Auditor Communications: Still More To Do
There is a clear need for better communication between the auditor, management, and audit committee. Standards in other countries offer examples of critical communication requirements, especially communications that go directly to the users of financial reports. While such communication standards might not have prevented failures like Enron, they might have alerting financial statement users to the risks of off-balance sheet debt and certain compensation arrangements.
ISB's Conceptual Framework for Auditor Independence
The ISB's major contribution to the standards-setting process was its Conceptual Framework for Auditor Independence. The ISB approach identified threats to auditor independence that could be mitigated by safeguards that would reduce independence risks. Although this approach has been rejected by the SEC and the Sarbanes-Oxley Act, the core ISB concepts have been used by both the International Federation of Accountants and the European Commission.
Internal Control Systems for Auditor Independence
As determined by an analysis of numerous violations found by the SEC at a Big Five firm several years ago, independence problems do not generally stem from wanton disregard for the rules but rather the malfunctioning of internal controls. Avoiding these kinds of problems requires independence rules that can be realistically enforced along with internal control procedures that work reliably.
New Safe Harbor for Reverse Like-Kind Exchanges
Like-kind exchanges are powerful tools that can defer gain recognition for taxpayers. The IRS has made like-kind exchanges of qualified property an even more attractive and flexible tax-planning tool through a safe harbor for reverse like-kind exchanges that can takes much of the risk out of the transaction.