Audit

Significant internal control weaknesses remain in the preparation of the U.S. government's consolidated financial statements, according to a report from the Government Accountability Office.

DREAMS INC. ENGAGES FRIEDMAN COHENSports memorabilia and licensing concern Dreams Inc. has named Friedman, Cohen, Taubman & Co. as its auditor.

With the exploding interest in and acceptance for market-value-based information in financial statements, we thought we would rerun a couple of columns from several years back as part of our summer tradition.This one was published in spring 2001, and talks about the hole in generally accepted accounting principles, even value-based GAAP, that continues to insist that there is a difference between unrealized and realized gains and losses. At the heart of this anachronistic practice is confusion between income and cash flows, which are two different things best described in two different financial statements.

Bob Levy of New York City-based Levy & Associates called to tell me about a CPA Career Day and The Singing CPA. I thought the idea a superb one. You see, students from the Academy of Finance schools in New York City had the opportunity to get a firsthand look inside the world of accounting at this year’s CPA Career Day, an event that featured speakers from Goldman Sachs as well as music from “The Singing CPA,” who played songs spiced with accounting-related lyrics. Sponsored by the Academy of Finance and the New York Society of CPAs, it was attended by high school students, many of whom are considering the field of accounting in their future. According to Joshelyn Vivas, a junior at John Dewey High School, the event was not only informative but motivating, as well. “After listening to the speakers it makes me want to be a CPA and take the exam. An accounting firm is where I want to be.” Julie Levin, a Goldman Sachs vice president in their tax department, notes that putting in the hours is one of the most surprising things for students. “I kind of tell people that you’re likely to start out working about 55 hours and that doesn’t include email time, coffee, or lunch breaks.” Regina Flannery, Director of the Academy of Finance, points out, “The fact that the students have the opportunity to gain access to successful professionals in the accounting field will prove extremely beneficial. What we’re really trying to do is give the students a three-dimensional look at a potential career choice. While many of these students may not choose accounting as their profession, they’ll at least have had the chance to see what the field has to offer.” This is extremely important says Levin because in the end she feels that it’s really the students who have to decide what they want to do with their future. “No one can make that decision for them. It’s all about taking your career in your own hands. If you want to do international travel, you really have to let people know.” Providing much of the entertainment was Steven Zelin, also known as “The Singing CPA.” He currently works at Societe Generale, a large corporate investment bank, in addition to having his own consulting CPA practice. “I enjoy sharing my experience as a CPA with young people,” says Zelin. “A lot of the students think first off that being a CPA is all about the numbers, but it’s really being able to work well with other people as well as understanding business and accounting concepts.” He adds that becoming a CPA provides a strong foundation for many types of careers in business. “I think that the training you get from studying accounting provides a terrific foundation for developing a good financial perspective on life.” He also stresses that becoming a member of the NYS Society of CPAs would be a sound financial investment to students looking to go into the field. The Academy of Finance is a partnership of the New York City Department of Education, the National Academy Foundation, and the New York business community. The Academy introduces students to a variety of career opportunities in the financial services industry while equipping them with the conceptual and practical tools they need to choose their future profession. The National Academy Foundation creates partnerships between business leaders and education through an innovative educational model. Its small public school-based learning communities empower high school students to successfully go on to higher education and professions of their choosing. Thanks, Bob.

Judge Lewis A. Kaplan, who dismissed charges against 13 of the defendants in the KPMG tax shelter case earlier this week, has issued a temporary stay on his own decision.

The Public Company Accounting Oversight Board said it plans to hold a meeting to consider a new ethics and independence rule concerning communication with audit committees.

Securities and Exchange Commission Chairman Christopher Cox told a Town Hall Los Angeles meeting that he wants Congress to give more power to the Governmental Accounting Standards Board so GASB can police accounting practices at the state and local government level and better regulate the municipal bond market.He would like the SEC to be able to enforce GASB accounting rules when it sees a violation by a state or local government, similar to the way the SEC can take action against companies that flout Financial Accounting Standards Board rules. Texas and Connecticut have both passed bills recently allowing alternative accounting rules, although Connecticut Governor Jodi Rell has vetoed that state’s bill.

A group of companies and organizations in the United Kingdom has responded to the Financial Reporting Council's report on constraints in the audit market that have forced most large public companies to rely on one of the Big Four accounting firms for audit services.

Louisiana accounting firms LaPorte Sehrt Romig Hand CPAs and the Gautreau Group plan to merge on October 1.

A federal judge has dropped the charges against 13 defendants in the KPMG tax shelter case.Judge Lewis A. Kaplan of the U.S. District Court in Manhattan blamed prosecutors for forcing the Big Four accounting firm to stop paying the legal fees of the 13 defendants and said their constitutional rights had been violated.

Many people believe in collectibles as another track of asset allocation. In other words, buying and maintaining certain pieces of collectibles is seen as an additional brick in their financial planning foundation. It’s all part of establishing a net worth. For many of my age group, we had a great collection of comic books until we went away to college and returned home to find that our mother had cleaned out the garage and tossed all those dust-carrying original copies of Superman. We all experienced that one. But, as I grew older, the penchant for comic books ceased and I gravitated to something with wheels. I have a car that is now 17 years old. Yes, you read that right. 17! It has a mere 110,000 miles on it and is in mint condition. It was also, when it was unveiled in 1990, rated by most of the motor trend magazines as the car of the year. It certainly, over its lifetime, has lived up to that accolade. I noticed that before it hit the 15-year mark, its valued had certainly dropped. But, as soon as it passed the 15-year threshold, I saw an immediate rise in value as it entered the “classic” stage, which it is today. So, this to me is like money in the bank. As long as I keep it in such great condition with constant mechanic supervision, I have developed a pretty good asset. Some people don’t gravitate toward cars but more toward, let’s say, art. A few weeks ago, I visited the Raymond James Financial center, its corporate headquarters in St. Petersburg, Florida, to talk with various executives to find out where they are heading with the financial planning explosion upwards because of the Baby Boomers. Talk about asset allocation. I was opened up to the Tom and Mary James/Raymond James Financial Arty Collection, one of the country’s largest private collections. It consists of more than 1,850 pieces including original paintings, sculptures, and graphics in both prints and posters. Tom James, Chairman of the Board and CEO of Raymond James Financial, and his wife Mary, own more than 95 percent of the collection. It is on display at the firm’s corporate headquarters. The art is placed on different floors of each campus building according to style and theme. Mr. James has selected almost every piece of artwork himself. While some of the artists in the collection are now deceased, he believes buying works from living artists helps to sustain them in their profession. Although the collection began in the late 1950s with predominately American artists, primarily from Florida, it has grown to include works by such artists as Alfredo Arreguin, Alexander Calder, Mihail Chemiakin, Salvador Dali, Jacob Lawrence, Roy Lichtenstein, Joan Miro, Leonardo Nierman, Robert Rauschenberg, James Rosenquist, Andy Warhol, Jamie Wyeth and Victor Vasarely, among others. In the mid 1980s, while on trips to Colorado and New Mexico, Mr. James began to collect Western and Southwestern art. At the present time, more than half of the collection consists of Western/Southwestern styles of art, including works by Roy Anderson, Earl Biss, J. D. Challenger, Glenna Goodacre, The James family, as well as Raymond James Financial, has long been a supporter of the arts. This year, for the fifth consecutive year, Raymond James Financial will be the major sponsor for the renowned Raymond James Gasparilla Festival of Arts. In addition, Mr. James is currently president of the Salvador Dali Museum Board of Directors. Hmmm. Is he interested in trading a piece of art for my car? Probably not. And I probably wouldn’t, either.

Ernst & Young and Grant Thornton may find themselves fending off legal claims of professional negligence and fraud from Refco shareholders in the wake of a report from the defunct financial company's bankruptcy examiner.

Grant Thornton has merged its Irish subsidiary with RSM Robson Rhodes in Ireland, after merging the two firms in the United Kingdom.The combined firm, Grant Thornton Ireland, builds GT's presence on the Emerald Isle and creates the sixth largest firm in the country, based on fee income.

The Institute of Internal Auditors has appointed Gerald D. Cox as chairman of the board and elected a slate of other board members.Cox heads the internal audit partnership at South West Audit Partnership in Yeovil, U.K. Joining him on the board is Patricia K. Miller, a partner at Deloitte & Touche in Pleasant Hill, Calif., who was elected as senior vice chairwoman.

I first came across the term a number of years ago when consultants stressed to me the importance of identifying where a business was in its life cycle. These consultants believed businesses and industries have a life cycle, and the key is identifying where the business is at that time. In the case of a business, its life cycle includes progressive identifiable stages, such as the “seed,” start-up, growth, established, etc.

A survey of internal auditors around the world found increasing adherence to standardization and a growing impact on organizational governance and risk management.

E&Y DISMISSED AS CYGNE AUDITORCygne Designs, a New York-based clothier, dismissed its auditor, Big Four firm Ernst & Young, and named Mahoney Cohen & Co. as its new independent accountant.

This column is approximately the 250th that has appeared under the title of "The Spirit of Accounting." Paul Miller has been around for all of them, and Paul Bahnson for the latest 150. As we were looking ahead to what to write about next, we looked back to the first few columns we published to see whether their messages might still be relevant for today.It turns out that they were, and we thought it would be insightful to reprint this one that first appeared in September 2000. One of the issues being debated at that time was the question of whether non-audit fees could compromise auditor independence. In those days, Enron was considered to be an amazing company, instead of the economic disaster that we now know was going to happen in 2001.

Big Four firm PricewaterhouseCoopers agreed to pay $225 million to settle a securities and accounting fraud class-action lawsuit brought by Tyco shareholders. The accounting giant's payment, combined with Tyco's share, will bring the total amount of the settlement to $3.2 billion including interest, according to the three law firms representing the plaintiffs: Grant & Eisenhofer, Schiffrin Barroway Topaz & Kessler, and Milberg Weiss.

Little Rock, Ark. - Arkansas accounting giant Moore Stephens Frost has acquired a North Carolina firm, Lynch and Howard.