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AUDITING
Eighty percent of investors have confidence in the audited financial information provided by public companies, according to a survey of investor sentiment. A national survey of 1,001 investors conducted by Glover Park Group for the Center for Audit Quality explored opinions about the Sarbanes-Oxley Act, the strength of the U.S. capital markets and the impact of SOX on investor confidence.

The majority of investors (56%) said SOX was a good idea; 5% said it was a bad idea; and 30% said SOX made no difference.

Other findings included:

62% of those surveyed said rules mandated by SOX should be left fundamentally as they are, and two-thirds would be concerned by any easing of the rules.

79% said the requirement to establish independent audit committees has been effective.

76% said external auditors’ reporting to independent board-based audit committees has had a positive impact.

76% said the requirement for companies to evaluate and disclose their internal controls and for external auditors to attest such disclosures has been positive. The survey and a summary of its findings are available at www.thecaq.org.

FINANCIAL REPORTING
FASB is seeking comments as it mulls over the need for a project on accounting for insurance contracts. FASB also is deciding whether to undertake the project jointly with the International Accounting Standards Board (IASB).

If FASB were to take on the joint project, its objective would be to develop a common standard that would address recognition, measurement, presentation and disclosure requirements for insurance contacts. The project would provide guidance for both the issuer and the holder of an insurance contract. The IASB is working on a project that addresses these issues. In May 2007, it issued a discussion paper, Preliminary Views on Insurance Contracts, describing the main components of a proposed accounting model for insurance contracts.

Comments are due to FASB by Nov. 16. To view the invitation to comment, visit www.fasb.org/draft/ITC_Insurance_Contracts.pdf.

“We’re opening up another front in our war on complexity,” said SEC Chairman Christopher Cox in remarks to the SEC’s new Advisory Committee on Improvements to Financial Reporting in August (see interview with committee Chairman Bob Pozen, page 30). “Not only are financial statements difficult for investors to understand, but also companies incur excessive costs as a result of complying with voluminous and overly prescriptive accounting and reporting rules. Your job is to help end this destructive cycle and get our financial reporting system back to first principles.”

To read Cox’s complete statement, visit www.sec.gov/news/speech/2007/
spch080207cc.htm.

The SEC published a concept release on allowing U.S. issuers, including investment companies, to prepare their financial statements using International Financial Reporting Standards (IFRS). The release describes the policy issues and provides a list of questions for public input. Comments are due by Nov. 13.

To view the release, go to www.sec.gov/rules/concept.shtml.

GOVERNMENT
The White House Office of Management and Budget (OMB) and the Department of Homeland Security (DHS) issued a paper on best practices for agencies to implement to improve security and privacy of their information systems to prevent identity theft. The guidance outlines the top 10 common mistakes for agencies to avoid in protecting personal information the government possesses. The paper includes recommendations from the President’s Identity Theft Task Force.

The OMB/DHS paper on best practices is available at http://csrc.nist.gov/pcig/document/
Common-Risks-Impeding-Adequate-Protection-Govt-Info.pdf. The Identity Theft Task Force Strategic Plan is available at www.idtheft.gov/reports/StrategicPlan.pdf.

FASAB is soliciting input on its exposure draft Reporting Gains and Losses From Changes in Assumptions and Selecting Discount Rates and Valuation Dates. The ED proposes changes to enhance the information provided on the statement of net cost. This includes showing gains and losses from changes in assumptions as discrete line items to highlight the effects of changes in assumptions. Guidance is also proposed for selecting discount rates for liability measurement and codification of guidance on selecting valuation dates.

The ED is available at www.fasab.gov/exposure.html or by calling 202–512–7350. Comments are requested by Nov. 30.

Ohio Gov. Ted Strickland issued an executive order creating an audit committee responsible for increasing controls on state fiscal operations. The State of Ohio Audit Committee will be a division of the Office of Budget and Management and accountable for identifying and encouraging effective financial management, internal control and internal auditing practices in all components of Ohio’s government. The committee will submit a report annually to the governor and state auditor on its work. The report will include recommendations regarding the role of the committee.

INTERNATIONAL
The International Auditing and Assurance Standards Board (IAASB) released eight exposure drafts as part of its effort to enhance the clarity of its International Standards on Auditing.

The EDs follow, with comment deadlines in parentheses:

ISA 530 (Redrafted), Audit Sampling (Oct. 31).

ISA 510 (Redrafted), Initial Audit Engagements—Opening Balances (Oct. 31).

ISA 805 (Revised and Redrafted), Engagements to Report on Summary Financial Statements (Nov. 30).

ISA 800, (Revised and Redrafted), Special Considerations—Audits of Special Purpose Financial Statements and Specific Elements, Accounts or Items of a Financial Statement (Nov. 30).

ISA 706 (Revised and Redrafted), Emphasis of Matter Paragraphs and Other Matter(s) Paragraphs in the Independent Auditor’s Report (Nov. 30).

ISA 705 (Revised and Redrafted), Modifications to the Opinion in the Independent Auditor’s Report (Nov. 30).

ISA 700 (Redrafted), The Independent Auditor’s Report on General Purpose Financial Statements (Nov. 30).

ISA 220 (Redrafted), Quality Control for an Audit of Financial Statements, and ISQC 1 (Redrafted), Quality Control for Firms That Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements (Dec. 31).

The complete set of redrafted ISAs is expected to be effective for audits of financial statements for periods beginning on or after Dec. 15, 2008. The drafts are available at www.ifac.org/IAASB/ExposureDrafts.php.

The Institute of Chartered Accountants of India voted to fully converge its accounting standards for public companies with International Financial Reporting Standards (IFRS). Listed entities and other public interest entities such as banks and insurance companies will adopt IFRS for accounting periods beginning on or after April 1, 2011. For more information, visit www.icai.org or www.iasb.org.

MONEY LAUNDERING
Federal financial regulators issued a statement outlining their policy for enforcing anti-money laundering provisions of the Bank Secrecy Act (BSA). The Interagency Statement of Enforcement of Bank Secrecy Act/Anti-Money Laundering Requirements promotes greater consistency among the regulators in enforcing the BSA.

The statement describes specific circumstances that would prompt the agencies to issue a cease and desist order against a regulated institution that fails to establish and maintain a BSA compliance program or to correct a previously identified problem. The statement also clarifies formal and informal enforcement actions regulators may take.

The statement, issued by the Federal Reserve Board, FDIC, Office of the Comptroller of the Currency, Office of Thrift Supervision and National Credit Union Administration, is available at www.federalreserve.gov/boarddocs/press/bcreg/2007/20070719/
attachment.pdf.

Shortly after the new regulatory guidance was issued, FinCEN and the Federal Reserve announced on Aug. 6 that American Express Bank International (AEBI) of Miami had agreed to a $20 million civil penalty for BSA violations. FinCEN also fined American Express Travel Related Services Company Inc. of Salt Lake City $5 million for BSA violations. AEBI will pay another $55 million to settle forfeiture claims made by the Department of Justice. The Federal Reserve issued a cease and desist order requiring AEBI to take corrective actions.

AEBI agreed to the fines in connection with charges that it failed to maintain an anti-money laundering program. The travel services firm, a wholly owned subsidiary of AEBI, was fined for failing to file a “significant number” of suspicious activity reports in accordance with the BSA, according to a government press release. The full report is available at www.fincen.gov.

PROFESSIONAL ISSUES
The AICPA’s Work/Life & Women’s Initiatives Executive Committee offers a free Guide to Building a Successful Off-Ramping Program that provides unique ideas for building employee loyalty and keeping individuals who voluntarily leave their jobs, called off-ramping, connected to the organization in an effort to use their skills in unique ways. According to the guide, by 2008, women will make up 48% of the U.S. work force but over their careers 37% will voluntarily leave their jobs either temporarily or permanently for reasons such as caring for children or elders. These off-ramped employees may find opportunities to continue working for an accounting firm through temporary or contract work or other opportunities. By implementing off-ramping programs and initiatives, firms can strategically address staffing needs while helping women to achieve greater professional and personal balance.

To receive a copy of the guide, e-mail womensinitiatives@aicpa.org or download it at www.aicpa.org/download/career/wofi/0666-331_WLWIECs_Off-Ramping_Program.pdf.

SECURITIES
The SEC approved the consolidation of the member firm regulatory functions of the National Association of Securities Dealers Inc. and NYSE Regulation Inc. The consolidated organization will be called the Financial Industry Regulatory Authority, or FINRA.

FINRA, operating under SEC oversight, will regulate all securities firms that do business with the public, including with respect to professional training, testing and licensing of registered persons, arbitration and mediation. FINRA also will be responsible, by contract, for regulating the Nasdaq stock market, the American Stock Exchange and the International Securities Exchange.

NYSE Regulation Inc. will continue to be responsible for the regulatory oversight of trading on the NYSE.

To view the SEC order approving the amendments to NASD’s bylaws, visit www.sec.gov/
rules/sro/nasd/2007/34-56145.pdf.

STATE SOCIETIES
The New Hampshire Society of CPAs was awarded a Proclamation in Financial Literacy from Gov. John Lynch for teaching financial literacy in high schools.

The Virginia Society of CPAs received the inaugural Commonwealth Community Service Award for its community outreach program, “Financial Fitness—Improving the Financial Health of Virginians” (www.financialfitness.org).

The North Carolina Association of CPAs created a new financial literacy initiative through its Young CPA Gulf Coast Service Camp. This effort will give young CPAs an opportunity to help individuals, small business owners and students, who have been affected by Hurricane Katrina. For more information, go to www.ncacpa.org/YCPA/
Community_Service.htm.

CLARIFICATION
In an article in July, “Tax Patents Considered,” the authors stated that “[f]ailure to license a patented tax strategy can give rise to a patent infringement lawsuit, with the burden of proof on the defendant.” In a patent infringement lawsuit, the patent owner (plaintiff) has the burden to prove that the defendant infringes the patent. The accused infringer (defendant) has the burden to prove its defenses, for example, that the patent is invalid or unenforceable.