Accounting And Auditing

Downloadable spreadsheet of the most recent changes in certifying accountants at public companies. Includes new auditor, departing auditor, and reason for departure. Use tabs along the bottom of the spreadsheet to navigate different time periods.

The SEC's new whistleblower rules exclude external auditors from participating in its bounty program, which rewards those who alert the SEC to corporate wrongdoing. But auditors still have some avenues to pursue a payout, lawyers say. "The net result is that auditors are able to become whistleblowers in some circumstances," says David Woodcock, a partner with law firm Vinson & Elkins. Details inside.

James Doty, chairman of the Public Company Accounting Oversight Board, is threatening to put the idea of term limits for audit firms back on the table, due to what he considers a trend toward low-quality audits. Audit firms and public companies are sure to push back hard, although Doty may just be trying to cajole auditors into making changes preemptively. More inside.

An investor group is pressing the Public Company Accounting Oversight Board to make audit firms more transparent and accountable to shareholders, asking the PCAOB to force steps such as disclosure of discussions the firms have with client companies and even disclosure of the firms' own financial performance. Full details inside.

Audit experts have predicted widespread adoption of continuous monitoring and continuous auditing for years. But recent surveys show the practices are gaining only limited acceptance. According to Lily Bi of the Institute of Internal Auditors, expense is one part of the equation. "You need to invest a lot of time, a lot of money, and a lot of resources," she says. More reasons inside.

2010 has been a busy year for the accounting world, as the Financial Accounting Standards Board continues to issue a slew of new rulemaking proposals. Next year is shaping up to be just as eventful. Inside, Columnist Scott Taub unpacks the latest accounting developments and provides insights on what they mean for the coming year.

Want to limit the scope of a tax examination and gain more control over the audit process? Here’s how.

It may be a terrible time to terminate a frozen defined-benefit pension plan due to the recent recession and low interest rates, but it’s never a bad time for companies with frozen plans to start mapping out a termination strategy, and plenty are doing just that.

Veterans of compliance with the Sarbanes-Oxley Act are now reporting record-low problems with internal control over financial reporting, although smaller companies newer to the SOX regime are still trailing behind in the march toward reliable, SOX-compliant financial reporting.

The Financial Accounting Standards Board, faced with strong criticism of its plans to change how companies report cash reserves set aside for loss contingencies, has decided to come up with a contingency plan of its own.

On June 2, 2010, the U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) (the "Boards") issued a joint statement outlining their updated work plan for the convergence and improvement of U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards (IFRS).

Movement toward IFRS in the United States seems to come and go in waves, and the SEC hasn?t made any firm decisions about adopting IFRS. But IFRS isn?t the only accounting change you need to worry about. The ambitious convergence agenda agreed to by the Financial Accounting Standards Board (FASB) and the International Ac­counting Standard Board (IASB) continues at a rapid pace.

Metaphorically speaking, the Financial Accounting Standards Board is asking corporations a relatively straightforward question right now: Would you rather receive several kicks to the shin over time, or one hard whack to the head and be done with it?

Six years ago the Financial Accounting Standards Board and the International Accounting Standards Board agreed to work on a joint project to develop an improved, common conceptual framework that would provide more consistent accounting rules. In September, the boards completed just the first phase of their collaborative effort. Slow going, indeed.

Congress and the Internal Revenue Service may soon assign more certainty to how the federal government treats tax credits for research and development cost, welcome news to corporate tax departments that have had to handle ambiguity on the issue for decades.

America’s largest companies need to start digging into their uncertain tax positions and contemplate how those items will look to a tax auditor on an itemized listing.

Phil Angelides, former California state treasurer and now head of the Financial Crisis Inquiry Commission, says he just doesn’t understand how Wall Street executives can claim they never saw the meltdown coming. In his view, the evidence was sitting in plain view, especially in places like Florida and California where bad home loans were piling up. The big banks must have known full well what was going on because they were buying these loans. Yet, as Angelides stated, “We’ve heard for a year how folks on Wall Street and people in Washington didn’t see it coming.”

Companies paying into multi-employer pension plans may be facing some catch-up contributions that could create new liabilities on the balance sheet and a long list of new disclosure requirements.

Among the most enjoyable parts of the six years I spent at the Securities and Exchange Commission were the intelligent discussions on how to resolve difficult financial reporting issues. Although many people think of accounting as a boring profession with little conflict, those of us in the profession know that important issues almost always result in mixed views. Good debates on these issues repeatedly have resulted in better reporting, whether the topic is one company’s accounting for one transaction, what principles should be embedded in a new accounting standard, or how to revise SEC rules and regulations.

Financial firms may be the ones combating the Financial Accounting Standards Board to derail a rule that would require more use of fair-value accounting for derivatives and similar instruments, but many others in Corporate America are cheering them on—fearful that provisions of the rule could lead to more valuation homework, more judgment about items on the balance sheet, and more earnings volatility.

After recovering from the initial shock that the cost of leases is now headed for the balance sheet, companies have plenty of work to prepare for a new accounting standard that has huge implications for leverage, earnings, taxes, capital allocation, accounting systems, and even executive pay.

The smallest of public companies may have won their long-fought battle to escape an audit of internal controls—but that doesn’t mean they are free from scrutiny.

Earlier this July, the Financial Accounting Standards Board published an exposure draft for comment, Contingencies (Topic 450): Disclosures of Certain Loss Contingencies. (Most of us know this as Financial Accounting Standard No. 5.) This is the board’s second attempt at addressing contingencies; its previous attempt in 2008 received 241 comment letters—mostly unsupportive.

Corporate America continues to win its long-standing battle in the fight to reduce audit fees.

Strapped for cash, most state governments are turning to unconventional means to increase revenue—and they are finding unclaimed property audits to be an easy target.

Companies may eventually face new procedures and documentation in their external audits—all, of course, potentially driving up costs—as auditors begin digesting an onslaught of new requirements for assessing and responding to risk.

Many accounting and financial reporting executives still wonder how they should report the fair market value of assets that are trapped in frozen or otherwise illiquid markets. Now investment banking giant Goldman Sachs has given a glimpse into how it has approached the problem.

The risks around financial reporting have never been more real for audit committees. Increasing pressure from regulators and economic events, combined with massive changes in accounting rules looming on the horizon, should be worrying audit committees like never before.

My first column this year discussed a few hopes for 2010. One of them happened in February, when the Securities and Exchange Commission clarified its thinking about International Financial Reporting Standards. I’m happy to report that another happened in June, as the Financial Accounting Standards Board issued several exposure drafts as part of its big push to improve and converge U.S. Generally Accepted Accounting Principles and IFRS, and announced a slower timetable for completion of the 15 or so projects on its agenda.

Selling off your old accounts receivable to banks or collections agencies in exchange for cash has long been a nifty way for public companies to strengthen the balance sheet. New accounting rules for asset transfers, however, are about to make that maneuver much harder to do.

When the Securities and Exchange Commission first published guidance on how to comply with the infamous Section 404 of the Sarbanes-Oxley Act, which requires companies to assess and disclose the strength of their internal control over financial reporting, the agency pointed to the Committee of Sponsoring Organizations’ 1992-era Internal Control-Integrated Framework as an example of a “suitable” control assessment framework. At the time, the agency did also state that other control frameworks met its suitability criteria, but the strong endorsement of the SEC (and the Public Company Accounting Oversight Board) has resulted in the now-dated COSO framework becoming, for all intents and purposes, the only official control criteria public companies use to assess the effectiveness of their accounting controls.

Businesses in the professional services and manufacturing sectors could see dramatic changes to their accounting policies if a new standard for recognizing revenue proceeds as proposed.

As financial institutions brace for legislative overhaul of their derivatives business, companies that enter into derivative contracts as part of a hedging strategy are wondering what the impending new regime will mean for them, too.

As a result of the persistent poor economy, more companies are filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code. So-called “fresh start” accounting is available for many of them. New accounting pronouncements, however—principally new rules for business combinations and fair-value measurements—have made the application of fresh-start accounting even more complicated than ever.

Bill Gradison, a member of the Public Company Accounting Oversight Board since its creation in 2003 under the landmark Sarbanes-Oxley Act, is as eager as everybody else to hear whether the U.S. Supreme Court believes he should have a job.

Any company wanting to avoid a tax examination by the Internal Revenue Service may find it helpful to know what’s on the agency’s agenda these days. Speaking at a June 16 Webcast hosted by PricewaterhouseCoopers, IRS Service Team Director Frank Rodjius offered some inside perspective.

Auditors and tax executives are reconsidering how best to protect their work analyzing a company’s tax positions following the Supreme Court’s recent refusal to hear a crucial lawsuit on that point.

Despite some guarded optimism about the economy in general, public companies are still caught in a pressure cooker over the question of whether they can continue as a going concern.

Financial reporting executives, prepare yourselves: Rough seas lie ahead for corporate accounting.

Corporate America’s long war to reduce audit fees—which it has been winning in recent years—seems to have reaped benefits for non-audit fees as well, according to a comprehensive new study.

In my first column this year, I wrote that I hoped the Securities and Exchange Commission would soon give us some clarity on its thinking in regard to moving U.S. reporting companies to International Financial Reporting Standards to calm some of the anxiety regarding that potential move. My wish was fulfilled in February when the SEC issued its “Commission Statement in Support of Convergence and Global Accounting Standards.”

Tax executives are getting up to speed on the tax implications of healthcare reform, including a subtle but significant new provision that has little to do with healthcare directly.

Federal trade regulators are finally getting around to their long-promised review of the anti-trust regulations they use when evaluating the competitive effects of so-called horizontal mergers between two business rivals.

As human resources departments across the country digest the implications of the landmark healthcare reform laws passed by Congress in March, accounting departments, too, are gearing up to assure that corporate financial statements accurately reflect the massive changes hurtling toward Corporate America.

The Internal Revenue Service has begun a charm offensive to help defuse tensions about its new plans to require corporations to disclose uncertain tax positions as part of their tax returns.

As tax experts dig deeper into the fine print in the newly passed HIRE Act, they’re finding an awfully big club meant to assure compliance with foreign tax reporting obligations.

Accounting rulemakers are poised to propose a new method for how companies disclose the possible cost of lawsuits—but rest easy, companies will have ample time to express their thoughts on the always controversial subject.

Executives in charge of financial reporting should prepare themselves: Accounting rulemakers are about to give their world one of the most profound transformations it has seen in decaded.

So much has been written lately about accounting scandals, audit failures, and the financial crisis. Reforms have been passed, yet accounting problems persist. This prompted me to ask: What’s the value of an external audit at all these days?

New accounting rules for consolidating business interests took effect at the start of 2010—but companies are still laboring to understand just what they need to add to their financial statements and how to do so.