Regulatory actions and programs

The Securities and Exchange Commission recently settled civil fraud charges against the former general counsel of Comverse Technology Inc.

In a brief filed Monday in federal appeals court, 30 states said that a number of investment banks are liable for their alleged role in Enron Corp.’s accounting fraud.

Two major standards setters have announced the 18 members of a new international working group established as part of a joint project to reconsider their standards on lease accounting.

Just when I thought there was nothing new to say about Enron, along comes Malcolm Gladwell.The New Yorker scribe’s latest article, “Open Secrets,” appeared in the Jan. 8 issue of the magazine and has caused a bit of a stir on the Internet. Several tax, accounting and legal blogs that I regularly troll made at least passing reference to the story, and I was surprised to see outgoing links to the commentary scattered among the postings on gossip site Gawker.com and in a column from ESPN’s “Sports Guy,” Bill Simmons.

The Committee of Sponsoring Organizations of the Treadway Commission has commissioned Grant Thornton LLP to develop guidance to help organizations monitor the quality of their internal control systems.

PEAPACK-GLADSTONE FINANCIAL DISMISSES KPMGPeapack-Gladstone Financial Corp. has dismissed Big Four firm KPMG as its auditor and named Crowe Chizek as its new independent accountant. In a filing, the Gladstone, N.J., bank holding company said that it had no disagreements with KPMG on any matter of accounting principles or practices.

Two of our prior columns critiqued the Financial Accounting Standards Board's recent preliminary views document on its new Conceptual Framework project, which, like many other FASB efforts, is a joint undertaking with the International Accounting Standards Board.Those columns examined the boards' take on financial reporting objectives and relevance, both of which are basically enhanced versions of FASB's first framework from the 1980s. While we see some improvement, we wish that the boards had pushed the envelope further and set the stage for more reformation in practice.

The Public Company Accounting Oversight Board will continue its forums on auditing in the small business environment throughout 2007.

This year should be one of expansion and progress at the Financial Accounting Standards Board. Though the profession will not see the issuance of many final standards, the year's projects should lead up to a productive 2008.Accountants will be keeping their eyes on several crucial projects - but the most fundamentally important may be that of the Conceptual Framework. This project will set the underlying philosophy of accountancy, the basic concepts on which generally accepted accounting standards are built.

A company's obligation to a worker for federal tax purposes depends primarily on whether the worker is an employee or an independent contractor, according to G. J. Stillson MacDonnell, a shareholder at the national labor and employment law firm of Littler Mendelson. "There is no other option," she said.While independent contractor status provides benefits to companies and individuals, it draws hostility from the Internal Revenue Service and state tax agencies, she said.

The Internal Revenue Service announced a formula allowing businesses and tax-exempt organizations to estimate their federal telephone excise tax refunds.In May, the government announced that it would stop collecting the federal excise tax on long-distance telephone service beginning Aug. 1, 2006, and provide refunds for taxes billed after Feb. 28, 2003.

Tax strategies don't just come from nowhere. They arise out of necessity and typically are reactive, constructed as work-arounds to avoid certain tax pitfalls or to meet certain rules. Viewed from this perspective and appropriate to the start of a New Year, we offer our list of the Top 10 tax developments of 2006 that will shape tax strategies in 2007.* No. 1: The IRS's use of the economic substance doctrine. Under the economic substance doctrine as adroitly used by the Internal Revenue Service Chief Counsel's Office in the Coltec case, Black & Decker and other tax-shelter-related litigation, a tax strategy can conform to the letter of the Revenue Code, yet fail to win the desired result.

In pursuit of auditing standards that would be clear to auditors around the world, the International Auditing and Assurance Standards Board has issued exposure drafts of existing international standards that have been recast in a clearer form.While the changes do not affect auditors in the U.S., who audit under the standards of the Auditing Standards Board, that board may soon begin a similar clarification process, perhaps following the IAASB model, or perhaps devising its own.

The Financial Accounting Standards Board has created a new committee comprised of a dozen individuals from the investment community who regularly focus on accounting and financial reporting matters.

Rep. Barney Frank said that wage inequality among U.S. workers is his No. 1 priority as he prepares to take over chairmanship of the House Financial Services Committee this week.In a speech at the National Press Club, Frank, D-Mass., said that he will hold hearings about wages over the next two years in an attempt to address the gap between economic growth and workers' wages.

As president and chief executive of the Institute of Management Accountants for the past three years, Paul Sharman has worked to establish a new direction for the association.Sharman’s ultimate goal is to reposition management accountants at the forefront of the accountancy profession, and in recent years the IMA has focused on advancing the management accounting and finance profession through certification, superior professional ethical standards and competence-based continuing education.

It was just this July that I authored a column praising Securities and Exchange Commission Chairman Christopher Cox for successfully navigating through a number of potentially sensitive issues during his first year on the job.Among one of the examples I cited was Cox’s handling of a number of investigations involving the practice of stock-options granting to executives. Now, just four months after implementing tough new rules on how companies have to disclose executive compensation, the SEC issued a quiet statement on Dec. 22 saying that it would take another look at those rules.

The International Federation of Accountants is proposing the first major revisions to its code of ethics for accountants since late 2001.

The President's Identity Theft Task Force announced that it is seeking public comment on various recommendations to improve the effectiveness and efficiency of the federal government's efforts to reduce identity theft.

Refco Inc., which collapsed amidst the revelations of an accounting scandal just over a year ago, has emerged from Chapter 11 bankruptcy to wrap up its business.A federal bankruptcy court approved the company’s exit plan on Dec. 15 to essentially dissolve itself by selling off its remaining operations and eliminating others. Payouts won’t put much of a dent in the $16.8 billion that creditors have claimed they are owed.