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AUDITING
The PCAOB voted to adopt Auditing Standard no. 6, Evaluating Consistency of Financial Statements, and an accompanying set of amendments to the Board’s interim auditing standards.

The new standard and related amendments update the auditor’s responsibilities to evaluate and report on the consistency of a company’s financial statements and align the auditor’s responsibilities with Statement of Financial Accounting Standards no. 154, Accounting Changes and Error Corrections. AS6 clarifies that the auditor’s report should indicate whether an adjustment to previously issued financial statements results from a change in accounting principle or the correction of a misstatement. The PCAOB also removed the GAAP hierarchy from its interim auditing standards because FASB intends to incorporate the hierarchy into the accounting standards.

The standard (available at www.pcaobus.org/Rules/Docket_023/PCAOB_ Release_No._2008-001_--_Evaluating_ Consistency.pdf) and amendments become effective 60 days after SEC approval.

BANKING
The Financial Crimes Enforcement Network (FinCEN) issued an administrative ruling to clarify currency transaction report (CTR) filing requirements for financial institutions when making Bank Secrecy Act reports of transactions involving sole proprietorships and transactions involving sole proprietorships and other legal entities operating under a DBA (doing business as) name.

When filing a CTR involving a sole proprietorship, financial institutions are required to complete only one section A, listing the name of the sole proprietorship’s owner, DBA name, the owner’s Social Security number, home address, date of birth and occupation. Only one section A needs to be filled out even if the business has a different address or tax identification number than its owner.

The ruling, FIN-2008-R001, replaces ruling FIN-2006-R003. FinCEN said it will continue to accept CTRs with two completed section A’s, containing information on both the sole proprietorship and its owner, in accordance with the ruling in FIN-2006-R003.

The ruling is available at www.fincen.gov.

FinCEN issued interpretive guidance to clarify how rules implementing section 312 of the USA Patriot Act (the correspondent account rule) apply to a covered financial institution presenting a negotiable instrument for payment to another financial institution.

The guidance addresses whether the presentation of a negotiable instrument for payment by a covered financial institution to a foreign financial institution on which the instrument is drawn would establish a correspondent account between the covered financial institution and the paying institution, subjecting the covered financial institution to compliance with the due diligence provisions of the correspondent account rule.

The guidance is available at www.fincen.gov.

The Federal Reserve Board amended the asset-size exemption threshold for depository institutions that are required to report data under Regulation C, the Home Mortgage Disclosure Act (HMDA). Institutions with assets of $37 million or less as of Dec. 31, 2007, are not required to collect HMDA data in 2008. The previous threshold was $36 million. The amended regulation is available at www.occ.treas.gov/fr/fedregister/72fr72234.pdf.

The Small Business Administration (SBA) is working to improve its lender oversight practices and maximize lending program efficiency. To protect the agency from potential fraud, SBA’s Office of Credit Risk Management (OCRM) checks to ensure that lenders have adequate internal controls to help detect and counter potential fraud. Additional opportunities—such as examining data anomalies, mining third-party databases, random sampling of loans for further review, and identifying and sharing fraud detection best practices—are being explored to identify suspicious lending patterns indicative of fraud.

A lender monitoring and risk management system has been developed with highly predictive lender risk ratings, the agency said. The GAO and SBA’s Office of Inspector General have recognized the SBA as conforming to private sector industry best practices for portfolio and risk management.

FINANCIAL REPORTING
FASB approved proposed FASB Staff Position no. FIN 48-2, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises, which defers the effective date of FIN 48 for qualified entities to the annual financial statements for fiscal years beginning after Dec. 15, 2007, unless they have issued a full set of annual financial statements incorporating the recognition, measurement and disclosure requirements of FIN 48, Accounting for Uncertainty in Income Taxes. Nonpublic consolidated entities of public enterprises that apply GAAP are ineligible for the deferral. The FSP is available at www.fasb.org/pdf/fsp_fin48-2.pdf.

FRAUD
The FBI says the subprime mortgage crisis is feeding a booming business for fraudsters. The Bureau’s Subprime Mortgage Industry Fraud Initiative is investigating 14 corporations involved in subprime lending—including mortgage lenders and investment banks that bundle loans into securities sold to investors.

At the end of January, the FBI said it was investigating 1,200 open cases involving subprime lending, a 40% year-over-year increase. Many of these cases involve fraud for profit, where groups of straw buyers or realtors rig schemes to buy properties that are flipped or allowed to go into foreclosure. Suspicious Activity Reports (SARs), which were reviewed for potential mortgage fraud, grew from 3,000 in fiscal 2003 to 48,000 in fiscal 2007. SARs are on pace to top 60,000 in the current fiscal year.

More information and statistics on the FBI’s enforcement efforts in this area are available at www.fbi.gov.

GOVRERNMENT
In testimony before the Senate Budget Committee, U.S. Comptroller General David M. Walker said the nation’s long-term fiscal outlook is on an "imprudent and unsustainable path." According to Walker, who resigned effective March 12, the U.S. faces an increasing need and a shrinking window of opportunity for action.

"Our long-term fiscal challenge is primarily a health care challenge," he said. "In fact, if there is one thing that could bankrupt America, it’s runaway health care costs. We must not allow that to happen."

A GAO report titled A Call for Stewardship: Enhancing the Federal Government’s Ability to Address Key Fiscal and Other 21st Century Challenges lays out a possible path for change. It provides 13 potential tools for Congress and the administration to use. The report is available at www.gao.gov/new.items/d0893sp.pdf.

Walker resigned to become president and CEO of the newly established Peter G. Peterson Foundation. The foundation’s stated goal is to enhance the public’s understanding of the most "substantial economic, fiscal and other sustainability challenges" the nation faces.

INTERNATIONAL
The International Public Sector Accounting Standards Board, an independent standard-setting board within the International Federation of Accountants, issued requirements to help governments and other public sector entities consistently report on international aid, development grants and other forms of external assistance. The disclosure requirements and recommendations are set out in the updated International Public Sector Accounting Standard, Financial Reporting Under the Cash Basis of Accounting (Cash Basis IPSAS). The new disclosures should reduce multiple reporting practices that can be costly for assistance recipients.

The external assistance requirements are effective for reporting periods beginning on or after Jan. 1, 2009. The Cash Basis IPSAS is available at www.ifac.org/store.

The International Auditing and Assurance Standards Board (IAASB) amended International Standards on Review Engagements (ISRE) 2400, Engagements to Review Financial Statements, and 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity.

To align the application of ISRE 2400, ISRE 2410 and International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, the IAASB agreed to restrict the application of ISRE 2400 to a review of any historical financial information performed by a practitioner who is not the entity’s auditor.

"These minor amendments, which are effective immediately, clarify the application of the ISREs and ISAE 3000 by eliminating a small gap in the apparent scope of the ISREs and ensuring that, as intended, there is no overlap in the scopes of the ISREs and ISAE 3000,” John Kellas, IAASB chairman, said in a press release. "As a result, practitioners will have no doubt about which standard is to be applied to a review engagement."

The amendments to ISREs 2400 and 2410 are available free at www.ifac.org/store.

The International Financial Reporting Interpretations Committee (IFRIC) released for public comment a draft Interpretation, IFRIC D24, Customer Contributions.

Customer contributions are transactions in which an entity—the access provider—receives an asset it uses to provide access to an ongoing supply of goods or services to a customer or customers. In some cases, the access provider receives cash, which it must use to acquire or construct the asset that will provide access.

IFRIC D24 clarifies:

Whether a customer contribution should be recognized as an asset and, if so, whether it should be initially recognized at cost or fair value.

Whether an agreement to provide ongoing services using a contributed asset contains a lease.

How to account for the credit that arises from the recognition of a customer contribution at fair value.

How to account for a cash contribution.

Comments are due by April 25. To download a copy, visit www.iasb.org.

The International Accounting Standards Board (IASB) issued an amendment to IFRS 2, Share-based Payment. The amendment clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The amendment will be effective for annual periods beginning on or after Jan. 1, 2009. Early adoption is permitted. For more information, visit www.iasb.org.

SEC Chairman Christopher Cox and the European Commissioner for the Internal Market and Services Charlie McCreevy agreed to develop a framework for mutual recognition during a February meeting in Washington. The goals of a mutual recognition arrangement would be to increase transatlantic market efficiency and liquidity while enhancing investor protection, according to an SEC news release. They jointly declared:

"The U.S. and EU, which comprise 70% of the world’s capital markets have a common interest in developing a cooperative approach to reducing regulatory friction and increasing investor access to investment diversification opportunities and enhancing investor protections. The concept of mutual recognition offers significant promise as a means of better protecting investors, fostering capital formation and maintaining fair, orderly, and efficient transatlantic securities markets. As we consider implementation of this concept, we encourage input from market participants."

SEC and European Commission officials and staff of the Committee of European Securities Regulators plan to hold regular technical meetings on the mutual recognition framework this year. McCreevy and Cox agreed to work closely during the year to review overall progress, the SEC said.

PROFESSIONAL ISSUES
Americans are concerned about retirement savings, health care and educational costs, according to an AICPA survey. Thirty-two percent of respondents from the AICPA Financial Planning Membership Section said their clients are postponing retirement for financial reasons. “Many baby boomers are discovering their retirement kitty is not as big as it needs to be to fund a comfortable retirement and that they are going to have to work longer than they had intended,” Jim Metzler, AICPA vice president–Small Firm Interests, said in a news release.

One-third of survey respondents said clients between the ages of 25 and 34 are foregoing buying a home, having children and even saving for retirement. Higher credit card debt due to unnecessary spending is increasing the need for education and guidance to help improve the financial well-being of Americans of all ages, according to Carl George, chairman of the AICPA’s National CPA Financial Literacy Commission.

The survey results can be viewed at www.aicpa.org/download/news/2008/Tabulation_of_AICPA_PFP_Survey_ Results.pdf.

XBRL
The SEC’s Division of Corporation Finance prepared issuers for the possibility of new proposed rules regarding the use of XBRL as early as this spring.

"As I have said before, we are ready to undertake further rulemaking whenever the technology is ready," said John W. White, SEC director of corporation finance, in a recent speech at the Securities Regulation Institute in San Diego." That time is fast approaching. In September, the chairman asked for a staff recommendation this spring (which could be a rulemaking proposal), with possible final action coming this fall."

White said the aggressive schedule would allow for a field test of the taxonomies released for comment in December by voluntary filers in their 2008 quarterly filings. “If successful, you can guess where this is all likely to lead,” he added. For the full text of White’s speech, visit www.sec.gov/news/speech/2008/spch012308jww.htm.