Audit & Accounting

Although they are supporting new audit rules that give public companies the option to report the elimination of a material weakness in internal control over financial reporting, the Big Four accounting firms have called on the Securities and Exchange Commission to issue more detailed guidance for making these disclosures.At issue: the Public Company Accounting Standards Board's new Auditing Standard No. 4, which recently won SEC approval. That standard allows the management of audited companies to voluntarily commission their auditors to report whether a previously reported material weakness continues to exist - an option that accountants at PricewaterhouseCoopers described as "a useful tool" for providing the public with assurance that a previously reported internal control problem no longer exists.

A handful of boldface names from the financial world lent their signatures to a letter to federal regulators, asking that no public company be exempted from the internal controls provisions of the Sarbanes-Oxley Act.Former Securities and Exchange chair Arthur Levitt, former Federal Reserve chair Paul Volcker and former comptroller general Charles Bowsher joined John Biggs, former chair and chief executive of TIAA-CREF, and John Bogle, former chair of the Vanguard Group Inc., in signing the letter. The Feb. 13 letter was addressed to current SEC chair Christopher Cox and the acting chair of the Public Company Accounting Oversight Board, William Gradison.

Taxation: Everybody does it, but the world has yet to agree on how to account for it.But that may soon change.

The effort to achieve convergence by ushering in a single accountancy system for the global economy is getting hammered in nearly every aspect by one of Europe's key figures in that sector.Pervenche Berès, the chairwoman of the European Parliament's Economic and Monetary Affairs Committee, is warning that the world's present governance system for accountancy institutions could lead to problems, including "the financialization of the [world] economy."

A new proposed Governmental Accounting Standards Board standard on accounting for pollution remediation may not decontaminate America's brownfields, but if adopted, it should make governmental financial statements a little neater.The proposal establishes a consistent way for governments to report certain costs and long-term obligations relating to pollution remediation. Any one of five triggering events would require a government to recognize a liability and apply an expected cash-flow measurement technique to recognize related liabilities, expenses and expenditures.

Congress is currently at work on legislation that includes, among other things, a two-year extension of dividend and capital gains tax cuts that were scheduled to expire at the end of 2008, and a one-year extension of alternative minimum tax relief.Without this relief, the AMT would cause higher taxes starting in 2006 for an estimated 16 million additional taxpayers to whom it was not intended to apply. Perhaps not surprisingly, House Republicans have sought to finalize the dividend and capital gains extension first, even though the AMT problem is much more immediate.

With a proposal that would let companies opt to report selected financial instruments at fair value, the Financial Accounting Standards Board has opened the possibility of a significant move toward more fair value measurement.The board has issued the proposal as an exposure draft in hopes that comments will support it as a reduction in the complexity of accounting and in volatility in earnings.

A federal review of 13 major contracts awarded in the aftermath of Hurricane Katrina pointed to poor communication as the reason behind the waste and mismanagement of some supplies and services that went unused.

The Office of Thrift Supervision approved an application from H&R Block Inc. to organize a federal savings bank in Kansas City, Mo.

Retail drugstore chain CVS Corp. said the Securities and Exchange Commission has launched an informal probe into how the company accounted for a 2000 transaction.