the U.S. needs to produce a similar study to the one released this week in the U.K., "Financial Reporting Council's Market Participants' Group," which examined concentration and choice in the U.K. audit market. "In addition to the fear of one of the large accounting firms failing, there is no question that audit concentration, along with uncontrolled litigation exposure, is undermining the U.S. economic business model that served so well for so many years: More accounting firms means greater competition and increases quality and lowers costs to the end user," said Nusbaum. "We need a similar U.S. auditor concentration study with accompanying action steps to address the issue."

A report by the Government Accountability Office has raised questions regarding the value of consumer-mandated credit counseling as required by the 2005 Bankruptcy Protection Act. The auditor general's study, which examined the BPA's requirement for consumers to undergo credit counseling and debtor education courses before having debts discharged, said that by the time most clients receive the counseling, their financial situations are dire, leaving them with no viable alternative to bankruptcy. The counseling was intended to help consumers make informed choices about bankruptcy and its alternatives. The auditor general's report was intended to address growing concerns over potential abuses by credit counseling agencies in the wake of the counseling/education requirement. Among other things, the GAO report examined: * The process of approving counseling and education providers; * The content and results of the counseling and education sessions, * The fees charged, and; * The availability of and challenges to accessing services. The GAO has recommended that the Justice Department's U.S. Trustee Program analyze the outcomes of pre-filing credit counseling and issue formal guidance on what constitutes "ability to pay." As of October 2006, the Trustee Program had approved 153 credit counseling and 268 debtor education providers. For the report, go to: www.gao.gov/cgi-bin/getrpt?GAO-07-203.

The Private Companies Practice Section of the American Institute of CPAs has developed an online toolkit to help members understand and implement Statement on Auditing Standards No. 112, "Communication of Internal Control Related Matters Identified in an Audit." SAS 112 is effective for audits performed on or after Dec. 15, 2006. The product -- accessible to PCPS member firms -- is available at www.pcps.org. It includes talking points, a newsletter template and a client communication letter, among other resources. For interested parties, a free FAQ sheet and SAS 112 Web forum archive are available on the Web site.

On the heels of its financial reporting roundtable last month, the Securities and Exchange Commission said it may allow U.S. filers to choose what standards they want to use to report their financials.

The President’s Identity Theft Task Force rolled out a strategic plan this week, outlining a number of recommendations for increased federal prevention of identity theft.

In anticlimactic news, former HealthSouth chief executive Richard Scrushy will pay $81 million to settle civil charges brought by the Securities and Exchange Commission.While SEC spokespeople have said that the amount of the deal is among the most expensive for an executive settlement, a federal judge ruled that the judgments in three other civil cases brought against Scrushy could count as a $71.5 million credit toward the disgorgement to the SEC.

As expected, KPMG flung some mud of its own back at home mortgage giant Fannie Mae last week, accusing the government-subsidized company of breach of contract and fraudulent misrepresentation -- claiming that the problems leading to Fannie Mae’s $6.3 billion restatement were largely of the mortgage lender’s own making.

Eide Bailly LLP, North Dakota’s largest accounting firm, announced that it will merge with Sioux Falls, S.D.-based Henry Scholten & Co. LLP.