Audit

Since Section 404 of the Sarbanes-Oxley Act went into effect, both external and internal auditors have been unsure exactly how to treat "the work of others," not to mention "each other."The Securities and Exchange Commission and the Public Company Accounting Oversight Board have made it clear that public auditors need to scrutinize companies more carefully, including their internal controls over financial reporting, but at a PCAOB roundtable discussion in April, auditors and corporate financial officers complained of the increased cost of these intensified audits.

Weak financial management at the Securities and Exchange Commission has led to budget overruns of nearly $50 million in two years, according to a report issued by the Government Accountability Office.

Clerks at the nation's bankruptcy courts processed a record 205,129 personal bankruptcy filings last week, and a private consulting firm estimates that a backlog of unprocessed filings could push the total to 300,000.

A federal prosecutor asked a Los Angeles judge to deny bail to a former KPMG partner indicted in the government's tax shelter fraud case, calling him a flight risk.

According to a recent study, the value of stock options given to employees at the nation's largest companies dwindled by roughly 60 percent throughout 2001-04.

The Securities and Exchange Commission's Advisory Committee on Smaller Public Companies has announced plans for a two-day meeting in Washington, D.C., on Oct. 24 and 25.

The government added 10 defendants to its indictment in the KPMG LLP tax shelter investigation, including the Big Four accounting firm's former chief financial officer, bringing the number of people charged in the case to 19.

The Social Security Administration recently announced the highest cost-of-living increase since 1991, setting the adjustment at 4.1 percent for more than 52 million retired and disabled recipients.

PricewaterhouseCoopers announced that Samuel A. DiPiazza, Jr. has been reappointed to a second four-year term as chief executive of PricewaterhouseCoopers' global organization. His new term will begin Jan. 1.

After trade groups went public with auditor guidance outlined by the American Institute of CPAs in a draft white paper, a number of groups on Wall Street have turned to the federal government with their own concerns.

The Japanese Institute of CPAs said that the nearly 400 accountants belonging to Japan's four largest auditing firms have worked with the same clients for more than seven years.

The Internal Revenue Service could revoke the tax-exempt status of about 20 credit-counseling firms, just as the country's new bankruptcy laws are set to go into effect on Oct. 17.

Media titan Barry Diller said lawmakers should revisit Sarbanes-Oxley, citing that the high cost of compliance is negatively impacting American businesses.

A bill creating a new regulator for Fannie Mae and Freddie Mac and setting capital levels for the two home mortgage giants could be ready for a House vote by the end of the month.

The Public Company Accounting Oversight Board had a harsh critique for several Deloitte & Touche audits performed by the firm last year. The PCAOB's report echoed many of concerns the regulators expressed last week about audits performed during the same period by KPMG.

The Securities and Exchange Commission said the former KPMG accountant who oversaw audits of Xerox Corp. will pay a $100,000 fine to settle charges that he failed to disclose accounting violations that came to his attention.

Eugene D. O'Kelly, 53, former chairman and chief executive of KPMG, died Sept. 10 at his New York City home at the age of 53.O'Kelly remained a senior partner at KPMG after disclosing a diagnosis of advanced-stage cancer in June and stepping out of his leadership role at KPMG, which he had helmed since 2002.

ABAXIS DISMISSES D&T: Blood-analysis systems manufacturer Abaxis Inc. dismissed Big Four firm Deloitte & Touche as its outside auditor, and retained Burr, Pilger & Mayer LLP as its successor.A federal filing did not state a reason for the auditor change, and there were no disagreements with Deloitte on accounting matters.

It's another busy season for us with the beginning of the academic year. As a result, we're buying some time by bringing back an all-time favorite tongue-in-cheek column that sheds light on how ludicrous many important features of GAAP are.If financial statements really are scorecards for business, reporting real outcomes, as well as sources of information for predicting the future, it's essential that they usefully describe what actually happens, instead of what someone hoped would happen.

Houses and offices under water. Looting in the streets. Factories on fire. What's an accountant to do?According to the Financial Accounting Standards Board's Emerging Issues Task Force, treat the situation as ordinary.