Audit

A sampling of tax returns filed by fishermen in 2004 revealed that thousands of workers had overpaid an average of $530, after failing to take advantage of the averaging provision in calculating their income tax liability. According to the report from the Treasury Inspector General for Tax Administration, more than 4,600 taxpayers -- about 90 percent of the fishermen who could have benefited from the averaging provision -- didn't take advantage of the provision included the American Jobs Creation Act of 2004. TIGTA said that the overpaid taxes for the individual returns filed during the 2004 tax year totaled more than $2.4 million; and a startling 90 percent of the fishermen’s returns were prepared by paid tax preparers. The 2004 law allows fishermen to elect to compute their tax liabilities by averaging all, or a portion, of their taxable fishing income from the prior three years. The measure was designed to help fishermen recover from low-income years by keeping more of their income in successful years and offsetting potentially high tax burdens in isolated years. At the time of its enactment, the Joint Committee on Taxation estimated the provision could save fishermen up to $61 million in taxes over the next decade -- between $3 million and $10 million annually. During a prior audit, TIGTA noted that less than one half of taxpayers who could benefit from a similar provision for farmers, had actually taken advantage of the measure. The inspector general recommended to a variety of federal offices that a better and broader effort be made to educate both fishermen and tax preparers about the averaging provision. The full report is available at www.treas.gov/tigta/auditreports/2006reports/200630158fr.pdf.

The Internal Revenue Service has issued details on the process for military reservists called to active duty to receive payments from individual retirement accounts, 401(k) plans and 403(b) tax-sheltered annuities, without penalities.

A Boston-based investment fund has received the go-ahead from a state court in Virginia to move ahead with a $51 million lawsuit against accounting firm Goodman & Co. LLP.

Two major players in the accounting scandals at energy giant Enron Corp. and telecom powerhouse WorldCom Corp. moved a step closer to punishment for their crimes.

PricewaterhouseCoopers announced the launch of a United States-based valuation practice offering a full range of valuation services. The Big Four firm has organized its valuation services into two teams. Offerings from the Transaction Services Accounting and Valuation Advisory practice are aimed at helping companies meet financial reporting and tax valuation requirements, especially those related to mergers and acquisitions. The practice will be lead by New York partner John Glynn, a former professional accounting fellow at the Securities and Exchange Commission and PwC's representative to the Appraisal Issues Task Force. Meanwhile, Chicago-based partner Mark Haller will head the firm's Business Analytics team that will offer applied valuation analysis and advisory services to help companies make business decisions. Haller is already the leader of PwC's Economics and Strategy practice. Both teams will operate with a goal of providing quantitative support to help clients makes decisions on issues such as new market entry and competitive threats, dispute resolution, changing and emerging business models, internal investment choices, product pricing, product rationalization and extension, and customer value assessment. The service was specifically created with non-audit clients in mind. PwC said that with the U.S. launch, it is capable of delivering valuation services worldwide through a team of more than 1,550 valuation professionals.

The Securities and Exchange Commission has awarded a trio of contracts -- totaling $54 million -- to transform the financial statements in its Edgar database to interactive information. The SEC hopes that the spending will propel the agency’s 1980s-vintage public company disclosure system from a form-based electronic filing cabinet to a real-time search tool with interactive capabilities. The investment is a likely precursor to widespread adoption of interactive data filing by companies that report their financial information to the SEC, which has been part of a voluntary pilot program loudly praised by SEC Chairman Christopher Cox. Financial organizations such as the Federal Deposit Insurance Corp., the Federal Reserve and the Comptroller of the Currency all already require banks to use the Extensible Business Reporting Language format. XBRL is a technology that tags financial information through disparate applications and carries it through the business reporting chain. The SEC hasn’t required companies to file their information in an interactive format largely because the XBRL labels haven’t all been completed, and because the commission’s own database can’t utilize the capabilities of the programming language. XBRL US Inc. received one of the contracts, for $5.5 million, to complete the writing of XBRL “taxonomies,” so that every item in a company’s financial statement, such as net income or gross sales, can be assigned a unique computer-readable label. The company, originally formed as a volunteer committee of the American Institute of CPAs, also announced that it will operate independently in the future -- as a nonprofit, member-supported entity of XBRL International Inc. XBRL US will have responsibility for the development of the computer standard in America and is expected to complete the SEC work within a year. The remaining contracts were awarded to: · Keane Federal Systems Inc., for $48 million, to modernize and maintain the database. The contract covers up to a six-year period -- an initial three-year contract term, plus three additional one-year terms. As part of the contract, Keane will partner with other technology firms, including BearingPoint, Microsoft, Rivet Software, EMC and Akamai. · Rivet Software and Wall Street on Demand, for $500,000, to create a new generation of interactive investor tools on the SEC’s Web site. The existing Edgar system is already one of the largest U.S. government presences on the Internet. Over 700,000 documents and data sets are filed on the system each year. However, the information Edgar stores is locked in essentially the same kinds of forms that the SEC has used for 72 years, since it first introduced Form A-1 for securities registration in 1934.

A federal appeals court ruling has essentially thrown the issue of whether shareholders should be able to nominate candidates in corporate board elections back to the Securities and Exchange Commission. A SEC has scheduled an Oct. 18 hearing on the issue, and Chairman Christopher Cox has said he wants the matter resolved before 2007 corporate meetings begin taking place. The Sept. 5 court ruling said that SEC staff improperly allowed American International Group Inc. to block a measure that would have made it easier for investors to nominate their own candidates for the board.

On the heels of the new risk assessment standards rolled out by the American Institute of CPAs, Thomson Tax & Accounting and the PPC brand are offering two new audit tools. PPC’s Smart e-Practice Aids focused on risk assessment, allows users to automatically generate customized audit programs based on risk assessments. Specifically, the aid will:

California’s Franchise Tax Board is in the process of notifying more than 200 corporate taxpayers that their information was made public Sept. 19 when an employee accidentally e-mailed a list of companies under audit. The e-mail distribution list included two writers for BNA, a publisher of print and electronic news, which promptly reported that the listing of taxpayers under audit for tax years 2003 and earlier had been released. The list included the name of the taxpayers, their identification numbers, and the name of the auditor assigned to each case. The tax board is responsible for collecting state personal income taxes, as well as bank and corporate taxes for the entire state. Under California’s Revenue and Taxation Code, the board must notify taxpayers that their information had been disclosed, and the responsible employee can be charged with a misdemeanor. An FTB spokeswoman told BNA that the employee intended to send the message to himself, but accidentally sent the message to a broader distribution list. In a follow-up email sent the same day, he asked recipients to permanently delete the e-mail from their computers. According to BNA, the list includes several well-known corporations in a variety of industries, including entertainment, energy, electronics, and banking. Notes in the file appear to show that several of the taxpayers are being audited for possible participation in abusive tax shelters.

The Public Company Accounting Oversight Board has announced two upcoming meetings -- one for its Standing Advisory Group in Washington, another a Philadelphia forum on auditing in the small business environment. The advisory group, which is comprised of 31 individuals who advise the board on auditing and professional practice standards, will meet on Oct. 5 at the Army and Navy Club in Washington. The group will discuss the board’s proposed standards-setting activities for 2007 and ways of measuring the success of the PCAOB. A panel discussion on the attributes of auditing in a smaller-firm environment and the attributes of auditing smaller issuers will also be held. The meeting is open to the public and will be Web cast on the board’s Web site, www.pcaobus.org, where an agenda is available. Separately, on Oct. 16, the board will host one of its regular forums for small business auditors. The program will be hosted by board member Kayla J. Gillan along with staff from the offices of inspections, enforcement and standards-setting, and will focus on educating smaller registered accounting firms about the board’s work. The forum will be held at the Rittenhouse Hotel and be open to auditors from smaller registered public accounting firms, who can earn continuing professional education credits. The board plans to hold two more forums in New York City and Chicago. Information on how to pre-register for the event, which is a requirement, is available by calling (202) 207-9061.

With their sentencing dates approaching, former Enron chief executive Jeffrey Skilling and former chief financial officer Andrew Fastow are taking divergent routes in the image they portray to the court. Skilling, 52, was ticketed for public intoxication earlier this month in Dallas, according to a report in the Houston Chronicle. The paper said that Skilling, who was not drinking at the time of the arrest, received a $385 ticket on Sept. 9 at about 1:45 a.m. and was briefly detained in a city jail. Public intoxication is a misdemeanor and punishable by a fine of up to $500.

Did you ever stop and think why you are now at the ATM machine again taking more money out when you were just there a few days ago? Does it seem like you are constantly replenishing your wallet and can’t understand why? Visa did something about it. They decided to do some research on where money goes, other than, of course, paying for their credit cards or people charging on the Visa card. Actually, in England, they discovered that the Brits spend as much as $160 billion (yes, with a “B”) a year but have no idea where that money went. Actually, Visa surveyed more than 1,000 people and found out that the average adult was spending some $60 every week with no idea of where the money was going. In other words, in answer to the question, “On what did you spend that extra $60?” the response was “I don’t remember.” Now, according to Visa, if you didn’t spend that $60 a week for something you don’t recall, you could have paid for the following: 1) All your electric and water bills for a full year 2) 96 percent of traveling costs for year 3) Your weekly grocery shopping for some nine months of the year 4) Three months’ of mortgage payments. So, to where is this money traveling? Visa says that most people spend more than they would like when grocery shopping (that’s the impulse buying habit) and on entertaining for children or grandchildren, not to mention their own “night out.” Who spends the most? Oddly enough, men do, averaging some $70 a week compared to half that by women. So ends that woman/shopping myth. Also, those 18-24 year olds spend almost a $100 a week. Who spends the least? Besides a five-month old baby, it’s the over 55ers who only use up about $30 a week on items they don’t remember buying. So, what does Visa recommend? They suggest monitoring your money through online banking and by maintaining accurate records every time you go to that ATM machine; in other words, marking down what the money’s for. According to Visa, if you can check your bank balance from home, you will find this is an enormous benefit in indicating what’s happened to your money.

Don Ogilvie, who served as president and chief executive of the American Bankers Association for two decades, has joined Big Four firm Deloitte as senior advisor to the firm’s banking and finance industry group.

In testimony before lawmakers, Securities and Exchange Commission chairman Christopher Cox defended the Sarbanes-Oxley Act, but sided with critics of the sweeping reform act who maintain that parts of the mandate need to be changed— in particular Section 404.

Nearly one year after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was passed into law, a study by information and research services provider LexisNexis found that Chapter 7 bankruptcy filings were 71 percent lower than over the same period for 2004.

Despite corporations gaining more experience with complying with the mandates of Sarbanes-Oxley, concerns over the burdens of its implementation have grown over the past several years.

In the sideshow to the main event, KPMG landed its own courtroom blow this week -- filing a claim seeking compensation from some of its former employees indicted in connection with the firm's sale of questionably-legal tax shelters.

The Securities and Exchange Commission's top accountant has added his thoughts on how to properly account for stock options in the historical financial statements of public companies.

A couple of months ago I came across the television and radio commercials of GoodAccountants.com and they got my back up.

The Government Accountability Office has released an updated listing of public companies that have made a financial restatement announcement because of financial reporting fraud or accounting errors.