Audit

Citing objections from banking regulators including the Federal Reserve, the Securities and Exchange Commission said it would delay a plan to oversee brokerage services offered by banks until March 31, 2005.

In one of the first cases of document destruction brought under Sarbanes-Oxley, a former partner in Ernst & Young's San Francisco office pled guilty to falsifying records in a federal investigation, the U.S. Attorney's Office for the Northern District of California said.

Two years after the introduction of Sarbanes-Oxley, corporate reforms are still impacting corporate directors, according to a study by Corporate Board Member magazine and PricewaterhouseCoopers LLP.

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 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.

Following its earlier decision to delay the implementation of a proposed standard to mandate stock option expensing, members of the Financial Accounting Standards Board decided that the standard will apply to private companies and small business issuers for fiscal years beginning after Dec. 15, 2005, as originally planned.

Grant Thornton LLP and its international parent firm are striking back against a $10 billion lawsuit filed against them by bankrupt dairy giant Parmalat.

The most significant challenge facing small firms in the Public Company Accounting Oversight Board's inspection process is the difference between the board's approach versus that taken during the peer reviews of the past, the deputy director of inspections in the board's New York office told a group of CPAs gathered here.

Grant Thornton LLP and its international parent firm are striking back against a $10 billion lawsuit filed against them by bankrupt dairy giant Parmalat.

Members of the Professional Ethics Executive Committee of the American Institute of CPAs acknowledged a series of practitioner's concerns with regard to PEEC's revised interpretation of rules governing members who offer non-attest services to attest clients.

Thomas C. Newkirk, associate director in the Securities and Exchange Commission's Division of Enforcement, will depart the commission in November after 19 years of service to become a partner in the Washington office of the law firm of Jenner & Block LLP.

Member response to the American Institute of CPAs' recently formed audit quality centers has been favorable, an institute vice president told Council members here, noting that the Employee Benefit Plan Audit Quality Center has attracted nearly 700 firms since its launch in March. As of last week, some 690 firms have joined the voluntary center, with five to 10 additional firms enrolling daily, Susan Coffey, AICPA vice president of audit quality and professional ethics, told Council members in an update Monday. The Governmental Audit Quality Center, which launched on Sept. 27, has just begun recruiting members. Coffey noted that some 6,300 firms practice in that environment, which includes the audits of state and local governments and nonprofits, as well as certain for-profit entities that receive government funds. In addition, Coffey noted that 950 firms (auditing 96 percent of all SEC registrants) have joined the Center for Public Company Audit Firms. That center, a revamped version of what used to be the AICPA's SEC Practice Section, launched in January of this year.

In two separate votes at a meeting today, one split and one unanimous, the Securities and Exchange Commission decided to require the registration of most hedge funds, and to propose new rules for companies seeking an initial public offering. Chairman William Donaldson and two Democratic commissioners voted against the two Republican commissioners to push through the tough new rules for hedge funds, which had previously been only lightly regulated. Traditionally investment vehicles for the extraordinarily wealthy, hedge funds have grown enormously over the past few years, both in terms of their assets under management and the types of investors involved. Of particular concern to many are the number of banks and pension plans that have turned to hedge funds as stock market returns have diminished from their dot-com highs. SEC registration would impose new record-keeping and information-sharing burdens on the industry, and require them to allow SEC inspections. Industry groups have complained that the new rules would hit funds with unfairly heavy costs for registration and compliance personnel, among other things. The other, unanimous decision by the commissioners was to propose changes for IPO-seeking companies that would, in some cases, eliminate the 70-year-old "quiet period" before the offering when they must remain incommunicado. "Well-known, seasoned issuers" would be allowed to distribute much more information than they currently can, in the form of media interviews, press releases and even possibly advertising. The proposal will now be sent out for public comment, with opinions required with 75 days of the proposal's publication in the Federal Register.

The Public Company Accounting Oversight Board approved a hefty $152.8 million operating budget for itself during 2005 -- an increase that will allow the PCAOB to expand its staff by 50 percent over the coming year. Most of the 150 new staff positions envisioned by the budget plan will be earmarked for an expansion of the PCAOB's team of auditors responsible for conducting inspections of the 1,389 accounting firms that have registered with the board to audit U.S. corporations. Under the new budget plan, the organization will engage in "an aggressive recruiting effort to hire experienced auditors," and by the end of 2005 the total inspection staff is expected to rise by 90 billets to 220, PCAOB chief financial officer Thomas Hohman said in the meeting at which the budget was approved. But even with a 70 percent boost in manpower, the board's inspection staff could be stretched thin next year. "We would like more [experienced auditors on the team], but we recognize this is a very tight employment market," Hohman said in outlining the budget plan to the five-member board. To achieve these recruiting goals, the board must be in a position to offer "outstanding" career advancement opportunities, as well as salary and benefits that are competitive with the private sector, human resources director Sara Bridwell said. Those sentiments were echoed by PCAOB Chairman William McDonough, who expressed appreciation for Congress' decision to allow the board to set staff salary levels high enough to recruit top prospects. Concluding that the PCAOB would not be able to fulfill its Sarbanes/Oxley Act requirements without such compensation flexibility, McDonough said, "I wholeheartedly support the aggressive recruiting effort we have embarked upon." The PCAOB's entire 2005 budget -- which must still be approved by the Securities and Exchange Commission -- will be funded by accounting support fees and other assessments paid by the U.S. and foreign audit firms that the board regulates. Personnel expenses (including training and recruitment costs, as well as salaries and benefits) will account for the lion's share of next year's budget ($98,900,000), with the rest going for information technology-related expenses, consulting fees and the cost of opening new regional offices in Chicago, Denver, and Costa Mesa, Calif., during 2005. At the meeting, the PCAOB also proposed new rules outlining the procedures under which accountants facing disciplinary actions before the board may seek authority to subpoena documents or witnesses for their defense. Under the proposal, parties subject to disciplinary proceedings before the board will have no "entitlement" to subpoena rights, but will be allowed to request a subpoena from the hearing officer assigned to their case. The hearing officer would have discretion to approve the request if he determines that there is a reasonable basis for the subpoena, and that the evidence subpoenaed would be relevant to the board's decision in the case. The SEC, however, would also have to approve the subpoena before it could be issued.

Nominations are open for CPA Wealth Provider's Second Annual Financial Planning Awards in the following three categories:

The Certified Financial Planner Board of Standards has turned over the setting and promotion of financial planning standards abroad to a newly established nonprofit standards-setting body, so that it can focus its efforts on promoting and setting planning standards in the U.S.

Cynthia Cooper, the former WorldCom vice president of internal audit who exposed the $11 billion fraud at the telecommunications company, is among three CPAs who will be inducted this month into the 2004 American Institute of CPAs Business & Industry Hall of Fame.

The Securities and Exchange Commission sanctioned KPMG LLP, two former partners and a current partner and senior manager for improper professional conduct in connection with audit failures involving licensing and advertising revenue in the past audits of Gemstar-TV Guide International Inc.

Social Security and Supplemental Security Income recipients will see a 2.7 percent bump in their benefits starting in 2005 under a cost of living adjustment announced Tuesday.

The Public Company Accounting Oversight Board will provide its full inspection reports to states that agree to honor Sarbanes-Oxley confidentiality provisions, the board's chairman told state regulators this week.