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To increase efficiency the Financial Accounting Foundation, which oversees and funds the Financial Accounting Standards Board, changes FASB’s voting requirement to a simple majority of four board members from a supermajority of five ( www.fasb.org/news/nr042402b.shtml ). After considering comment letters on related proposals made in March, FAF trustees decide to retain the seven-member board at its present size and take no action to shorten the exposure periods for draft standards, which typically vary with project requirements.

To update and clarify current accounting literature, FASB issues Statement no. 145, Rescission of FASB Statements no. 4, 44, and 64, Amendment of FASB Statement no. 13, and Technical Corrections ( www.fasb.org/news/nr043002.shtml ). The statement provides to the secondary lending market a fresh analysis of accounting for gains and losses related to debt extinguishment, a risk management technique lenders use on a day-to-day basis.

A FASB exposure draft, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, clarifies the definition of a derivative and addresses accounting for beneficial interests in securitized credit card receivables and similarly structured financial assets ( www.fasb.org/news/nr050102.shtml ). FASB issued the ED to help reporting entities determine whether a given financial contract—option-based or not—is truly a derivative, as discussed in paragraph 6(b) of Statement no. 133. Comments are due July 1.

The AICPA SEC practice section issues guidance titled Assessing the Effect on a Firm’s System of Quality Control Due to a Significant Increase in New Clients and/or Experienced Personnel ( www.aicpa.org/download/secps/020508_practaid.pdf ). Drawing from existing AICPA professional literature, the SECPS created this practice aid to help audit firms identify and resolve internal deficiencies that could arise when client rosters and new personnel rapidly increase, overburdening existing quality control systems. Areas in which such problems might appear include auditor independence, personnel management (including audit partner rotation and concurring partner review) acceptance and continuance of clients and engagements, engagement performance and quality-control monitoring.

Federal Reserve regulators are taking a closer look at the effectiveness of both internal and external risk management audits at a number of banks, says board governor Mark W. Olson. Speaking at the Bank Administration Institute’s April audit, compliance and electronic security conference, Olson questioned—in view of some banks’ recent “material financial consequences”—the reliability of attestations their internal auditors have made about the adequacy of measures in place to ensure the institutions’ safety and soundness. The Fed also is reviewing the workpapers of the banks’ external auditors to see whether they reflect adequate scrutiny of risk management practices and what, if any, additional regulatory measures may be necessary to improve audit quality and maintain public and investor confidence in the institutions’ financial security. ( www.federalreserve.gov/boarddocs/speeches/2002/20020430/default.htm )

The SEC proposes disclosure requirements pertaining to companies’ adoption of accounting policies that could materially affect their financial statements and to the estimates they make in applying such policies ( www.sec.gov/rules/proposed/33-8098.htm ). The commission recommends the companies explain in their annual reports and in registration and proxy information statements the events or transactions that led them to adopt the accounting policies. And if their accounting estimates require assumptions about then uncertain matters—because different projections are reasonably possible—companies also would have to explain in management’s discussion and analysis the judgments they made in formulating their estimates and any factors likely to change as a result. Comments are due July 19.

The International Federation of Accountants establishes the International Auditing and Assurance Standards Board ( www.ifac.org/IAASB ) to replace the International Auditing Practices Committee. The new body provides guidance on audit and assurance functions and works to improve uniformity of practice throughout the world. In one of its first actions, the IAASB releases a practice statement, Electronic Commerce—Effect on the Audit of Financial Statements, that helps auditors apply three international standards on auditing: ISA 300, Planning ; 310, Knowledge of the Business ; and 400, Risk Assessments and Internal Controls.

The European Federation of Accountants (FEE) releases a discussion paper on enforcement of high-quality financial reporting in Europe ( www.fee.be/secretariat/Pressreleases.htm ). The study examines compliance issues central to European Union companies’ implementation of international financial reporting standards by 2005, as its members had agreed in 2000. It calls for EU member states to review their accounting standards enforcement policies and establish a joint enforcement commission to ensure consistency.

The SEC proposes amendments to rules governing mutual fund advertisements, which the commission says may give investors the false impression that funds’ occasional high returns typify their overall performance ( www.sec.gov/rules/proposed/33-8101.htm ). The changes would require the ads to disclose that a fund’s past results do not guarantee future returns, to direct investors’ attention to fund charges and expenses and to clearly disclose important information, such as the period during which the quoted performance occurred. Further, the amendments would reemphasize that fund ads are subject to federal securities laws’ antifraud provisions. Comments are due by July 31.

The Securities Investor Protection Corporation (SIPC) tells brokerage firms that if they choose to explain in their literature what the SIPC is and does, they must use one of two standard phrases to do so ( www.sipc.org/release08may02.html ). In this way, investors will have a better understanding of the extent to which the SIPC protects their account balances in the event of a brokerage failure.

The AICPA top technologies task force releases its annual ranking of noteworthy issues ( www.aicpa.org/news/2002/p050702.htm ), putting business and financial reporting at the head of its list. Training and technology competency placed second. With information and security controls in third position, the ranking clearly reflects the effects of Enron’s fall and the September 11 terrorist attacks.

An Information Technology Alliance study ( www.italliance.com/articles/executivesummary.pdf ) reports that a formerly lucrative practice niche—providing technology consulting services to middle-market businesses—encountered a serious revenue decline in 2001. Sixty percent of the 47 member firms surveyed experienced flat or lower revenue, while 22% didn’t even turn a profit.

David M. Walker, comptroller general of the United States and head of the GAO, appoints 10 new members to three-year terms ( www.gao.gov/govaud/newmem02.htm ) on the watchdog agency’s advisory council on government auditing standards (the yellow book), replacing those whose terms have expired.

The SEC names Lawrence E. Harris its chief economist. Harris, a professor of finance at the University of Southern California, succeeds acting chief economist William J. Atkinson, who is retiring. During his term, for which he took a two-year sabbatical, Harris will advise the commission and its staff on crucial economic issues, propose policy to increase the effectiveness and efficiency of SEC regulations and supervise staff analysis of the economic impact of SEC policies, proposals and regulations. ( www.sec.gov/news/press/2002-60.htm )

The Association of Government Accountants bestows its 2002 Cornelius Tierney/Ernst & Young Research Award on Wanda A. Wallace, CPA, for outstanding research accomplishments over the course of her career. The citation recognizes financial management professionals whose leadership, achievements and service have significantly advanced the profession. ( www.agacgfm.org/pdc/pr_wallace.htm )