Audit

Big Four firm Ernst & Young will pay some $125 million to settle ongoing claims stemming from the firm's audit of failed thrift, Superior Bank FSB of Illinois. By virtue of a signed consent order with the Office of Thrift Supervision, E&Y will pay the Federal Deposit Insurance Corp. $85 million as receiver for Hinsdale, Ill.-based Superior, and an additional $40 million in restitution. In the settlement, Ernst & Young didn't admit or deny that its audits failed to comply with any professional accounting standards. The FDIC filed suit against Ernst & Young shortly after Superior Bank was declared insolvent three years ago. The FDIC contended that the audit firm had delayed alerting regulators about improper accounting practices at the banking concern because it was wary that the negative publicity would hinder E&Y's efforts to sell its consulting arm. The suit was dismissed in 2003, but the FDIC subsequently appealed. Ernst & Young said it has since implemented changes to its audit methodology for savings and loan association clients.

Two top executives and auditor KPMG are out this week at Fannie Mae, following the Securities and Exchange Commission's decision that the mortgage giant violated accounting rules, leaving it faced with a massive restatement.

H&R Block Financial Advisors, the investment arm of the tax prep giant, agreed to pay a $500,000 fine and to return $325,000 in clients' mutual fund trading profits to settle charges brought against it by the National Association of Securities Dealers related to the market-timing of mutual fund shares by two of its former financial advisors.

The Global Alliance, an association of top-ranked CPA firms formed last month, has expanded its ranks with the addition of West Coast firm Armanino McKenna LLP to the group.

The American Institute of CPAs has named California accounting professor Robert S. Roussey as the 2004 recipient of its Special Recognition Award, which is presented to individuals who have made substantial contributions to the accounting profession.

PricewaterhouseCoopers said that its fiscal 2004 aggregate net revenues climbed nearly $2 billion to $16.3 billion, an increase of 6 percent in local currencies and just over 13 percent in U.S. dollars.

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Marking its 11th consecutive year of aggregate revenue growth, Big Four firm Deloitte Touche Tohmatsu reported global revenue of $16.4 billion, up 8.6 percent over last year.

The Financial Accounting Standards Board has begun to deliberate again on one of its most far-reaching and controversial projects - that of fair value measurement.

The Public Company Accounting Oversight Board has reportedly opened an investigation into KPMG's audits of mortgage finance company Fannie Mae.

The Securities and Exchange Commission has established an advisory committee to gauge the impact of the Sarbanes-Oxley Act and other aspects of the federal securities laws on the nation's smaller public companies.

Concerns that the outsourcing of finance and accounting functions impedes the ability to control key processes related to compliance and governance appear to have abated, according to a survey commissioned by Accenture.

Following a review of Fannie Mae's accounting practices, the Securities and Exchange Commission said that the mortgage concern didn't comply with two major accounting rules and asked it to restate past earnings.

At long last, the Financial Accounting Standards Board has issued its final rule mandating that companies expense at fair value the stock options that they grant to their employees.

Despite acknowledging the impact of higher producer prices, chief financial officers expect higher capital and technology spending at their companies during the next 12 months, according to a recent survey.

Big Four firm Deloitte & Touche LLP has named 26-year veteran Brian Derksen to the post of deputy chief executive.

While fewer chief executives of America's fastest growing companies are optimistic about the U.S. economy's prospects over the next 12 months, they continue to predict a healthy increase in their own company's revenue growth over the next year, according to a survey by PricewaterhouseCoopers.

Triggered by congressional concerns over the marketing of abusive tax shelters by some accounting firms, the Public Company Accounting Oversight Board has proposed new rules restricting the ability of accountants to provide tax services to audit clients.

While a majority of financial executives polled feel that compliance with the sweeping Sarbanes-Oxley Act was beneficial for shareholders and has bolstered internal controls at their respective companies, just as many think Congress needs to revisit the legislation in the near future.