Current SEC Developments
The priorities of the SEC staff, as discussed at the December 2001 AICPA Conference on Current SEC Developments, include working with registrants to get accounting issues right the first time, improving the effectiveness of standards setting, and modernizing financial reporting and disclosure. The staff emphasized clear and transparent disclosures in the financial statements and management's discussion and analysis as way to increase public confidence in the financial reporting system.
Independence and the Users of Closely Held Companies' Financial Statements
The debate over auditor independence usually focuses on large public companies. Given the possibility that the new SEC independence rules may trickle down to smaller companies, one must ask whether the users of closely held companies' financial statements find these rules relevant. A survey of small lending institutions indicates that independence standards for small companies need to be distinct from those for larger companies.
Will the Fair Credit Reporting Act Handcuff Employee Misconduct Investigations and Certain Routine Audit Activities?
The Fair Credit Reporting Act (FCRA), as interpreted by the FTC, imposes certain requirements on outside investigators that may hamper their ability to detect criminal conduct by employees. It is unclear when particular audit procedures become subject to the FCRA, leaving auditors and investigators to face unreasonable restrictions on certain activities and increased liability exposure.
State Tax Credits for Research and Experimentation
Business can frequently benefit from state research and experimentation tax credits; however, the differences in statutory rate, creditable research, and other credit limitations makes a comparison between states complicated. For a given set of financial statements, the authors calculate the effective R&E credit for all states which offer one.
Financial Statement Disclosure of Corporate Tax Shelters
Regulatory efforts to curb abusive tax shelters have tended to focus on disclosure through tax filings and offering materials. The disclosure of corporate tax shelters in a company's financial statements is often overlooked. There is, however, current guidance regarding materiality and contingent liabilities that may require accounting disclosure.