Regulatory actions and programs

STUN GUN MAKER SWAPS AUDITORS: Three months after restating its 2004 earnings, stun gun manufacturer Taser International Inc. said that it had fired Big Four firm Deloitte & Touche as its auditor.In May, Taser said that miscalculated tax amounts related to employee stock options had led to the restatement of its 2004 earnings - amounting to a penny per share.

In several sports, especially golf, tennis and baseball, a player occasionally makes contact with the ball in the exact right place on the club, racket or bat.Hitting it on the "sweet spot" brings about the maximum transfer of energy under full control. Last June's report out of the Securities and Exchange Commission on off-balance-sheet financing really hit a sweet spot by pointing out several areas for improvement in financial reporting practice.

Roughly two thirds of companies in the S&P 500 have exceeded analysts' estimates on earnings per share dating back to the first quarter of 2004 -- a signal that companies have become more conservative on their earnings guidance.

William J. McDonough, who in two years as chair of the Public Company Accounting Oversight Board helped guide the audit overseer from shaky beginnings to a powerful regulatory entity with eight offices and over 400 employees, will step down from his post effective Nov. 30."I have a wide range of interests in corporate governance, finance and international affairs, and will explore one or a variety of activities in those fields," McDonough, 71, said.

A backlash is beginning to be felt throughout the auditing profession in Europe over proposed changes to accountancy rules covering combinations and mergers.Several non-governmental organizations, such as the European Federation of Accountants (FEE), the European Financial Advisory Group (EFRAG) - which represents a broader range of interest groups - and the Union of Industrial and Employers' Confederations of Europe (UNICE), are skeptical of what the International Accounting Standards Board has put forth in its proposal.

Complying with the federal tax code costs American taxpayers at least $100 billion annually, and lost economic efficiency associated with the tax system may top half a trillion dollars, auditors for the Government Accountability Office told Congress.In a report likely to add fuel to the campaign for an easy-to-administer national consumption tax, the GAO said that the lowest available estimates of the cost of complying with federal income, payroll and excise taxes is $107 billion - a whopping 1 percent of the nation's total gross domestic product. Other studies suggest that compliance costs may be 50 percent higher than these estimates.

The Governmental Accounting Standards Board has proposed a new standard that would clarify accounting for sales and pledges of receivables and future revenues, including those arising from tobacco settlement agreements.The proposal addresses whether certain transactions should be regarded as collateralized borrowing, or as a sale.

The workload for financial advisors in Seattle and Austin lessened somewhat over the last few years, as big employers such as Microsoft and Dell curtailed their use of stock options.Across the nation, an increasing number of companies have moved toward alternative forms of employee incentive compensation in response to the sweeping changes in accounting rules regarding options expensing dictated by the Financial Accounting Standards Board.

Since Section 404 of the Sarbanes-Oxley Act went into effect, both external and internal auditors have been unsure exactly how to treat "the work of others," not to mention "each other."The Securities and Exchange Commission and the Public Company Accounting Oversight Board have made it clear that public auditors need to scrutinize companies more carefully, including their internal controls over financial reporting, but at a PCAOB roundtable discussion in April, auditors and corporate financial officers complained of the increased cost of these intensified audits.

Weak financial management at the Securities and Exchange Commission has led to budget overruns of nearly $50 million in two years, according to a report issued by the Government Accountability Office.

The Securities and Exchange Commission's Advisory Committee on Smaller Public Companies has announced plans for a two-day meeting in Washington, D.C., on Oct. 24 and 25.

The problems at commodities and futures broker Refco Inc. that emerged over the past week made for another interesting case study in the debate over the necessity of the internal control provisions contained in the Sarbanes-Oxley Act.

After trade groups went public with auditor guidance outlined by the American Institute of CPAs in a draft white paper, a number of groups on Wall Street have turned to the federal government with their own concerns.

The Japanese Institute of CPAs said that the nearly 400 accountants belonging to Japan's four largest auditing firms have worked with the same clients for more than seven years.

The independence of auditors was the focus of an international forum hosted by the Ethics Committee of the International Federation of Accountants in Brussels on Oct. 11

The Supreme Court voted to let stand a ruling against two former executives of Gemstar-TV Guide International, supporting the ability of the Securities and Exchange Commission to freeze payments to executives under federal accounting fraud law.

Refco Inc., the futures broker that removed chairman and chief executive Phillip R. Bennett this week after discovering that a company he controlled owed Refco $430 million, is the target of a Securities and Exchange Commission investigation, according to published reports.

Media titan Barry Diller said lawmakers should revisit Sarbanes-Oxley, citing that the high cost of compliance is negatively impacting American businesses.

The Public Company Accounting Oversight Board had a harsh critique for several Deloitte & Touche audits performed by the firm last year. The PCAOB's report echoed many of concerns the regulators expressed last week about audits performed during the same period by KPMG.

The Securities and Exchange Commission said the former KPMG accountant who oversaw audits of Xerox Corp. will pay a $100,000 fine to settle charges that he failed to disclose accounting violations that came to his attention.