Audit & Accounting

Washington - Regulators at the Public Company Accounting Oversight Board are wrestling with proposals to abandon the current "pass/fail" auditor reporting model for informing investors of the accuracy of corporate financial statements - a move that could require independent accountants to provide considerably more information about the veracity of their clients' financial reports.Whether the additional work and information will translate into more useful data for investors was a matter of considerable debate during the latest meeting of the PCAOB's Standing Advisory Group.

Accounting for social policy obligations has long confounded the preparers and users of governmental financial reports.The controversy currently surrounding the gargantuan obligations of the Social Security Administration is an example of the difficulties of dealing with long-term, big-number obligations of vaguely defined liability.

Brussels - Following the start of 2005, when the EU's International Financial Reporting Standards ventured out of port, so to speak, users might have hoped that only the odd technical hitch or two remained to be solved, and that the arrival of IFRS accountancy standardization to the economic zone's 7,000 listed companies would be smooth sailing.Subsequently, European investors, who previously faced a tangle of variegated regulations - which led to confusion over how companies were performing - would then be able to balance performance with performance.

The Governmental Accounting Standards Board has released its new five-year strategic plan, an effort that kicks off with a series of sweeping surveys of the board's standing with its constituency, as well as a barometer of its progress.

The constant headlines of regulators' actions against broker/dealers recall the image of falling dominoes.

Despite the Securities and Exchange Commission giving the okay for companies to voluntarily file reports using XBRL, and the Federal Deposit Insurance Corp. being poised to require quarterly call reports in the tagged data format, the United States still lags behind Europe, Asia and Australia in the adoption and implementation of the Extensible Business Reporting Language.Now more than five years old, XBRL is the financial reporting derivation of Extensible Mark-up Language, or XML - a framework that establishes individual "tags" for elements in structured documents, allowing specific elements to be immediately accessed and aggregated.

The President's Advisory Panel on Federal Tax Reform will hold its fourth meeting on Wednesday, March 16, at the University of Chicago Graduate School of Business Gleacher Center. Witnesses will provide perspectives on the impact of the tax laws on important taxpayer decisions and how the tax system treats investment alternatives. Panel I, on taxes and individual decisions, will hear testimony from James J. Heckman, a Nobel Laureate in Economics and professor of economics at the University of Chicago. Panel II will examine taxes and investment alternatives. Its witnesses include Brian Wesbury, chief investment strategist at Claymore Securities Inc.; Kathleen Kennedy, an associate professor of law and director of the Center for Tax Law and Employee Benefits at John Marshall Law School; Dr. Susan Dynarski, assistant professor of public policy at the Kennedy School of Government at Harvard University; and Armond Dinverno, principal and co-president of Balasa Dinverno & Foltz LLC. Panel III, on taxation of financial instruments, will hear David Weisbach, a professor of law at the University of Chicago; and Robert McDonald, a professor of finance at the Kellogg School of Management at Northwestern University.

Auditor General David M. Walker said that, while Social Security is staring at a long-term financing problem, the 70-year-old program does not face an "immediate crisis." In testimony before the House Ways and Means Committee, Walker told lawmakers that it would be "prudent" to address the Social Security problem "sooner rather than later." Walker also took President George W. Bush to task for his aggressive selling of his privatization plan, where younger workers would be able to divert a portion of their payroll taxes into private investment accounts. Walker testified that private accounts by themselves would "exacerbate the solvency problem" that Social Security faces, and suggested that Congress first focus on improving the program's financing. The private accounts plan faces stiff opposition from Democrats and even some Republicans. Rep. Charles B. Rangel, D-N.Y., ranking Democrat on the Ways and Means Committee, was quoted as telling Walker that, "Private accounts will not be on the table if you are looking for bipartisanship.''

Adecco, the world's largest staffing firm, announced Tuesday that the Securities and Exchange Commission had closed its investigation into the Swiss company's accounting, with no recommendation for enforcement action. The probe was initiated after Adecco's uncovering of accounting irregularities at its North American unit early in 2004 caused it to delay financial reports. Swiss authorities launched a similar investigation. The firm's own independent examination found no fraud, but did report minor accounting control weaknesses at Adecco Staffing North America. Uncertainty about the company's financials cost its investors billions of dollars in market value, and led to the resignation of the chairman, finance chief and head of its North American operations. In June 2004, a new board of directors and new co-chairmen were appointed to try and restore confidence in the firm. Adecco's stock rose on news of the end of the SEC's probe, though it was still almost 20 percent below where it stood before the discovery of the accounting problems.

As part of a deal reached Monday with its regulator, mortgage giant Fannie Mae agreed to a number of corporate governance and management changes. The new practices, which supplement an earlier agreement meant to satisfy the Office of Federal Housing Enterprise Oversight regarding Fannie Mae's governance, include: * Separating the duties of the chairman and the chief executive officer; * Establishing a compliance and ethics office that can communicate directly with OFHEO; * Strengthening accounting rules; and, * Implementing policies to prevent the falsifying of signatures. Last year, OFHEO discovered significant problems with the mortgage giant's practices, including juggling the books to meet targets that triggered executive bonuses. The revelations led to the resignation of chairman and CEO Franklin Raines and chief financial officer Timothy Howard in December. The Securities and Exchange Commission said that from 2001 to mid-2004, Fannie Mae's accounting practices didn't comply with the requirements related to accounting for deferred purchase price adjustments and for derivatives and hedging activities, and advised the company that it should, among other things, restate its financial statements to eliminate the use of hedge accounting. In February, SEC chief accountant Donald Nicolaisen announced that the commission would conduct a thorough, top-down examination of the mortgage financing concern.