Audit

A Pennsylvania judge has dismissed a professional malpractice lawsuit against KPMG employees accusing them of breach of contract, negligence, fraud and negligent misrepresentation.

More than 110 female financial advisors and 200 guests gathered recently for the 13th Annual Women’s Symposium in St. Petersburg. Florida, hosted by the Raymond James Network for Women Advisors. It was a three-day event that covered business building sessions and networking activities. There was a wide array of speakers and breakout sessions provided guests with economic outlook updates and useful information on practice management and professional development. There was even a technology lab set up for on-site training that offered hands-on demonstrations of various tools such as the new Client Relationship Manager, the Financial Planning Suite, and the Advisor’s Resource Console. In addition, home office departments conducted showcases with presenters attending from the Planning Corporation of America, Alternative Investments Group, Marketing, The Trust Companies, Raymond James Bank, Asset Management Services, Investment Banking, and Wealth Solutions. The Raymond James Network for Women Advisors was established in 1994 with the goal of providing advisors with educational and networking opportunities to help grow their practices. The Network aims to assist female financial advisors in leveraging their talents to create successful and fulfilling careers. Through a collection of activities and resources, it strives to help women advisors expand their knowledge, expertise, and businesses in a supportive, collaborative environment. The Network also offers an annual gathering of its top recognition club women advisors. This event allows these senior level women to discuss specific issues they commonly face in their practices such as succession planning, team development, as well as unique estate planning strategies for high-net-worth clients. A key component of The Network is the Women’s Advisory Council. This group of 12 female financial advisors, with varying levels of experience and a range of practice types, provides guidance and assistance to Raymond James’ women advisors. Along with developing strategies for supporting women, the group also serves as a resource to branch and senior management as the firm looks to attract quality female financial advisors. The Council is also responsible for shaping the agenda of the Symposium, from identifying timely topics to leading or facilitating many of the event’s breakout sessions. Karen Schultz, vice president, and director for the Network, says that council members are integrally involved in mentoring activities, from leading monthly conference calls for trainees to providing advice, support, and guidance to experienced advisors. The Network also provides business development support to its women advisors, including offering consulting services to advisors who are considering local sponsorship opportunities, assisting in the creation of materials to promote the event, and, in some instances, providing financial support. Moreover, Schultz points out that the Women's Resource Centerwas created specifically for women advisors and contains links to useful marketing materials and strategies, tips, and best practices for growing a business, an "ask the experts" page, links to Websites containing key information and statistics on women, articles of interest, and a calendar of events.

The Securities and Exchange Commission has released a previously announced set of computer labels corresponding to generally accepted accounting principles that companies can use to make their financial statements more interactive.

Financial Accounting Standards Board Chairman Robert Herz envisions a day when FASB will become part of the International Accounting Standards Board, but there are some hurdles to overcome first.

The Public Company Accounting Oversight Board voted to issue for public comment a proposed policy statement that would allow it to rely on audits done by oversight bodies abroad on non-U.S. firms.

Miss California was forced to give up her crown after accounting errors accidentally mixed up the rankings of the winner with the runners-up.

Accounting firm Hausser + Taylor has changed its name to Maloney + Novotny and severed its association with RSM McGladrey.

Accounting firm Grant Thornton signed a deal to purchase the assets of Goldenberg Rosenthal’s GR Consulting business.

The Financial Accounting Standards Board has issued two statements as it continues on the road to international convergence: on business combinations and on noncontrolling interests in consolidated financial statements.

As the subprime mortgage meltdown grows, some experts are starting to see the resulting fallout rivaling corporate scandals of earlier this decade, like Enron, that prompted the passage of the Sarbanes-Oxley Act.

Tax prep firm Gilman Ciocia has acquired Madison CPA, a Fort Lauderdale accounting firm.

The Treasury Department's recently established Advisory Committee on the Auditing Profession can play a role in improving the usefulness of audits, said a letter from an audit profession watchdog group.

The Financial Accounting Standards Board has released its preliminary views on financial instruments with the characteristics of equity in an effort to simplify a patchwork of 60-plus pieces of guidance.

Adding to its continuing professional education portfolio, Thomson Tax & Accounting has acquired AuditWatch, a high-profile audit-training and process improvement consulting firm headquartered in Reston, Va.

The city of Miami named McGladrey & Pullen as its external auditor.

Problems with revenue, related-party transactions and outside auditors were among the deficiencies found among auditing firms, according to a recent report.

The Tax Council Policy Institute plans to host a webcast on the business tax implications of the Tax Reduction and Reform Act, a bill introduced by House Ways and Means Committee Chairman Charles Rangel, D-N.Y.

The U.S. Supreme Court heard arguments in a case involving the ability of trusts to deduct fees for investment advice.

Something out of the Stanford Graduate School of Business (courtesy of Marguerite Rigoglioso) tickled my interest when she said that two Stanford researchers claimed that what investors fear the most is not the risk of a loss but rather the risk that they may do poorly relative to their peers. This especially comes to the surface in light of the current economic plight and sub-prime mortgage debacle. Apparently, these Stanford researchers, Peter DeMarzo and Ilan Kremer, said that individual investors care deeply about how their level of wealth compares with others in their peer group and community. “Investors fear being poor when everyone around them is rich,” pointed out DeMarzo, the Mizuho Financial Group Professor of Finance at Stanford’s Graduate School of Business. Kremer, who is Associate Professor of Finance, added, “It’s worse to have a lower income in an area where everyone is wealthy than it is in an area where everyone has a similar income as you.” They explained that this concern centers around the fact that the cost of living in any community may very well depend on the wealth of its residents. In other words, the more money people have, the more expensive will be their homes, not to mention all sorts of amenities. Using economic models, the researchers noted that external concerns have great consequences on the manner in which people invest. I don’t find this unusual as people oft-times decide on portfolios based upon what others have. It’s kind of a “herd” mentality with the built-in fear that others will rake in the gold while you will not. DeMarzo and Kremer said that they found a traditional economic assumption whereby people are driven by the straightforward desire to maximize their wealth as simplistic but that as soon as actual consumption decisions are considered, peer pressure comes into play. “We might classify behavior based on relative wealth as ‘irrational,’ but in choosing similar, risky portfolios, investors are actually doing what makes sense to them,” emphasized Kremer. They also discovered that investors tend to congregate around high-tech investments (fiber optics, internet-related infrastructure) that have the potential to return big. “These are typically high-risk stocks that, in seven out of eight cases, are likely to go bust. But people are willing to invest in them in the hopes that they’ll hit that one-in-eight jackpot,” added DeMarzo. According to DeMarzo and Kremer, when people begin gravitating to specific investments, the price of the assets they hold may become over-inflated. However, they do find that even if people know a stock is overpriced, their fear of doing something different from their peers and potentially losing out makes them move in ever greater numbers to the swelling investment. For individuals, herding can also provide a kind of buffer when the bubble bursts. “If everyone loses his or her money together, it’s perceived as not as bad as if just you alone lose,” said DeMarzo. Thus the “keeping up with the Joneses” school of investing has benefits on the upside as well as the downside. I don’t know. I tend to march to my own drummer. It seems to work better than worrying about what others are or are not doing.

KPMG International saw combined revenues from its member firms rise 17.4 percent to $19.8 billion in fiscal year 2007.