Audit

Ernst & Young has shed its investment banking arm by selling the practice to the consulting firm run by former New York City Mayor Rudolph W. Giuliani.

Fewer than one-third of audit committees implement a majority of practices that lead to higher ratings of the financial audit process, according to a report by J.D. Power and Associates.

Filomeno & Company PC, an eight-partner CPA firm based here, has expanded its financial planning practice with the merger of fee-only planning firm Thibodeau Financial Advisors LLC into its fold.

Laura L. Cox, a high-level aide to Securities and Exchange Commission Chairman William Donaldson, is departing the regulator to join Big Four firm PricewaterhouseCoopers as partner-in-charge of professional and governmental activities.

A recent report identified two trends among companies that report material weaknesses -- skyrocketing audit fees and disappearing chief financial officers.

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.

Thanks to some fast footwork by regulators at the Securities and Exchange Commission and the Public Company Accounting Oversight Board, accounting firms and many of their smaller audit clients gained an additional 45 days of breathing room to comply with complex new Sarbanes-Oxley Act internal control reporting rules.

Audit, tax and professional services provider Jefferson Wells, headquartered here, said that it has opened its initial office in Boston, bringing its total number of units to 37. The concern said that David Welch has been named managing partner of the Boston location. Welch's resume includes stints with Spencer Brook Partners and Big Four firm PricewaterhouseCoopers. Welch said that the newest branch would fuel the company's "significant expansion of our East Coast client base." In addition to Boston, Jefferson Wells' 2004 openings include London, Salt Lake City, Las Vegas, Portland, Ore., Grand Rapid, Mich., and San Francisco.

The Public Company Accounting Oversight Board is poised to vote Tuesday Nov. 30 on implementing Auditing Standard No. 2 and the required audits of internal control over financial reporting. In March, the oversight body adopted AS No. 2, which is titled "An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements." The standard addresses both the work that is required to audit internal control over financial reporting and the relationship of that audit to the audit of the financial statements. The requirement pertains to companies with more than $75 million in market capitalization. It is in effect for fiscal years ending on or after Nov. 15, 2004.

Despite Internal Revenue Service assertions that it had halted the decline in the government's efforts to police corporate tax non-compliance, the pace of corporate audits is running well below the record-low levels registered in 2003, according to an analysis of IRS data.

There's good news for accounting and finance professionals - starting salaries are expected to increase an average of 2.4 percent next year. But the news is far better for internal auditors and professionals focused on Sarbanes-Oxley and other corporate governance-related initiatives - they're poised to see huge boosts in base compensation, according to staffing giant Robert Half International Inc.

In an annual survey of recommended projects and priorities, the Financial Accounting Standards Advisory Council has warned the Financial Accounting Standards Board that the world is changing fast and getting riskier, and that the board's agenda will have to prepare accountancy for what's coming.

In an unheralded but potentially earthshaking move, the Financial Accounting Standards Board voted last spring to reconsider its conceptual framework, which was mostly completed in the 1970s and 1980s. In addition, the board plans to work closely with the International Accounting Standards Board to accomplish convergence with that institution's own framework.

Top-ranked accounting and consulting firm Citrin Cooperman has added corporate governance services to its roster. The New York-based firm has hired corporate governance veteran Michael Rhodes to lead the new practice, which will focus on offering Section 404 compliance and other corporate governance services to public, private and nonprofit companies. Citrin Cooperman doesn't offer attest services to publicly traded companies -- the firm gave up its Securities and Exchange Commission practice in 2002. Rhodes, who joined Citrin Cooperman as director of corporate governance, most recently worked at a large consulting firm where he focused on SOX compliance, business process reengineering, financial and accounting system implementation, and other CFO advisory services. Citrin Cooperman ranked No. 45 on the 2004 Accounting Today Top 100 Firms list with $31 million in revenue.

More than half of U.S. and European multinational companies will increase their compliance spending by an average of 23 percent over the next 12 to 24 months, according to a recent survey from Big Four firm PricewaterhouseCoopers. According to PwC's Management Barometer Survey, about 51 percent of those polled said that they would raise spending on compliance, while some 44 percent of senior executives revealed that their respective companies do not have a clear view of their total compliance spending. Overall, companies that responded to the survey indicated that they expect to increase their compliance spending by an average of 9.9 percent over the next 12 to 24 months. A large majority (90 percent) said that during the next 12 to 24 months, they are planning improvements to their company's compliance efforts including risk management, bolstering programs to reduce compliance costs and streamlining cost efficiency. According to the poll, 59 percent of executives surveyed admitted that their compliance programs are "somewhat inefficient," while an additional 5 percent said that their programs are inefficient and that their company spends more than it needs to. Only 32 percent considered their compliance programs "very efficient." Some 49 percent of U.S. and European multinational companies believed that their compliance programs need improvement, while a surprising 52 percent said that they don't understand clearly the value their company receives from compliance spending. The survey, as well as PDF versions of the U.S. and European findings, are available at http://www.barometersurveys.com.

The audit committee of financial services conglomerate American Express Co. approved the appointment of Big Four firm PricewaterhouseCoopers as its auditor for 2005, according to a federal filing. PwC succeeds Ernst & Young as the company's independent accountant. Ernst will remain as auditor for AmEx through Dec. 31. American Express engaged PwC following an extensive RFP process. The company's audit committee conducts a mandatory review of its outside auditor every 10 years. There were no disagreements between American Express and E&Y on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

The Financial Accounting Standards Board has issued FASB Statement No. 151, Inventory Costs. According to FASB, the new statement, an amendment to No. 43 Chapter 4, would improve financial reporting via clarification that abnormal amounts of idle facility expense -- i.e. freight, handling costs and spoilage -- should be recognized as current-period charges. The measure also requires the allocation of fixed production overheads to inventory based on a facility's normal capacity. The standard-setter, headquartered here, said in its clarification of ARB 43 that it adopted language used in International Accounting Standard No. 2 as part of its effort toward convergence to a single set of global accounting standards. FASB said that the guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The statement may be accessed from the FASB's Web site at http://www.fasb.org.

Financial services audit committee members say that the implementation of Sarbanes-Oxley Section 404 is the most pressing issue they face, according to a survey by PricewaterhouseCoopers.

Strong revenue and market share growth don't guarantee a financially healthy independent investment advisor practice -- but being focused and deliberate about the types of clients served and the services offered can drive profitable growth, according to a study of the top firms by Schwab Institutional and Moss Adams.

A recent survey on issues related to long-term care and the sometimes widely varying views between men and women on the subject gives credence to the phrase, "Men are from Mars and women are from Venus."