Before dissolving itself on July
31, the Independence Standards Board approves issuance, as a
staff report, of a conceptual framework for auditor
independence. This theoretical structure focuses on auditor
independence as a means of improving the quality of
auditsand of expanding investors faith in financial
statementsin order to optimize the allocation of capital (
Members of the House and Senate submit bills that would make it easier for small businesses, including community banks, to incorporate under subchapter S of the Internal Revenue Code. Under it, shareholdersbut not the companypay tax on the entitys income, unlike C corporations, which are taxed at both levels. Proponents say passage of the bills would greatly improve smaller banks competitiveness ( www.aba.com/Press+Room/reform072001.htm ).
Automated underwriting systems at the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) get a common data format, as the two agencies adopt extensible markup language (XML) data specifications ( www.mbaa.org/news/2001/pr0723a.html ).
The IRS issues final regulations related to the minimum cost requirement under IRC section 420, which governs the transfer of excess defined benefit pension plan assets to a retiree health account. The new rules, which apply to transfers occurring on or after December 18, 1999, have an effective date of June 19, 2001 ( ftp.fedworld.gov/pub/irs-regs/td8948.pdf ).
The IRS needs to improve its accounting procedures and internal controls, says the GAO. In audit findings, the watchdog agency cited the IRSs inaccuracy in reporting costs for reimbursable activities, lack of procedures to record working-capital-fund prepaid expenses, use in financial reports of unverified financial information from contractors and premature transfer of funds from one budget appropriation to another ( www.gao.gov/cgi-bin/fetchrpt?rptno=GAO-01-880R ).
The Department of Defenses Contract Audit Agency issues guidance to help the DOD, by 2005, base most of its fixed-price service contracts on contractor performance. The guidance encourages cooperation between auditors and contracting officers to devise and apply criteria for assessing the propriety of payments based on performance and to share knowledge of contractors financial strength ( www.dcaa.mil/mmr/m01ppd056.pdf ).
South Africa becomes the first country to say it will base its public sector accounting practices on the International Federation of Accountants public sector accounting standards (IPSASs). As support for the standards risesthe Organisation for Economic Development and Cooperation is basing its 2001 financial statements on themIFACs public sector committee aims to complete a core set of accounting standards by the end of this year. To that end, IFAC releases four new IPSASs Revenue from Exchange Transactions, Financial Reporting in Hyperinflationary Economies, Construction Contracts and Inventories and two new exposure drafts Related Party Disclosures and Provisions, Contingent Liabilities and Contingent Assets, comments on which are due November 30 ( www.ifac.org/news/LastestReleases.tmpl?NID=9954690712-139 ).
The International Accounting
Standards Board (IASB) announces its first agenda of
technical projects. Four of themaccounting for insurance
contracts, business combinations, performance reporting and
accounting for share-based paymentsfocus on the boards
primary mission of promoting harmonization of international
and national accounting standards. The remaining projects
aim to improve or simplify the application of international
financial reporting standards (for example, amendments to
IAS no. 39, Financial Instruments: Recognition and
Measurement ) (
Two new publications from the Information Technology Governance Institute, prepared with assistance from the International Federation of Accountants, examine IT-related risks and issues. Titled Board Briefing on IT Governance and Information Security Governance for Boards of Directors and Executive Management, they explain, respectively, the importance of effective governance and how company leaders can identify and resolve deficiencies in IT security ( www.ifac.org/store/Category.tmpl?Category=Information%20Technology&Cart ).
The Securities Industry Association releases a Harris Poll survey that shows most Americans understand and are satisfied with the opt-out privacy provisions brokerages, banks and insurance companies offer in accordance with the Gramm-Leach-Bliley Financial Services Modernization Act ( www.sia.com/press/html/pr_opt_out.html ).
The SEC issues staff legal bulletin no. 14, Shareholder Proposals, to address issues pertaining to the 1934 Securities Exchange Acts rule 14a-8, which governs inclusion of such documents in stock issuers proxy materials. The bulletin explains how the SEC applies the rule and reviews companies requests for no-action letters documenting its agreement not to take legal action against companies for a particular activity ( www.sec.gov/interps/legal/cfslb14.htm ).
In order to modernize the professions rules on independence, the AICPA professional ethics executive committee adopts revisions to the financial interest and family relationship provisions under rule 101, Independence . The new requirements, which take an engagement-team-focused approach to independence, apply to all parties that are in a position to influence the engagementan interpretation the SEC and the International Federation of Accountants support. Further, the committee adopts revisions to an interpretation under the statements on standards for attestation engagements (SSAE) permitting a modified application of rule 101 for certain engagements in which restricted-use reports are required ( www.aicpa.org/members/div/ethics/adopt.htm ).
The SEC seeks to fill four professional accounting fellow positions in the Office of the Chief Accountant. During their two-year terms, which will commence in June 2002, successful candidates for these positions will study and develop rule proposals under federal securities laws, interact with professional accounting standard setters and advise registrants on accounting and financial reporting issues. Applications are due by December 14, 2001 ( www.sec.gov/news/press/2001-82.txt ).