Regulatory actions and programs

NEOPHARM RETAINS BDO SEIDMANPharmaceutical concern NeoPharm Inc., a marketer of cancer treatment drugs, has engaged BDO Seidman as its new independent accountant, succeeding Big Four firm KPMG.

Two years ago, we criticized the Financial Accounting Standards Board for publishing an exposure draft that proposed doing away with the Rule 203 exceptions that permit, and even encourage, departures from generally accepted accounting principles when compliance would produce misleading financial statements. Underlying this proposed action was a presumption that compliance with published GAAP always leads to relevant and reliable information. Back then we prepared a series of columns describing the intolerable flaws in this premise.The first two focused on how essential it is to allow Rule 203 exceptions to foster innovations when the old ways can no longer be considered adequate.

Computer maker Dell said its audit committee has finished its investigation into the company's accounting and financial reporting issues and has identified significant errors and irregularities.

On a muggy July day five years ago, President George W. Bush put his pen to the Sarbanes-Oxley Act, an expansive piece of corporate reform legislation designed to help restore investor confidence in a nation scarred by an apparently unending series of accounting scandals.The 11-section measure, which essentially changed the way public companies do business, ushered in a cascade of new reforms, service prohibitions and standards for public issuers, their boards and the CPA firms that audit them. It was the most deliberately invasive regulatory reform passed since the Roosevelt administration, touching nearly every aspect of the financial reporting process.

Is the Governmental Accounting Standards Board in trouble? "Trouble" may be too strong a word, but it's been a bumpy couple of months for the state and local government standard-setter.In December, the Government Financial Officers Association voted to "re-assess GASB's role as the authoritative accounting standard-setting body for state and local governments."

The Securities and Exchange Commission approved the Public Company Accounting Oversight Board's new internal control auditing standard by a 5-0 vote in late July.Registered audit firms are now required to use the new standard for all audits of internal controls no later than for fiscal years ending on or after Nov. 15, 2007. Auditing Standard No. 5 replaces the older AS2.

This coming January officially marks the three-year countdown before the axe falls on the lower individual capital gains rates now in place.Since May 6, 2003, thanks to the Jobs and Growth Tax Relief Reconciliation Act of 2003, gain from the sale of most long-term capital assets is subject to a maximum tax rate of 15 percent (5 percent for individuals in the 10 percent or 15 percent tax bracket). Starting in 2011, however, these rates are scheduled to revert to their former pre-May 6, 2003, levels of 20 percent and 10 percent, respectively. Nevertheless, before the party ends, a 0 percent rate will replace the 5 percent rate for tax years beginning after Dec. 31, 2007.

The Governmental Accounting Standards Board has unveiled a new standard on accounting and reporting for intangible assets, clearing up a requirement of Statement 34 that had caused widespread uncertainty in the preparation and comparison of governmental financial reports.GASB Statement 51, Accounting and Financial Reporting for Intangible Assets, adopts a clear and simple description of intangibles as assets that have no physical substance, are non-financial in nature, and have a useful life extending beyond a single reporting period. Such assets would include easements, internally generated and third-party computer software, water and timber rights, patents, and trademarks.

On the heels of a conviction against former Brocade Communications CEO Gregory Reyes, the Securities and Exchange Commission has filed fraud charges against Michael Byrd, the company's former CFO and COO.

Thomson Tax & Accounting's Practitioners Publishing Co. unit has beefed up its audit guidance line with two products aimed at auditing construction contractors and financial institutions.

BDO Seidman was ordered to pay $170 million in compensation and $350 million in punitive damages by a Florida jury that blamed the accounting firm for negligence in failing to uncover fraud in its audits of a financial services company.

At least 61 percent of sole proprietor companies are underreporting their net business income, but a small proportion of them account for the bulk of understated taxes, according to a report by the Government Accountability Office.

Accounting irregularities caused Beazer Homes to delay its third-quarter financial report after the company said in a financial filing that it had encountered accounting problems.

The Internal Revenue Service and the Treasury Department's Office of Tax Policy have released a "priority guidance plan" for 2007-2008, outlining the 303 projects they plan to complete through June 2008.

Linden Lab, creator of the online virtual world Second Life, has begun outsourcing its finance and accounting work to Consero Global Solutions.

Board directors and general counsel are spending more time on enterprise risk management as a result of Sarbanes-Oxley compliance, but they would prefer not to, according to a newly released study.

The Securities and Exchange Commission filed charges against the former CEO, CFO and treasurer of natural gas distributor Nicor, charging the Chicago-area company with financial fraud spanning the period of 1999 to 2002.

Paragon Computer Solutions has integrated its TripsWare online travel and entertainment expense management system with Sage Software's Peachtree Accounting.

The American Institute of CPAs is criticizing proposed regulations for how post-death events might be considered in determining the value of a taxable estate.

Roel Campos, one of the two Democrats on the five-member Securities and Exchange Commission, announced plans to return to the private sector next month, further tipping the balance on the panel as the SEC continues to issue and enforce regulations affecting accountants.