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AUDITING
The SEC approved on February 6, 2006, the Public Company Accounting Oversight Board’s (PCAOB) Auditing Standard no. 4 (www.sec.gov/news/digest/dig020706.txt; www.pcaobus.org/news_and_events/). This standard provides guidance for a standalone engagement that is voluntary and performed only at the request of management. It provides direction and establishes requirements that apply when an auditor is engaged to report on whether a previously reported material weakness in a company’s internal control over financial reporting continues to exist as of a date specified by its management. To facilitate the implementation of the standard, the SEC is allowing the PCAOB 90 days from the date of the commission’s order to issue a clear and concise outline of the affirmative audit steps set forth in the standard.

The Federal Financial Institutions Examination Council (FFIEC), on behalf of the Federal Reserve System, the Federal Deposit Insurance Corp., the National Credit Union Administration, the Office of the Comptroller of the Currency and the Office of Thrift Supervision, issued a final advisory that instructs financial institutions not to enter into agreements such as external audit engagement letters that contain “unsafe and unsound” limitation of liability provisions regarding audits of financial statements and internal control over financial reporting (www.ots.treas.gov/docs/4/480217.pdf). The advisory includes examples of such inappropriate provisions and is effective for engagement letters executed on or after February 9, 2006. While the guidance does not apply to previously executed engagement letters, the FFIEC encourages financial institutions subject to multiyear audit engagement letters to amend them to be consistent with the advisory for periods ending in 2007 or later. The advisory reflects earlier comments from the AICPA in support of engagement letters that limit an auditor’s liability to the client for punitive damages, provided it remains liable for actual damages.

GOVERNMENT ACCOUNTING
The Governmental Accounting Standards Board (GASB) issued Accounting and Financial Reporting for Pollution Remediation Obligations, an exposure draft (ED) that specifies five circumstances—any of which would require a government to estimate its obligations to address the current or potential detrimental effects of existing pollution (www.gasb.org/exp/exdfpg.html). The ED also establishes a probability-weighted method—the expected cash-flow technique—to estimate liabilities, expenses and expenditures. If approved, the ED’s requirements would be effective for financial statements covering periods beginning after June 15, 2007. Comments are due May 1, 2006.

INTERNATIONAL
The International Accounting Standards Board (IASB) published an ED to amend International Financial Reporting Standard (IFRS) 2, Share-based Payment (www.iasb.org) by stipulating that the vesting conditions an individual or organization must satisfy to receive shares concern only specified periods of service or required performance targets. It also requires that all cancellations of arrangements receive the same accounting treatment. If approved, the proposed amendments would apply for annual periods beginning on or after January 1, 2007, with earlier application encouraged. Comments on the ED are due June 2, 2006.

The IASB also revised Guidance on Implementing IFRS 4, Insurance Contracts, in order to reflect changes in that standard’s disclosure section made by IFRS 7, Financial Instruments: Disclosures.

The International Public Sector Accounting Standards Board of the International Federation of Accountants issued an ED, Revenue from Non-Exchange Transactions (Including Taxes and Transfers), that proposes establishing an international standard for reporting taxes and other major nonexchange sources of government revenue, including gifts, donations and transfers from other public-sector entities and international organizations (www.ifac.org/eds). Comments on the ED are due June 30, 2006.

PRIVACY

The AICPA’s board of directors approved a document that replaces the initial Privacy Framework developed by the AICPA and the Canadian Institute of Chartered Accountants (CICA). The new guidance, “Generally Accepted Privacy Principles (GAPP),” is based on the premise that good privacy practices are essential to effective corporate governance and accountability (www.aicpa.org/privacy). Recognizing the difficulty of preserving confidentiality, especially in operations spanning multiple jurisdictions, the AICPA and CICA developed GAPP to help managers protect privacy while complying with local, national and international requirements. The guidance also provides criteria for performing effective privacy audits.

TECHNOLOGY
The AICPA issued its annual ranking of the 10 technologies most likely to significantly affect practitioners, their clients and their employers in the coming year (http://infotech.aicpa.org/resources/top++10+technologies/). For the first time, the AICPA invited members of ISACA to join the AICPA Information Technology (IT) section members and Certified Information Technology Professional (CITP) credential holders in the voting. Heading the list for the fourth consecutive year was information security—the use of hardware, software and processes to protect an organization’s data. It was followed by assurance and compliance applications (that, for example, help companies comply with Sarbanes-Oxley and manage enterprise risk); disaster recovery and business-continuity-planning processes; IT governance methodologies; privacy management procedures; digital identity and authentication processes; wireless communication technologies; application and data integration techniques; paperless digital technologies; and “antispyware” applications, which detect and remove programs attempting to covertly gather and transmit confidential data.

The Institute and ISACA also entered into an agreement under which the CITP credential will be granted automatically to all CPAs who are AICPA members and also hold ISACA’s Certified Information Systems Auditor (CISA) credential. CPA/CISAs who wish to obtain the CITP credential under this agreement should visit http://infotech.aicpa.org/memberships/CPA.CISA+application.htm, where they can download the streamlined CPA/CISA application.

FYI
A semiannual AICPA survey of CPAs serving as senior corporate executives revealed they have a mostly favorable outlook for the U.S. economy in 2006 (http://fmcenter.aicpa.org/NR/rdonlyres/). Sixty percent of respondents believed that the economy will continue to improve, and 74% of them had high hopes for their own organization’s prospects over the next six months.

The IRS again is holding CPE-eligible tax forums to keep tax professionals up-to-date on its policies and programs (www.taxforuminfo.com). The topics to be addressed include form 990, which the IRS and most state agencies use to regulate tax-exempt organizations, the IRS e-file program, practitioner case resolution, the IRS Oversight Board and the Electronic Federal Tax Payment System. The tax forums will be held in Anaheim, Calif. (June 27–29), Chicago (July 11–13), Atlanta (July 25–27), Orlando, Fla. (Aug. 1–3), Las Vegas (Aug. 22–24) and New York (August 29–31).

The Public Company Accounting Oversight Board also is administering another series of public forums—on auditing in the small business environment (www.pcaobus.org/news_and_events/news/2006/01-17.aspx). Small firms registered with the PCAOB are invited to attend a one-day session on the board’s inspection process, the impact of new auditing standards and other subjects. This series of public forums began in January; the remaining sessions will take place in San Antonio (May 2 and 3), Seattle (June 21), Boston (Sept. 8), Philadelphia (Oct. 16), New York (Nov. 7 and 8) and Chicago (Dec. 7).

Karen Botvin, CPA, a senior manager in the Vanguard Group’s Investor Tax Services office in Malverne, N.Y.; Holly Carlin, CPA, the owner of a small firm in Park City, Utah; and Erica Dinner, CPA, an assistant director of tax information reporting in the Hartford Life Insurance Company’s Simsbury, Conn., office were selected to serve three-year terms on the IRS’s Information Reporting Advisory Committee (www.irs.gov/taxpros/article/0,,id=98158,00.html). Members of the committee discuss tax administration issues with IRS officials and make recommendations to promote equitable treatment of all taxpayers.

The AICPA’s Private Companies Practice Section (PCPS) is temporarily offering free access to the PCPS Firm Practice Center (www.aicpa.org/pcps), where practitioners can view articles, tools and technical updates that normally are available only to employees of PCPS member firms. Nonmember firms that want to access this material after May 15, 2006, can apply for membership at http://pcps.aicpa.org/memberships/Join+PCPS.htm or by calling 800-CPA-FIRM.

The Accounting and Audit Policy Committee (AAPC) of the Federal Accounting Standards Advisory Board (FASAB) is looking for volunteers to serve on its Inter-Entity Cost Implementation Task Force. The AAPC is reestablishing this task force to develop implementation guidance for Statement of Federal Financial Accounting Standards 30, Inter-Entity Cost Implementation Amending SFFAS 4, Managerial Cost Accounting Standards and Concepts. The AAPC also is looking for volunteers to serve on a task force established to assist in a guidance project on heritage assets and stewardship land. For information, contact FASAB Assistant Director Monica Valentine at valentinem@fasab.gov or 202-512-7362.