Audit & Accounting

Following the old saw that "What goes up must come down" - and vice versa - advisors who employ a strategy of buying cheap like it when market sectors decline.By the same token, some economic-minded advisors are continually on the lookout for market laggards in the expectation that the next swing might trend upward. Top performers over the recent past are the likely suspects for future price declines, say experts.

It's summer vacation time, and we're following our tradition of digging into the files and reprinting columns from the past. This one from June 2003 deals mostly with the accounting for stock options.In those days, of course, there was a lot of Chicken Little shouting that the mandatory expensing of stock options would destroy free enterprise and the rest of Western civilization. Everyone jumped on the bandwagon to save options and to keep financial statements from being polluted by bad numbers.

In an effort to increase charitable giving across the U.S., the Fidelity Charitable Gift Fund, an independent public charity within the donor-advised fund program of financial services conglomerate Fidelity, has rolled out the Charitable Investment Advisor Program.Fidelity's new offering allows independent investment advisors to provide discretionary investment management to the Gift Fund for contributions made by the advisors' clients.

An individual who is an active participant in a qualified retirement plan cannot make deductible contributions to a traditional IRA unless her modified adjusted gross income is below certain specified levels.The level depends on the type of income tax return the individual files. For single taxpayers and heads of household, the otherwise allowable deduction is phased out ratably in 2006 and later years, when the taxpayer's MAGI is between $50,000 and $60,000.

Keeping up with the rules and regulations that govern our professional existence is a challenging endeavor, but, relatively speaking, it could be worse.Consider the environment in other countries. In France, for example, students participating in a graduate-level accounting program in a business school must learn three sets of standards. Yes, three!

The American Institute of CPAs praised a new law that will prevent states from taxing the retirement income of non-resident partners last week.

In a significant move toward unifying a number of related standards and harmonizing them with a new international standard, the Auditing Standards Board has voted out a proposed statement on quality control.It was one of three exposure drafts issued for comment by summer's end.

The Securities and Exchange Commission requested that the Public Company Accounting Oversight Board delay issuing guidance related to backdating stock options.According to reports, the PCAOB had planned to issue an alert to accounting firms about the topic, which would have advised auditors about grant issues they should examine in audits. The regulator reportedly asked the board to delay issuing the guidance until the commission completes its own work on a proposed rule to revamp disclosure of executive pay.

New guidance stressing efficient application of effective internal controls over financial reporting was released in mid-July by the Committee of Sponsoring Organizations of the Treadway Commission.The guidance, titled "Internal Control over Financial Reporting - Guidance for Small Public Companies," was released with a Webcast that was attended by over 1,750 participants.

One of the provisions inserted by the Conference Committee into the Tax Increase Prevention and Reconciliation Act of 2005, signed by President Bush on May 17, 2006, was a tax increase on citizens working abroad. The provision was not in either the House or Senate versions of the legislation, although Congress has considered a number of proposals related to the taxation of citizens working abroad over the years, including some Senate bills in the current Congress.It is estimated that over 4 million citizens work abroad. The U.S. Census does not count them, so we have no accurate numbers. The Treasury does try to tax them, but with questionable effectiveness. For the 1999 tax year, out of 127,667,890 returns filed, 1,350,890 had foreign addresses, but this included the APO and FPO addresses of members of the armed forces, as well as some Puerto Rico residents with offshore income. A 2004 Internal Revenue Service study reported that in 2001, fewer than 300,000 tax returns reported foreign-source-earned income.