Audit & Accounting

Fannie Mae will pay $400 million to put an end to the accounting woes that have dogged the home mortgage giant since 2004.The latest estimates from government-chartered Fannie Mae, whose official name is the Federal National Mortgage Association, are that the company expects to reduce net income by upwards of $11 billion in financial restatements for fiscal years spanning 1998 to 2004.

The Auditing Standards Board is issuing a new standard on auditing internal controls. By adopting definitions from Auditing Standard No. 2 of the Public Company Accounting Oversight Board, the standard will make audits of public and private companies more similar."This standard is important because it requires the auditor to communicate with management those areas of their internal control system that are not up to par," said AICPA vice president of professional standards and services Chuck Landes. "We want to make it clear that management has a responsibility for not only their financial statements but their internal control systems, and they are responsible to take appropriate action with respect to any material weaknesses or significant deficiencies that the auditor may identify."

The Tax Increase Prevention and Reconciliation Act of 2005, signed by President Bush on May 17, 2006, took so long in coming that it still carried the "Act of 2005" label.Far from having no surprises, however, the final bill contained a generous handful of provisions that had been far out of the money only weeks before. While some of these unexpected changes impact businesses, the most high-profile surprises appear to focus on the individual taxpayer. These include the lifting of the adjusted gross income cap on Roth IRA conversions, the raising of the "Kiddie Tax" age limit to 18 years, and the increase in the AMT exemption amounts.

When recognizing benefits from uncertain tax positions in their financial statements, what level of confidence should corporations have that those positions will be sustained? How do they determine whether or not their positions meet that threshold for recognition?And if the position meets that recognition threshold, what share of the related benefit should be included in the entity's financial statements? What actions or events could change that recognition status for future financial statements?

It's the biggest item in a financial statement, and the most frequent cause of restatements. Elements of its generally accepted accounting principles appear in over 200 pronouncements from half a dozen standard-setters. It causes confusion. It shakes the market. It tempts fraud.It's the perpetual and dizzying headache called revenue recognition - and even the Conceptual Framework of the Financial Accounting Standards Board can't agree with itself on the nature of the beast.

Ernst & Young Global Ltd. announced that Mitchell & Titus LLP, the country's largest minority-owned accounting firm, is expected to join as a member firm this October.

After a six-month vacancy, the Securities and Exchange Commission is zeroing in on a new chairman for the Public Company Accounting Oversight Board, according to published reports.

Deloitte Tax LLP announced an agreement to sell its Corptax software unit to MLM Information Services LLC. About 1,000 corporations and partnerships use the tax software.

The new risk assessment standards are all about getting back to basics, said expert Hiriam Hasty while speaking at the New York State Society of CPAs' annual Accounting and Auditing in the Nonpublic Environment Conference.

The Securities and Exchange Commission filed a status report with the U.S. Court of Appeals, saying that it will again ask for public comment on its independence proposal for the boards of most mutual funds.