Highlights


  

 

The AICPA’s Professional Ethics Executive Committee (PEEC) issued an exposure draft, Interpretation 101-17, Networks and Network Firms, under Rule 101, Independence, of the AICPA Code of Professional Conduct. Along with new or revised definitions for network, network firm and firm, the ED proposes that when CPA firms form associations with other firms and entities to provide professional services, they may share characteristics that classify them as networks and must therefore be independent of certain attest clients of the other network firms.

Firms are considered to be part of a network if they share one or more of the following characteristics:

  • The use of a common brand name in the firm name.
  • Common control among the firms.
  • Profits or costs, excluding costs of operating the association; costs of developing audit methodologies, manuals and training courses; and other costs that are immaterial to the firm.
  • A common business strategy that involves ongoing collaboration among the firms whereby the firms are responsible for implementing the association’s strategy and are held accountable for performance pursuant to that strategy.
  • A significant part of professional resources.
  • Common quality control policies and procedures that are designed and monitored by the association and that the firms are required to implement.

Any firm or entity that a network firm controls (either individually or through its owners), is controlled by, or is under common control with, is also considered a network firm.

If only a subset of firms within an association shares one or more of the characteristics of a network firm (for example, a common brand name), only that subset of firms, rather than the entire association, would be considered a network under the proposed interpretation.

Comments will be accepted through Nov. 15 on the ED and should be sent to Lisa Snyder, director–Professional Ethics Division, at lsnyder@aicpa.org. The document is available at www.aicpa.org/download/ethics/August_13_2007_Exposure_Draft.pdf .

AICPA President and CEO Barry Melancon was appointed to the U.S. Treasury Department’s new Advisory Committee on the Auditing Profession.

Treasury Secretary Henry M. Paulson Jr. created the advisory panel after convening top U.S. business leaders including Melancon in Washington in March to address issues facing U.S. financial markets.

In addition to human capital challenges, the panel will look at competition and concentration in audit services, regulation and the profession’s business model.

“The largest accounting firms are already serving the needs of investors in global capital markets, but this is a very diverse profession with broad capacity and talent that is open to opportunities,” Melancon said in a press release. “Clearly the capital markets of the world are moving toward harmonized international standards and it’s important that our regulatory process matches that evolution.”

Former SEC Chairman Arthur Levitt Jr. and former SEC Chief Accountant Donald T. Nicolaisen will co-chair the panel. It is expected to make recommendations within one year.

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) released a discussion document titled Guidance on Monitoring Internal Control Systems. The discussion document discusses what entities of all sizes should do to properly monitor the effectiveness of their internal control system, including their internal control over financial reporting. It is likely to be especially useful to organizations subject to the reporting requirements of section 404 of the Sarbanes-Oxley Act. To download the document, visit www.coso.org .

COSO intends to publish an exposure draft later this year that will include tools, case studies and implementation guidance. Final guidance is expected early in 2008.

The XBRL U.S. consortium completed its U.S. GAAP taxonomy, a key step necessary for the full implementation of interactive data technology for financial reporting. The Financial Accounting Foundation and critical stakeholder groups including analysts, public company preparers and software providers are reviewing the draft taxonomy before it is released for public review, said the SEC, which has contributed funding to the project. For more information, visit www.xbrl.org/us/taxonomies or www.sec.gov/spotlight/xbrl.htm.

NYSE Euronext is the first stock exchange to submit financial reporting information using interactive data, according to the SEC. In furnishing 10-Q information in XBRL format, NYSE Euronext joined more than 40 public companies that are participating in the SEC’s voluntary interactive data filing program. For more information, visit www.sec.gov/spotlight/xbrl.htm

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