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The Institute’s accounting standards staff releases two technical practice aids. One provides guidance on reporting financial highlights by separate accounts ( www.aicpa.org/members/div/acctstd/general/separate_accts.htm ); the other supplies guidance on accounting for computer-systems costs incurred in connection with the Health Insurance Portability and Accountability Act of 1996 ( www.aicpa.org/members/div/acctstd/general/health insprotability.htm ).

The GAO issues final standards on auditor independence ( www.gao.gov/special.pubs/agagas3.pdf ). They contain significant changes affecting audits of governments and non- and for-profit entities that participate in federal programs. Among the new rules’ provisions are restrictions on auditing firms’ ability to offer consulting services to their audit clients.

The AICPA is negotiating with the GAO to mitigate negative effects the rules may have on accounting firms and small entities subject to government accounting standards (the yellow book). The Institute encourages practitioners to send their implementation issues and questions via e-mail to GAOIndependence@icpa.org . The standards are effective for reporting periods beginning after September 30, 2002. ( http://ftp.aicpa.org/public/download/members/div/ethics/INDEPENDENCE_FINAL.doc ; http://ftp.icpa.org/public/download/members/div/ethics/GAO_AICPA_Comparison.pdf ; http://ftp.aicpa.org/public/download/members/div/ethics/Fact_Sheet_Final.doc ; www.aicpa.org/info/020802memo.htm )

Separately, the GAO issues an exposure draft that proposes revisions throughout all yellow book government auditing standards except the above-discussed second standard—independence ( www.gao.gov/govaud/yb2002ed.htm ). Besides modifying the GAGAS framework, the proposed revisions would strengthen and streamline standards that apply to audits, while encouraging their consistent application. For clarity, the ED discusses financial audits, attestation engagements and performance audits individually. Comments are due by April 30.

Although there is no evidence banks are abusing “special purpose entities” to inappropriately move liabilities off their balance sheets, Mark W. Olson, a Federal Reserve Board governor, says the Fed is working with banking regulators to prevent such practices. According to Olson, when financial institutions retain substantive risks associated with assets they’ve moved to special purpose vehicles, banking regulations require them to consolidate those assets in publicly available GAAP-compliant financial statements. He added that the Fed retains—and has exercised—the right to apply its own rigorous interpretation of GAAP to such statements to ensure their accuracy. ( www.federalreserve.gov/boarddocs/speeches/2002/20020207/default.htm )

The Department of Labor’s Pension and Welfare Benefits Administration (PWBA) adds a series of questions and answers to its Web site to help employee-benefit-plan administrators comply with pension, health and disability claims regulations it published last year. The new rules establish shorter claims-processing time frames, additional disclosure requirements and new standards for adjudicating claims. They apply to new pension and disability claims filed after December 31, 2001, and to new group health claims only for plan years beginning after June 30, 2002. Free copies of the document are available from the PWBA at 800-998-7542. http://askpwba.dol.gov/faq-claims-proc-reg.html )

AICPA Board Chairman James G. Castellano testified in February before the House Energy and Commerce Committee in support of accounting, auditing and financial reporting reforms. He called for a modernized financial reporting model, more frequent reporting, revised accounting rules for special purpose entities, a new auditing standard enabling auditors to better detect financial statement fraud and a requirement that companies’ management ensure and testify to the effectiveness of their internal control systems, with subsequent auditor reporting on the effectiveness of management’s assertion. ( http://ftp.aicpa.org/public/download/news/stmt_jgc_021402.pdf )

FASB Chairman Edmund L. Jenkins, who testified before the same House committee, said in the second quarter the board will propose guidance on consolidated reporting for special purpose entities.

The secretary of the Treasury, the director of the Office of Management and Budget and the comptroller general of the United States restructured the Federal Accounting Standards Advisory Board in January to increase the number of public members to six from three, decrease the number of federal government members to three from six and provide for terms of up to 10 years. ( www.fasab.gov/pdf/press_release_1-11-02.pdf )

Rating service Standard & Poor’s says the financial performance of personal insurers—which offer auto, health and similar coverage—continued a downward trend in 2001. Under earlier, more favorable market conditions, these insurers had amassed huge financial reserves and cut prices aggressively. However, since 1998, S&P says, managed care and other cost-reduction measures have lost their effectiveness, eating up personal insurers’ savings and making it harder for them to compete by reducing premiums. ( www.standardandpoors.com/Forum/RatingsCommentaries/Insurance/Articles/121801_pcoutlook.html )

Several federal financial regulators jointly issue a guide to help consumers make informed decisions about choices they face as a result of the privacy provisions of the Graham-Leach-Bliley Act of 1999, which loosened restrictions on banks, insurers and other financial institutions’ sharing of marketing information about their customers. The guide, Privacy Choices for Your Personal Financial Information, is available online at www.consumer.gov . ( www.sec.gov/news/press/2002-21.txt )

SEC Chairman Harvey L. Pitt calls for the commission’s greater influence over FASB to ensure it addresses urgent topics and issues standards more swiftly than it has. He also says the commission will quickly establish a private-sector regulatory body—composed largely of individuals independent of the accounting profession—to replace the Public Oversight Board. And reaffirming the importance of effective corporate governance, Pitt says, the SEC is asking Congress for the power to bar officers and directors—if guilty of serious malfeasance or nonfeasance—from similar positions in other public companies. ( www.sec.gov/news/speech/spch540.htm )

The IRS should improve communications between its senior managers and field employees about its reorganization and customer service operations, the AICPA testified before the Internal Revenue Service Oversight Board in January. The Institute praised certain recent IRS initiatives, such as the large and midsize business division’s Fast Track dispute resolution program, but faulted the service for poor internal coordination of its reorganization.