The Hindu Business Line : Big Four have room for improvement

REPORT cards of the giants in accounting have something uniform — that there is scope for improvement. AccountingWeb reports that the Public Company Accounting Oversight Board (PCAOB) in the US has found "significant auditing and accounting issues" after the limited reviews it conducted last year.

The Board reviewed work for 16 different high-risk corporate audit clients for each of the firms, and the results gave rise to questions of quality control. In a few months from now, the PCAOB intends posting on its site, edited versions of the reports. "The Big Four firms received draft reports earlier this week and have 30 days to respond. Final reports go to the Securities and Exchange Commission and state regulators as appropriate." In 2004, the Board plans to examine 5 per cent of audits by the Big Four and 15 per cent of audits by the next four biggest firms, adding up in all to a review of about 650 audits. With much fanfare the ICAI announced its move to do a similar exercise in India, but we are yet to hear of any results in that sphere.

Tax plus a heavy cost of compliance

TAXING is not as bad as finding taxing too taxing. Which is what the House of Lords in the UK has pointed out as happening due to the government's obsession with tax avoidance. In short, "It is costing honest taxpayers too much money." AccountingWeb reports about the call by the House of Lords asking the government to "balance its desire to close loopholes in the law which allow some people to avoid paying the taxes due from them with the need to reduce the costs of compliance for bona fide taxpayers".

There is also criticism of the government's plans to force prior disclosure of tax planning arrangements on advisors and individuals. The Lords' report concludes its comments about the Finance Bill by adding: "The way in which the Bill and its supporting regulations are currently drafted involves a risk that the net which the tax authorities are proposing to cast will catch large numbers of bona fide taxpayers as well as the small number of serious tax avoiders at whom the measures are aimed."

Looked differently, if the net is effective in grabbing bona fide people, then the officers can immediately start looking at whoever is left out.

Watchdogs of health costs

HOW to reduce medical costs? AccountingWeb cites the Wall Street Journal to report an experiment launched by the Whole Foods Market Inc. grocery chain. The theory is simple: "If employees feel a financial pinch every time they go to the doctor, get an MRI or replace a crown, they will be more conscious of slowing the growth of medical costs."

For the interested this is a case study because the new plan has been touted a resounding success for the company. "Medical claims dropped 13 per cent in the first year, and hospital admissions per 1,000 employees fell 22 per cent... Under the new plan, workers at the 159-store grocery chain are turning to generic drugs, rejecting unnecessary procedures and watching doctors' charges more closely." Check it out.

Communication about communication

THE Governmental Accounting Standards Board (GASB) in the US has published an Exposure Draft for a proposed Statement of Governmental Accounting Concepts, Communication Methods. AccountingWeb notes that the new ED would provide a conceptual basis for selecting communication methods to present items of information within general-purpose external financial reports that contain basic financial statements.

"The proposed Concepts Statement defines the communication methods commonly used in general purpose external financial reports, and develops criteria for each communication method. The definitions and criteria should help the GASB or, in the absence of authoritative guidance, a preparer of a financial report determine the appropriate methods to use to communicate an item of information. Using a consistent approach in the selection of communication methods should benefit users in understanding the location and nature of information in financial reports."

Communication about communication.

Reviews will soon go public

THE Securities and Exchange Commission (SEC) in the US will start publishing its comments on companies online from August this year, according to Accountancy. "In a bid to improve transparency in the post-Enron world, all SEC reviews and responses by companies will be made public within 45 days," adds the report.

"This decision will allow investors and rivals of the companies a better appreciation of the weaknesses of the disclosures of businesses and which financial issues are paramount to regulators." An idea worth emulation here too, because the above move is seen as having the potential to "offer some insight into the conduct of SEC reviews" too.

Hong Kong accountants reaching out

ACCOUNTANCY reports that close working relations could emerge between the ICAEW and the Hong Kong Society of Accountants (HKSA). "The two professional bodies signed a Heads of Terms accord last week, with an expectation that this will lead to a more formal cooperation agreement in the autumn of 2004." Implications?

"This agreement would allow members of the HKSA who are qualified through the QP programme to take up full membership of the ICAEW. The QP programme is approved by CAGE, a grouping of the main chartered accountancy institutes around the world." The ICAI may please note these comments of Winnie Cheung, CEO and registrar of the HKSA: that its strategic partnership with the ICAEW would help the body further its goal of producing the world's best accountants.

"The HKSA wanted to continue to lead the region by maintaining and expanding its geographic reach while following the `highest world standards' in training and governance." Accountancy reports that approximately half the HKSA's 22,000 members are expected to be eligible for ICAEW membership under the agreement, and around 5,000 are expected to take up dual membership by the end of this year. Any comments?

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