The SEC approved the PCAOB’s Auditing Standard no. 5, An Audit of Internal Control Over Financial Reporting That Is Integrated With An Audit of Financial Statements, clearing the way for the measure to replace Auditing Standard no. 2.

The new standard is designed to increase the likelihood that material weaknesses in internal control are found before they result in material misstatement of a company’s financial statements, and, at the same time, eliminate procedures that are unnecessary, according to the PCAOB.

Registered audit firms are required to use the new standard for all audits of internal control no later than for fiscal years ending on or after Nov. 15, 2007.

The full text of the rule is available at www.pcaobus.org/Rules/Rules_of_the_Board/Auditing_Standard_5.pdf.

A July report issued by the Robert Half International Financial Leadership Council identifies several major issues confronting the future of accounting and related professions .

Charting the Future of the Accounting, Finance and Audit Professions is the result of a two-day summit of council members representing a diverse group of leaders from these fields, including AICPA President and CEO Barry Melancon.

The report identifies the following key findings and solutions:

Recruitment and Retention. As competition for skilled professionals increases, new approaches for locating and retaining these individuals must be sought out and implemented. New recruitment strategies include a concerted branding effort on behalf of the accounting, finance and auditing professions. Spotlighting individuals who have achieved a successful balance between career and family may help address perception-related recruiting challenges. An increased focus on enhancing the early experiences of Generation Y professionals includes career guidance, projects involving continual learning and better balance between routine and challenging assignments.


Preparing the Workforce for the Future. Practitioners at all levels need a wider range of skills to be successful in the future. These include effective communication skills and involve staying on top of the latest technologies that enhance communication. Also, expanded analytical skills—answering the “why” behind the numbers—are necessary for professionals in more strategic roles.


Adapting to Today’s Global Business Environment. Increasing cultural literacy, professional judgment and familiarity with new financial reporting methods will contribute to a professional’s improved ability to operate within a global business environment. The urgent need for skilled professionals may include seeking talent globally.

For more information about the council or to get a free copy of the report, go to www.financialleadershipcouncil.com or call 800-803-8367.

The PCAOB proposed a new ethics and independence rule, Communication With Audit Committees Concerning Independence , which would replace the board’s interim independence requirement and two related interpretations. Proposed Rule 3526 would require a registered public accounting firm to inform an issuer’s audit committee about any relationships between the firm and the issuer that could reasonably be thought to affect the firm’s independence. The communications would be required both before the firm accepts a new engagement pursuant to the standards of the PCAOB and annually for continuing engagements.

The board also proposed an amendment to Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles , and an adjustment to the implementation schedule for the rule as it applies to tax services provided during the audit period. The amendment would exclude from the scope of the rule the portion of the audit period that precedes the beginning of the professional engagement period.

The proposed rule and amendment are available at www.pcaobus.org/Rules/Docket_017/index.aspx . Comments on both proposals are due by Sept. 7.

FASB issued proposed Statement 133 Implementation Issue no. E23, Issues Involving the Application of the Shortcut Method Under Paragraph 68. The proposal provides guidance on certain practices involved in the application of the shortcut method—one technique for determining hedge accounting. The proposal is designed to promote consistency in the use of the shortcut method and to provide investors and others with better information about how the shortcut method affects a company’s financial statements.

Comments on the proposal are due by Sept. 21. The proposal is available at www.fasb.org/derivatives/07-23-07_E23.pdf.

The Center for Audit Quality has signed on as a supporter of the Aspen Principles, a set of guidelines for business and investment practices and the long-term competitiveness of U.S. business. Compensation provisions in the Aspen Principles include a call for companies to tie senior executives’ interests to their companies’ long-term growth by requiring them to hold on to company stock for periods beyond their tenure with a company. Another provision supports the use of “clawbacks” to recoup certain performance-based compensation for senior executives in the wake of corporate financial restatements. The principles also urge companies to stop providing quarterly earnings guidance to analysts.

“The Center for Audit Quality, with the public company auditing profession, is committed to protecting investors and ensuring the continued vibrancy of U.S. capital markets,” Cynthia Fornelli, CAQ’s executive director, said in a news release. “The Aspen Principles play a fundamental role in achieving these goals.”

The set of principles resulted from an initiative involving The Aspen Institute Business and Society Program, the Council of Institutional Investors and the Business Roundtable.

Audit firms could face stronger international independence requirements, according to a proposal by the International Ethics Standards Board for Accountants (IESBA). The IESBA, which is an independent standard-setting board within the International Federation of Accountants (IFAC), released an exposure draft that would make changes to Proposed Revised Section 290, Independence—Audit and Review Engagements , and Proposed Section 291, Independence—Other Assurance Engagements, of the IFAC Code of Ethics for Professional Accountants.

The proposed changes focus on the provision of internal audit services to an audit client, independence implications based on the relative size of fees received from one assurance audit client that is an entity of significant public interest and contingent fees for services provided to assurance clients. Comments are due by Oct. 15. To view the ED, visit www.ifac.org/EDs.

The SEC took another step toward XBRL technology with final rule amendments that enable mutual funds to submit risk and return summary information from their prospectuses using interactive data under the SEC’s voluntary program. The submission of tagged risk and return summary information will be supplemental and will not replace the required versions of the information. The rule amendments permit mutual funds to submit tagged risk and return summary information using a taxonomy developed by the Investment Company Institute. The taxonomy is available on XBRL International’s Web site at www.xbrl.org/Taxonomy/ici/ici-rr-summarydocument-20070516-acknowledged.htm . To view the SEC release, go to www.sec.gov/rules/final/2007/33-8823.pdf.

The National Credit Union Administration (NCUA) issued a proposed rule that would prohibit an official, employee, or their immediate family members, from receiving, directly or indirectly, any commission, fee or other compensation in connection with an eligible obligation transaction. An eligible obligation includes a loan or group of loans made to a member by another lender.

The purpose of the rule is to ensure federal credit unions make decisions about the purchase and sale of eligible obligations based on business considerations and not personal benefit to insiders. Subject to certain exceptions, the rule would allow a federal credit union to purchase its members’ eligible obligations from any source as long as the loans are ones the federal credit union is authorized to grant, up to an amount equal to 5% of its unimpaired capital and surplus.

The new rule, which became effective Aug. 27, is available at www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/P-701-23.pdf .

The PCAOB entered into a statement of protocol with the Australian Securities and Investments Commission to enhance cooperation in the oversight of auditors and public accounting firms that practice in their respective jurisdictions. Nearly 40 of the 780 audit firms registered with the PCAOB are in Australia.

“Expanding the PCAOB’s international program is a top priority for the organization, and we are currently working with other oversight bodies in several non-U.S. jurisdictions to establish cooperative arrangements,” Rhonda Schnare, the PCAOB’s director of international affairs, said in a news release.


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