Audit & Accounting

Without the release of all pertinent documents by San Diego's pension board, attorney's office and firefighters union , auditor KPMG says that its review of the city's 2003 year could drag on even longer.

The Norwegian branch of KPMG International will pay $53.6 million to eight banks in order to settle damages over one of the country's worst bankruptcies.

Securities and Exchange Commission Chairman Christopher Cox will recuse himself to avoid any appearance of impropriety in the agency's investigation of Cox's former congressional colleague, Senate Majority Leader Bill Frist.

The board of trustees of the Financial Accounting Foundation appointed telecomm executive Robert J. DeSantis as president and chief operating officer.

It was a deal years in the making, though industry observers say that it didn't have to be.In striking an agreement to escape a potentially fatal criminal indictment for its sale of legally questionable tax shelters from 1996 to 2002, KPMG will pay a $456 million fine to the federal government and essentially spend the next 16 months on probation. The firm has also agreed to close its tax business for high-net-worth individuals within six months.

Years of lower equity risk premiums have prompted advisors to begin looking beyond the traditional modern portfolio theory for strategies that can produce heftier returns.Enter the core/satellite design - defined as a commitment to longer-term investing in "core" vehicles, combined with satellites of frequently changed assets that can add to returns.

While Big Four firm KPMG was busy writing a check for $456 million as a settlement with federal regulators for its part in pushing fraudulent tax shelters, the remaining three global audit firms were either breathing a sigh of relief or wondering if they'll soon receive a request for a chat with prosecutors.Because KPMG avoided a criminal indictment like the one that ultimately proved fatal to now-defunct Big Five firm Arthur Andersen, my guess is you won't see a lemming-like exodus of audit clients like that at Andersen circa 2002.

ZONES INC. DISMISSES PWC: Zones Inc., an Auburn, Wash.-based reseller of information technology products, dismissed Big Four firm PricewaterhouseCoopers as its independent accountant and hired Grant Thornton as its successor.In a filing with the Securities and Exchange Commission, Zones said that it had no accounting disagreements with its former auditor over the last two fiscal years.

Audit committees have never felt so stressed and stretched. Everybody, from stock exchanges to boards of directors to investors, expects more from them, and the penalties for failure have never been more serious.As a result, audit committees are meeting more often, setting more serious agendas tilted more toward inquiry, demanding more of internal auditors, and calling for committee members with better qualifications.

In our preceding five columns, we have expressed our concerns to our good friends at the Financial Accounting Standards Board about their May 2005 exposure draft on the hierarchy of accounting principles.We confess that we yawned when we first saw this document superficially. However, a closer, more careful look made us sit upright and kick into gear. We don't think they meant anything sinister, but we found great hubris in their words.