Audit & Accounting

The Public Company Accounting Oversight Board named former Ernst & Young partners Greg Wilson and Michael Pauk to head its branch units in Chicago and Denver, respectively. Wilson, a deputy director of inspections, is a retired E&Y audit partner and served in a number of management and administrative posts with the Big Four firm, including directing the audit practice in E&Y's Chicago office and serving as a regional director of human resources. Pauk, a regional associate deputy inspector who most recently operated his own consulting practice, was an E&Y partner in both the Denver practice office and the Cleveland national office. The regional offices support the oversight body's audit inspections program, which is headquartered in Washington. In addition to Denver and Chicago, the PCAOB has offices in New York, Atlanta, Dallas, San Francisco, and Orange County, California.

A report by the Treasury Inspector General for Tax Administration absolves the procedures used by the Internal Revenue Service's Tax Exempt and Government Entities Division for reviewing political activities by exempt organizations. While many charities speak out on public issues, the code prohibits Section 501(c)(3) organizations from specific types of political activities. In response to media reports of allegations that the TE/GE Division was examining these types of activities just prior to the 2004 presidential election for politically motivated reasons, the IRS asked the TIGTA to investigate. "This report confirms what we've said all along," said IRS Commissioner Mark W. Everson. "Political considerations played absolutely no part in the inquiries we launched last summer." Everson said that recommendations in the report would be addressed by the IRS and would be in place for future election cycles.

Paul F. Roye, director of the Securities and Exchange Commission's Division of Investment Management -- the division that polices the mutual fund industry -- is leaving to pursue a job in the private sector. Roye, who has served as the unit's director since 1998 and steered it through the explosive market-timing scandals affecting a number of large fund families, had been instrumental in orchestrating a number of initiatives at the regulator, including: o Strengthening the corporate governance regime for mutual funds; o Enhancing ethical standards for funds and investment advisers; and, o Requiring that funds and advisors adopt comprehensive compliance policies and procedures, and designate a chief compliance officer."It has been an honor and a privilege to serve America's investors as the director of the Division of Investment Management," Roye said in a statement. "I will miss my talented and dedicated colleagues in the division who, particularly during the challenges of recent months, have given their all to serve and protect America's investors." A successor has not been named.

A critic from Washington-based think tank the American Enterprise Institute has called on Congress to terminate the Public Company Accounting Oversight Board within five years and fold the oversight body into the Securities and Exchange Commission.

AARP, the high-profile lobbying group for the roughly 36 million Americans over 50, has come out swinging in the fight over Social Security reform with the release of a poll showing a lack of support for President Bush's plan to allow investors to divert some of their Social Security taxes into private accounts.

Some of your clients may not yet have made their contributions to traditional or Roth IRAs for 2004, but plan to make them before filing their 2004 income tax returns. Others may be planning to contribute the maximum amount possible to their IRAs for 2005 as soon as possible.

FPA AWARDED FOUNDATION GRANT: The Financial Planning Association has received a $252,468 grant from the Foundation for Financial Planning - the largest grant ever given by the foundation.

In just under two years at the helm of the Public Company Accounting Oversight Board, Chairman William McDonough has gone from being a respected figure in banking to being the most influential - and often feared - figure in accounting.

The American Institute of CPAs' Auditing Standards Board is poised to issue an exposure draft of five proposed statements and amendments to statements relating to auditors' risk assessment.

In 2004, some 1,600 companies told their independent accountants that their services would no longer be required, an eye-opening jump of 78 percent in auditor changes from the prior year, according to a study conducted by proxy researcher Glass Lewis & Co. The report found that the auditor switching hit the Big Four firms the hardest, with Ernst & Young posting a net client loss of 200, while the aggregate client exits for E&Y, PricewaterhouseCoopers, KPMG and Deloitte hit 400. Conversely, the national firms have picked up much of the client largesse emanating from the Big Four, with Chicago-based BDO Seidman adding 109 new audit clients last year. The Glass Lewis report said that audit clients who revealed why they switched audit firms said that the top reasons for changing accountants included Sarbanes-Oxley prohibitions and lower audit fees, among others. According to published reports, the 2,500-plus companies than changed auditors over the past two years represent more than 25 percent of the Securities and Exchange Commission issuers in the United States.