Regulatory actions and programs

The Public Company Accounting Oversight Board announced that chief administrative officer Paul Schneider and public affairs director Christi Harlan will leave the board this month. Schneider joined the PCAOB in January 2003 as interim chief administrative officer, taking responsibility for a variety of start-up related activities. He was named chief administrative officer four months later. PCAOB Chairman Mark Olson said Schneider was instrumental in leading the selection of key personnel to head the board’s administrative offices, including information technology, finance, human resources and facilities management, as well as managing the budget and design aspects of the board’s benefit plans. Before joining the board, Schneider was the managing principal of Vector Recovery Group LLC, a turnaround management firm that provided restructuring and crisis management services. He has not announced his future plans. Harlan joined the board in April 2003, and said in a statement that she would be leaving to seek a new venture in public service. Harlan came to the PCAOB from the Securities and Exchange Commission, where she served as public affairs director from January 2002 until April 2003. Prior to her SEC service, Harlan was director of external affairs at the Federal Emergency Management Agency and communications director for the Senate Committee on Banking, Housing and Urban Affairs.

A $39.5 million settlement between PricewaterhouseCoopers and investors in a mortgage loan fund is a done deal, now that the California Supreme Court has officially dismissed the original filing. The state’s highest court had agreed to hear the case back in March, just days before the plaintiffs reached a settlement after agreeing to mediation with the Big Four firm. That settlement has since received approval from both a federal bankruptcy court as well as the Alameda County Superior Court. Both sides requested a dismissal of the case in early September. The plaintiffs sued PwC in 2002, accusing the firm of abetting a fraudulent scheme carried out by then general partner, James Hillman, of two partnerships in which they had invested. Hillman and the director of the mortgage fund were sued in 2001 by the Securities and Exchange Commission. According to court filings, PwC audited the financial statements of the two partnerships in 1999, but ended its audit after telling Hillman he had given the firm falsified audit reports. The case itself had questioned whether PwC was required to inform investors of the fraudulent scheme. The money will go into a fund established under a global settlement agreement reached in federal court in 2002, and be distributed to plaintiffs.

The Internal Revenue Service has launched its much-anticipated Income Verification Express Service or IVES, a program offering immediate electronic delivery of client tax and income information to financial lenders such as mortgage companies.

Lawmakers have passed a provision as part of the sweeping Financial Services Regulatory Relief Act of 2006, that exempts CPAs from the Gramm-Leach-Bliley Act’s requirement that they send clients an annual privacy notice.

Just one week after the Treasury Department released a report on its strategy for closing the $300 billion tax gap, the ranking minority member of the Senate Finance Committee labeled the plan “incomplete” and not credible.Sen. Max Baucus, D-Mont., said he would continue to hold up the nomination of Eric Solomon as the assistant Treasury secretary for tax policy.

Several more 2007 Toyota models have been certified by the Internal Revenue Service to qualify for the hybrid tax credit enacted by the Energy Policy Act of 2005.

When the Auditing Standards Board met back in August, its discussions were appropriate for a mid-to-late summer session - relatively quiet, with no pronouncements issued, no exposure drafts, just some pensive ponderings on progress soon to come.While topics included communication, clarity and auditor reports, and although it did not reach any decisions, the board felt that the roundtables could eventually lead to broad and substantive changes in the nature and form of information relating to audits.

FOREST OIL TAPS E&Y: Denver-based Forest Oil Corp. dismissed its auditor, Big Four firm KPMG, and hired Ernst & Young as its new independent accountant. In a filing, the oil and gas exploration concern said that the decision to jettison KPMG was approved by its executive committee. KPMG's reports on Forest Oil's two most recent fiscal years ended Dec. 31, 2004 and 2005, did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.ENTRAVISION ENGAGES PWC: Spanish-language media concern Entravision Communications Corp. terminated McGladrey & Pullen as its independent accountant and named Big Four firm PricewaterhouseCoopers as its replacement.

Edward W. Trott, a member of the Financial Accounting Standards Board, said that he would step down from that position in June 2007, after eight years on the board of the standard-setter.Trott had accepted a second five-year term in July 2004, but at that time had advised the trustees of the Financial Accounting Foundation - the body responsible for the oversight, administration and finances of both FASB and its counterpart for state and local government, the Governmental Accounting Standards Board - that in 2006 he would re-evaluate his ability to complete that term. The foundation is also responsible for selecting the members of both the FASB and GASB boards. FASB's board is currently comprised of seven members.

In July, the Financial Accounting Standards Board announced that its agenda now includes a major project on lease accounting. As justification, the board cited encouragement from its own advisory councils and the Securities and Exchange Commission staff, all of which apparently concurred that "current lease standards fail to provide complete and transparent information."The announcement also stated that "lease arrangements have evolved considerably over the past 30 years and the standards are outdated." We're tempted to say, "Well, duh!" but we won't because of our great satisfaction that the board is preparing to throw out this example of WYWAP (Whatever You Want Accounting Principles) and POOP (Pitifully Old and Obsolete Principles).

Poor oversight and shaky internal controls on the use of government purchase cards to make relief transactions for victims of Hurricane Katrina led to widespread abuse and fraud, according to a report issued by the Government Accountability Office.

The threat by Sen. Max Baucus, D-Mont., to hold back the appointment of Eric Solomon as assistant secretary for tax policy at the Department of the Treasury is misplaced, according to observers.Baucus, the ranking member of the Senate Finance Committee, said that he would place a hold on President George W. Bush's nominee for the Treasury's top tax position unless the department details how it will close the tax gap.

The Securities and Exchange Commission and the Department of Justice formally supported the constitutionality of the Public Company Accounting Oversight Board with the filing of a 46-page legal brief just before Labor Day.The brief outlined the government's arguments in support of the PCAOB's constitutionality, and was submitted in the U.S. District Court for the District of Columbia in a case brought by the Free Enterprise Fund in February.

Should governments provide more information on their economic conditions? How should changes in the fair value of government investments be measured? Is the Statement 34 reporting model working well enough?Such questions being crucial to financial reporting by government entities, the Governmental Accounting Standards Board has put out a call for proposals for research projects. Offering up to $5,000 per project, the board is seeking input on several questions relating to three general issues:

-- The Financial Accounting Standards Board has released a standard that, in essence, would shuttle obligations of pension and defined benefit plans to the balance sheets instead of often being submerged in footnotes.

Three former executives at a Bermuda-based reinsurer are facing fraudulent accounting charges from the Securities and Exchange Commission.

The just-released 2006 Rosenberg Associates MAP Survey found the accounting profession to be in the midst of its best year since 2000.The CPA industry posted revenue growth of 9.7 percent for 2005, up from 7 percent in 2004, according to the eighth annual survey of firms. The growth is the best since 2000, when firms saw an 11.8 percent increase.

A Boston-based investment fund has received the go-ahead from a state court in Virginia to move ahead with a $51 million lawsuit against accounting firm Goodman & Co. LLP.

The fugitive former chief executive of voicemail software manufacturer Comverse Technology Inc. was tracked down in Namibia, Africa, this week after spending the past two months on the lamb. Jacob ''Kobi'' Alexander, 54, was charged in August with conspiracy related to backdating stock options by the Securities and Exchange Commission. Two other defendants, former Comverse finance chief David Kreinberg and former senior general counsel William Sorin, surrendered in August and were each released on $1 million bonds. Before he disappeared, Alexander allegedly transferred $57 million to Israel, prompting speculation that he may have fled there. The SEC complaint accuses the trio of men of profiting from stock options by backdating prices to a low point in the stock's value. From 1991 through 2005, Alexander reportedly exercised options and sold stocks worth approximately $150 million, making $138 million profit -- about $6 million by backdating options -- according to the complaint. Kreinberg and Sorin each also earned about $1 million on backdated options. In addition, the SEC alleges that the company awarded thousands of stock options to fictional employees, then secretly transferred the awards to an internal account. The scheme allowed Alexander to award those options to employees and himself without board of directors approval.

Two major players in the accounting scandals at energy giant Enron Corp. and telecom powerhouse WorldCom Corp. moved a step closer to punishment for their crimes.