Audit

It was a deal years in the making, though industry observers say that it didn't have to be.In striking an agreement to escape a potentially fatal criminal indictment for its sale of legally questionable tax shelters from 1996 to 2002, KPMG will pay a $456 million fine to the federal government and essentially spend the next 16 months on probation. The firm has also agreed to close its tax business for high-net-worth individuals within six months.

While Big Four firm KPMG was busy writing a check for $456 million as a settlement with federal regulators for its part in pushing fraudulent tax shelters, the remaining three global audit firms were either breathing a sigh of relief or wondering if they'll soon receive a request for a chat with prosecutors.Because KPMG avoided a criminal indictment like the one that ultimately proved fatal to now-defunct Big Five firm Arthur Andersen, my guess is you won't see a lemming-like exodus of audit clients like that at Andersen circa 2002.

ZONES INC. DISMISSES PWC: Zones Inc., an Auburn, Wash.-based reseller of information technology products, dismissed Big Four firm PricewaterhouseCoopers as its independent accountant and hired Grant Thornton as its successor.In a filing with the Securities and Exchange Commission, Zones said that it had no accounting disagreements with its former auditor over the last two fiscal years.

Audit committees have never felt so stressed and stretched. Everybody, from stock exchanges to boards of directors to investors, expects more from them, and the penalties for failure have never been more serious.As a result, audit committees are meeting more often, setting more serious agendas tilted more toward inquiry, demanding more of internal auditors, and calling for committee members with better qualifications.

In our preceding five columns, we have expressed our concerns to our good friends at the Financial Accounting Standards Board about their May 2005 exposure draft on the hierarchy of accounting principles.We confess that we yawned when we first saw this document superficially. However, a closer, more careful look made us sit upright and kick into gear. We don't think they meant anything sinister, but we found great hubris in their words.

In a continuing struggle to keep up with the increasing complexity of financial assets and special purpose entities, the Financial Accounting Standards Board has issued three proposals to amend existing statements that have, in just a few years, become - to some extent - obsolete.The proposals are a response to constituents in various sectors who requested clarifications and simplifications of the technically complex Statement 140, Accounting for Transfers and Servicing of Financial Assets, which was seen as becoming harder to interpret and implement as new kinds of financial assets come into existence, especially in the areas of securitizations and special purpose entities.

RIA, a part of the Thomson Corp. providing information and software to tax professionals, has computed the changes to next year's tax brackets, standard deductions, personal exemptions and other important tax breaks.

Insurance company Equitable Life dropped a $3.7 billion lawsuit against accounting firm Ernst & Young, ending what had been the country's largest claim ever brought against an auditor.

William J. McDonough, chairman of the Public Company Accounting Oversight Board, announced that he will resign on Nov. 30 or when his successor is put in place, whichever occurs sooner.

It was a smooth first meeting for Securities and Exchange Commission Chairman Christopher Cox, with the panel voting unanimously to extend the deadline for when small companies will have to have their internal controls documented under Section 404 of the Sarbanes-Oxley law.

The Public Company Accounting Oversight Board will host a forum in Boston to bring information to the small business community.

It's been several days now since Louisiana's treasurer called for the state to hire a Big Four firm to oversee the distribution of billions of dollars in Hurricane Katrina aid.

Louisiana's treasurer said the state should hire one of the Big Four firms to handle the accounting and auditing of the federal funds flowing into the state for the Hurricane Katrina recovery effort.

Three months after restating its 2004 earnings, stun gun manufacturer Taser International Inc. said it had fired its accounting firm.

Employer-sponsored retirement plans, including 401(k) programs, will be allowed to make loans and hardship distributions to victims of Hurricane Katrina and members of their families, the Internal Revenue Service said.

PricewaterhouseCoopers, Britain's biggest audit firm, will face formal complaints from the country's Accountancy Investigation & Discipline Board in connection with the failure of bus manufacturer TransBus.

Ameriprise Financial, formerly American Express Financial Advisors, launched its first advertising campaign since announcing plans to spin off from its parent company, American Express Co.

Merrill Lynch & Co. Inc. announced a new options expensing policy for all U.S. equity research analysts that will be implemented as of the first reporting date after Sept. 30.

The International Federation of Accountants is seeking input for the development of a how-to guide on implementing International Standards on Auditing for small and midsized businesses.

Two technical committees from Financial Executives International have sent a letter making suggestions to the Financial Accounting Standards Board's proposed interpretation, "Accounting for Uncertain Tax Positions."