The Securities and Exchange Commission
approved the Public Company Accounting Oversight
Board’s (PCAOB) new rules concerning ethics, independence, tax
services and contingent fees. The SEC said it expects the
PCAOB will issue additional guidance to facilitate
implementation of the rules, which generally require a
PCAOB-registered firm and those associated with it to be
independent of their audit clients throughout the audit and
professional engagement. Under the rules, registered
firms are not independent of their audit clients if they have
contingent-fee arrangements with them or provide tax services
to persons in a financial reporting oversight role at the
client or to their immediate relatives. The rules further
implement the Sarbanes-Oxley Act’s requirement that auditors’
nonaudit services be preapproved by the audit committee.
Specifically, a registered firm seeking approval to provide
tax services must give the client’s audit committee a written
description of the services it is proposing, discuss with the
committee the effects providing such services might have on
the firm’s independence and document the substance of that
discussion. One rule, focused on ethics, codifies the
principle that individual accountants or other persons
associated with a registered firm can be held responsible when
their actions contribute to a firm’s violation of relevant
laws, rules or professional standards. More
information on the rules and their effective dates is
available at
www.sec.gov/rules/pcaob/2006/34-53677.pdf and www.pcaobus.org/News_and_Events/News/2006/04-21.aspx.
The AICPA’s 360 Degrees of Financial Literacy
program offers baby boomers strategies for meeting
the near-term expenses over which many of them expressed
concern in a recent Institute-sponsored survey (
www.aicpa.org/download/news/2006/Baby_Boomers_Worried.pdf;
see News Digest, page 20). More than half (51%) of respondents
said they worry more about rising energy costs, uninsured
medical expenses and credit-card debt than about longer-term
issues such as saving for retirement, accumulating an
emergency fund and caring for aging parents. Carl
George, CPA, chair of the AICPA’s National CPA Financial
Literacy Commission and CEO of Clifton Gunderson LLP, said,
“Consumers are juggling today’s real financial pressures and
trying to save enough for their retirement.” They can cope
with the strain of these urgent but competing priorities, he
said, by remaining focused on their savings goals and planning
for contingencies. To that end, the Institute’s financial
literacy program advises consumers to establish a steady
savings plan, create an emergency fund, join a carpool, adopt
energy conservation measures and consult a CPA or other
personal financial planning specialist. More information on
these recommendations and the program’s free tools and
resources is available at
www.360financialliteracy.org.
The Governmental Accounting Standards Board
(GASB) issued a preliminary views document intended
to improve state and local governments’ accounting for and
financial reporting of derivatives. Because the number and
value of government derivative contracts have increased
substantially, GASB says the public needs more information on
the risks inherent in these transactions and their potential
impact on a government’s financial position. It therefore is
proposing that governments report in their financial
statements the fair value of derivatives, as well as the
change in that fair value. If a derivative is effectively
reducing the risk it was created to address, however, the
changes in its fair value would be deferred and reported in
the balance sheet. Governments also would have to disclose
additional information about their derivatives in the notes to
their financial statements. The proposal and a plain-English
summary of its provisions can be downloaded at www.gasb.org. Comments are
due July 28, 2006.
The AICPA submitted comments on regulations
the IRS and the Treasury Department proposed
regarding corporate estimated tax payments. The proposal is
designed to reflect the significant changes to the tax law
since 1984 and to prevent taxpayers from using inaccurate
calculations to compute their estimated tax liability. In its
comments, the AICPA’s Estimated Tax Task Force expressed
concern, however, that “the rules are too mechanical, and as a
result, distort annualized taxable income and create traps for
the unwary.” Taxpayers who don’t fully understand the proposed
rules, the Institute said, could easily miscalculate taxable
income for the annualization period and incur unwarranted
penalties. The task force also said that because the
proposed rules would inappropriately discriminate between
taxpayers in similar circumstances, the IRS and the Treasury
Department should modify the regulations to reduce the
administrative burden associated with them, eliminate
potential pitfalls and treat all affected taxpayers equitably.
The comment letter can be downloaded at http://tax.aicpa.org/NR/rdonlyres/9FB69F8A-9C5B-4E71-8164-
CFD4D204D150/0/AICPA_Coments_on_Corporate_Estimated_Tax.doc.
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Cobb
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