Category: ANR

Strauss-Kahn Case Seen as Near Collapse [NYT]
The sexual assault case against Dominique Strauss-Kahn is on the verge of collapse as investigators have uncovered major holes in the credibility of the housekeeper who charged that he attacked her in his Manhattan hotel suite in May, according to two well-placed law enforcement officials. Although forensic tests found unambiguous evidence of a sexual encounter between Mr. Strauss-Kahn, a French politician, and the woman, prosecutors now do not believe much of what the accuser has told them about the circumstances or about herself. Since her initial allegation on May 14, the accuser has repeatedlaw enforcement officials said.

They’re Everywhere! Big Four Auditors Mixed Up In Mortgage Fraud [Forbes]
Francince McKenna sees “complicit auditors.”

Geithner Exit Would Force Obama to Rebuild [Bloomberg]
Treasury Secretary Timothy F. Geithner’s potential departure from the administration would force President Barack Obama to assemble a new economic team as he enters a re-election campaign that’s likely to be dominated by voter concern over jobs. Geithner has told Obama that he’s considering leaving the administration after the president reaches an agreement with Congress to raise the national debt limit, according to a person familiar with the matter.

Bill Clinton Backs Tax Holiday on Foreign Profits, With Caveats [Bloomberg]
Former U.S. President Bill Clinton endorsed a tax holiday on repatriating offshore profits with conditions, taking a position contrary to the Obama administration. “I favor it under certain circumstances,” Clinton said in an interview with Bloomberg Television’s Al Hunt yesterday in Chicago. He suggested an approach that would give companies a 20 percent tax rate on repatriated profits, which could be reduced to 10 percent if they “reinvest it in increasing employment in America.”

H-P Girds for iPad Battle [WSJ]
H-P’s device, the TouchPad, comes more than a year after Apple started selling its iPad. In that time, Apple has sold more than 25 million tablets and added nearly $100 billion in market capitalization. H-P, meanwhile, has lost $50 billion. H-P is planning a marketing blitz for the TouchPad. But it faces an uphill battle in the fast-growing tablet market, which is dominated by the iPad and crowded with devices from Samsung Electronics Co., Motorola Mobility Holdings Inc. to BlackBerry maker Research In Motion Ltd. “We know we’re the fifth man in a four-man race,” said Richard Kerris, the H-P executive in charge of developer relations.

Minnesota government shuts down [CNN]
A budget stalemate forced a virtual full shut down of the Minnesota government on Friday and left only a limited array of state services in operation over the busy holiday weekend. Visitors won’t be able to go to the state parks or the zoo, and travelers will find the highway rest stops shuttered. Road construction projects will cease, as will licensing for teachers and businesses.

Accounting woes threaten Chinese listings in Singapore [Reuters]
The string of blow-ups at overseas-listed Chinese companies could derail Singapore Exchange’s efforts to revive investor confidence and dent its status as a major trading hub for mainland issues. The bourse’s long-running charm offensive in China means Chinese stocks, known in the city-state as S-chips, now make up around 20 percent of its 779 listed companies, up sharply from April 2004 when there were just 41 mainland firms listed on the exchange. But a rash of accounting problems that broke this year, reminiscent of a previous wave in 2008 in Singapore, threatens to undermine SGX’s strategy as investor interest fades.

PricewaterhouseCoopers names new managing partner in Kansas City [KCBJ]
It’s New Year’s Day at PwC (E&Y too) and John Martin takes over in Kansas City from James Gegg. Well, sort of. The entire firm has the day off.

Pay Tally Up 19% for Finance Chiefs [WSJ]
Median pay for chief financial officers of S&P 500 companies surged 19% to $2.9 million last year, as profits and stock valuations rebounded and some finance chiefs assumed broader responsibilities, according to a Wall Street Journal survey. CFO pay varied widely, from less than $600,000 to more than $60 million. Five CFOs received more than $20 million in compensation. Growth in pay partly reflected the growing clout and multiple responsibilities of some finance chiefs, and moves by some companies to combine the function with others.

Fannie Mae Silence on Tay Fraud [Bloomberg]
The first sign of what would ultimately become a $3 billion fraud surfaced Jan. 11, 2000, when Fannie Mae executive Samuel Smith discovered Taylor, Bean & Whitaker Mortgage Corp. sold him a loan owned by someone else. Fannie Mae, the government-sponsored enterprise which issues almost half of all mortgage-backed securities, determined over the next two years that more than 200 loans acquired from Taylor Bean were bogus, non-performing or lacked critical components such as mortgage insurance.

In Deficit Plan, Taxes Must Rise, President Warns [NYT]
President Obama pressured Republicans on Wednesday to accept higher taxes as part of any plan to pare down the federal deficit, bluntly telling lawmakers that they “need to do their job” and strike a deal before the United States risks defaulting on its debt.

LivingSocial Said to Be in Talks With Banks for $1 Billion IPO [Bloomberg]
LivingSocial, the second-largest website devoted to daily coupons, is selecting investment banks for an initial public offering that may value the company at $10 billion to $15 billion, according to a person with direct knowledge of the talks. The Washington, D.C.-based company is seeking to raise about $1 billion in an IPO and has had conversations with Barclays Plc, JPMorgan Chase & Co. and Allen & Co. to lead the offering, said the person, who asked not to be named because the discussions are private. LivingSocial also has talked with additional banks for the IPO, which may happen by the end of the year, the person said.

No News from the SEC on its IFRS Roundtable is Bad News [Accounting Onion]
Tom Selling can’t get any details for the upcoming dog and pony show.

Spreadtrum Says Muddy Waters Questions Over Its Accounting Are Groundless [Bloomberg]
Spreadtrum Communications Inc. (SPRD), the Chinese chip designer whose accounting was questioned by Muddy Waters LLC, responded to the short seller’s report today by saying inventory surged last year because of new products. Muddy Waters, the investment firm run by Carson Block whose research has preceded almost $5 billion in share losses among Chinese companies trading in North America, cited a fivefold increase in inventory in a letter to Spreadtrum’s management. Block’s firm said the company’s deferred costs may have climbed too fast in explaining why it was betting the stock will fall.

Energy Cos Face Big Tax Hit If Congress Ends Accounting Method [Dow Jones]
As contentious negotiations over how to raise the federal government’s $14.29 trillion debt ceiling continue, Republicans lawmakers this week sharply criticized the White House for wanting to repeal the “last-in, first-out,” or LIFO, accounting method in order to raise revenue. The Joint Committee on Taxation, a nonpartisan Congressional research office, has estimated that repealing the method would generate new revenue of nearly $70 billion over 10 years, but the GOP charged that such a move could cripple struggling manufacturers.

PwC Appoints Nick Walker to Lead Kentucky Market [PwC]
Mr. Walker takes the helm in Louisville from Philip Gregory who is retiring after 33 years with P. Dubs.

Greece Secures Austerity Vote [WSJ]
Clashes have broken out between dozens of anarchists and police in front of Greece’s parliament Wednesday, just ahead of a vote on a five-year austerity plan the country needs to pass to avoid default. Eyewitnesses said demonstrators smashed marble paving stones in Athens’s central square and threw rocks at police, prompting them to respond by firing tear gas and clearing the area of people in front of Parliament.

Congress Finds Tax Code Complexity Contributes to Tax Gap [AT]
The complexity of the federal Tax Code can engender errors and underpaid taxes, according to a new government study. The study, by the Government Accountability Office, noted that the GAO has documented millions of taxpayer errors in following complex rules for determining taxpayers’ “basis”—generally the taxpayer’s investment in a property—in securities they sold or corporations they own.

Bank of America Agrees to $8.5 Billion Mortgage Settlement [WSJ]
Bank of America Corp. agreed Wednesday to pay $8.5 billion to settle claims by a group of high-profile investors who lost money on mortgage-backed securities purchased before the U.S. housing collapse. The payment will be the largest such settlement by a financial-services company to date, exceeding the total profits of the Charlotte, N.C., bank since the onset of the financial crisis in 2008.

Large Accounting Firms Bungled 17% of Australia Audits, Regulator Says [Bloomberg]
Four large accounting firms in Australia didn’t conduct proper audits in 17 percent of the cases reviewed by the country’s regulator, with smaller firms falling short almost a third of the time. The firms, which aren’t identified in the report, generally didn’t contain sufficient evidence to back the conclusions reached, according to the study, which was conducted between July 1, 2009 and Dec. 31 and was released today by the Australian Securities & Investment Commission.

The PCAOB’s Concept Release: What Might a Truly Useful Auditors’ Report Actually Say? [Re:Balance]
No, coverage of the Casey Anthony trial will not be a part of it.

A UBS Customer Pleads Guilty to Tax Evasion [Reuters]
An 81-year-old disbarred New York maritime lawyer admitted hiding more than $26.4 million at the Swiss bank UBS to avoid paying taxes, and agreed to pay a $9.8 million fine in pleading guilty on Monday. The former lawyer, Kenneth Heller, banked the money with UBS and then moved it to a smaller private Swiss bank, Wegelin, in June 2008 after reading that UBS might identify account holders, federal prosecutors said.

My Auditor, My Whistle-blower [CFO]
The Securities and Exchange Commission’s new whistle-blower rules, issued late last month, received much attention for providing cash rewards to securities-fraud informants. CFOs should be aware of a potential outcome of the rules that was not well publicized: auditors can blow the whistle on their own audit clients and receive a substantial bonus for doing so.

~ Good morning capital market servants. I’ll be traveling this morning to an undisclosed location, so posting my be on the lighter side until later this afternoon. That should give you plenty of time to either A) determine my whereabouts or B) dig up some dirt and send it to us. If you manage to sniff out my trail correctly, your reward will be a hot date with either Adrienne or DWB, depending on your preference.

Former Citigroup Accountant Accused of Embezzling $19.2 Million [NYT]
Gary Foster toiled away as a midlevel accountant in Citigroup’s Long Island City back office, collect0 paycheck last year. But federal prosecutors claim Mr. Foster gave himself a bonus fit for a star investment banker by embezzling more than $19.2 million from Citi before its auditors picked up on the scheme.

Siemens CFO Says Tailwind From Recovery Is Likely Over [WSJ]
“The tailwind from the economic recovery is likely over. Now, increased efforts are required for continued growth,” Siemens Chief Financial Officer Joe Kaeser told analysts at an event in Shanghai. Kaeser has already said several times that growth will slow in the second half of the current fiscal year 2011, which ends in September, as the comparison base gets tougher.

Lululemon eyes $1 billion in revenue [Reuters]
While Lululemon’s sales have soared along with its share price, investors have been concerned that competition might start to slow its ascent. “We’re not feeling it or seeing it on a global basis or even store by store,” Chief Financial Officer John Currie told the Reuters Global Consumer and Retail Summit on Monday, when the stock hit an all-time high. “But you know, it’s a competitive marketplace. So, the next competitor … we have to worry about them just like we do about Nike and Adidas.”

Fed policymaker: Mortgage-interest deduction can be bad incentive [The Hill]
Narayana Kocherlakota, the president of the Federal Reserve Bank of Minneapolis, said in a speech in Big Sky, Mont., that the tax code now provides both taxpayers and financial institutions incentives to carry at times excessive debt. Kocherlakota, currently a member of the policy-making Federal Open Market Committee, specifically singled out the mortgage-interest deduction and a policy that allows banks to deduct interest payments on debt.

Los Angeles Dodgers File For Chapter 11 Bankruptcy, Seek Television Deal [Bloomberg]
The Los Angeles Dodgers filed for bankruptcy protection after Major League Baseball rejected a television deal with News Corp. (NWS)’s Fox Sports, leaving team owner Frank McCourt unable to make payroll this week. Major League Baseball Commissioner Bud Selig last week said the 17-year TV-rights deal, which McCourt valued at about $3 billion, would harm the franchise in the long term. Baseball took over the Dodgers’ business operations about two months ago.

Negotiators Wrangle on Taxes [WSJ]
With time running short to reach a deal to avoid a government default, President Barack Obama met privately Monday with Senate leaders in hopes of resolving an impasse over whether to include tax increases in a deficit-reduction agreement. The White House argued that the deficit can’t be significantly cut without eliminating tax breaks for certain wealthy individuals and companies, while Republicans said doing so would cripple the economy.

Audit Comittees Dig Into Compensation [CFOJ]
A new rule requiring companies to disclose whether their compensation structures could lead to excessive risk-taking has so far failed to result in significant new disclosures. However, the rule has forced audit committee board members to work more closely with their compensation committee counterparts and may result in more members serving on both in the future.

Companies Are Erecting In-House Social Networks [NYT]
As social networks increasingly dominate communications in private lives, businesses of all sizes — from tiny start-ups to midsize companies like Nikon to behemoths like Dell — are adopting them for the workplace. Although it is difficult to quantify how many companies use internal social networks, a number of corporate software companies have sensed the opportunity and offer various systems, some free to existing customers, others that charge a fee per user.

Pelosi Says U.S. Debt-Ceiling Deal Must Reduce Tax Subsidies for Companies [Bloomberg]
Democratic President Barack Obama and Republican House Speaker John Boehner will need the support of Democrats to get an agreement through the House, Pelosi said yesterday in an interview on CNN’s “State of the Union.” Such an agreement would have to include both spending cuts and an end to tax breaks for some industries such as oil, she said. “You can’t cut your way out of the deficit,” California Democrat Pelosi said. “You have to have revenue on the table.”

What the CFOs Want [WSJ]
CFOs at big companies are no longer content to manage just finances or operations. They want, and say they need, a prime seat at the table when setting strategy. So said the roughly 60 big-company finance chiefs at The Wall Street Journal’s inaugural CFO Network annual meeting last week. Many of these CFOs already count strategic planning among their responsibilities, a shift from the past, and one that primes them to possibly take the chief executive spot some day.

Chipotle Will Raise its Prices Regionally [WSJ]
We need a Poncho No. 8 over here.

Did Green Mountain Coffee Roasters Violate Its Code of Ethics, too? [White Collar Fraud]
This is starting to get awkward.

Must the Amish e-File? [TaxProf]
The horror!

Senate’s Snowe offers bill to repeal tanning tax [The Hill]
A bill, sponsored by Sen. Olympia Snowe (R-Maine) and co-sponsored by Sens. John Barrasso (R-Wyo.), Roy Blunt (R-Mo.), John Boozman (R-Ark.), John Cornyn (R-Texas) and Pat Roberts (R-Kansas) was introduced on Thursday in the Senate, mirroring an effort in the House to eliminate the 10 percent tax on certain tanning services. Support for the House measure has grown since June 2 when Rep. Michael Grimm (N.Y.) introduced the bill. His legislation now has 29 Republican co-sponsors backing the effort.

Tax activists want U2’s Bono to ‘pay up’ [DMWT]
Reports of actual mud-slinging have not been confirmed.

‘Angry Birds’ Staying Power Tested With CEO Hatching Movie [Bloomberg]
And now, some important news.

China tells firms to favour govt-designated accounting firms [Reuters]
China has told companies to favour government-designated accounting firms as their auditors for sake of “fair and orderly competition” in the sector, according to a notice published by the Ministry of Finance on Friday. The notice came as a string of accounting problems and stock plunges has hit publicly traded Chinese firms in overseas markets and sparked deep concerns across auditing quality in China. According to Ministry of Finance notice, large and medium-sized companies should prefer accounting firms that are allowed to provide auditing for H-share listed companiesricans See Debt Threat, Reject Tax ‘Scare’ [Bloomberg]
Americans say that the $14.3 trillion U.S. debt threatens the economy and that entitlement programs may go broke even as they dismiss as “scare tactics” the arguments offered by Republicans and Democrats who are debating a solution. Their sentiments in a Bloomberg National Poll suggest that the public is open to the recommendations of the majority of President Barack Obama’s debt commission. Members of the group, which included current and former members of Congress and White House officials, called for revenue increases and spending cuts that would have shaved deficits by $3.8 trillion over the next decade.

Tax Dispute Stalls Debt Talks [WSJ]
House Majority Leader Eric Cantor (R., Va.) said he was backing out of the talks for now because the group had reached an impasse over the question of whether tax increases should be included in the deal. The only other Republican in the group, Sen. Jon Kyl (R., Ariz.), soon followed suit, agreeing that only the highest levels of leadership could break the logjam between Democrats’ demand that the budget deal include tax increases and Republicans’ adamant opposition to that demand.

Tax Break for Mortgage Debt Is Ready for the Wrecking Ball [Bloomberg]
Forty-nine percent of respondents in a Bloomberg National Poll said they were willing to abandon the mortgage tax break if it meant lower overall tax rates. Only 45 percent opposed the switch. That’s a sharp contrast with polling patterns of prior years, when the public showed 2-to-1 support for keeping the mortgage deduction. The Bloomberg poll of 1,000 adults conducted June 17-20 has a margin of error of plus or minus 3.1 percentage points.

Let’s Make a Deal, Amazon Tells Texas [NYT]
In the middle of a fight with Texas tax collectors over book sales in the state, Amazon offered Thursday to invest $300 million in five or six warehouse and distribution centers in the state, employing 6,000 people, if lawmakers would let the company operate for four-and-a-half years without collecting sales taxes.

The NBA Salary Cap Gives No-Tax Dallas and Miami an Unfair Advantage [TaxProf]
Relatively decent teams.

IRS Increases Mileage Rate to 55.5 Cents per Mile [AW]
Up from 51¢.

Factbox: Big Four audit firms on approach to risk in China [Reuters]
The string of accounting scandals in China is prompting the “Big Four” audit firms to be on alert, fearing a blow up at a Chinese company could cause big reputational risk. Reuters asked all four firms about their approach to working in China and whether the recent scandals have prompted them to review their procedures when taking on work for Chinese companies looking to list on exchanges.

PwC to Acquire PRTM [PwC]
“The PRTM team will provide our firm with significant capabilities in the areas of operational strategy, execution and business model innovation,” said Dana Mcilwain, PwC Vice Chairman and U.S. Advisory Leader. “We are especially pleased that the PRTM team of highly talented, globally-oriented professionals have chosen to continue their careers at PwC.”

Koss suit against former auditor to proceed [MJS]
Koss Corp.’s lawsuit against the company’s former auditor, Grant Thornton, will move forward in Cook County, Ill., according to a ruling from a judge in Chicago this week. Koss accuses Grant Thornton of gross negligence for not uncovering the $34 million embezzlement by its former vice president of finance. Sujata “Sue” Sachdeva is serving an 11-year sentence in federal prison for the crime, which came to light in December 2009 when American Express notified Koss of the fraud.

New York’s Schumer Gives ‘Newfound Life’ to Tax Holiday Sought by Apple [Bloomberg]
The lobbying campaign by Apple Inc. (AAPL), Pfizer Inc. (PFE) and Duke Energy Corp. (DUK) to allow companies to bring overseas profits to the U.S. at a low tax rate gained new traction after Senator Charles Schumer of New York signaled that Democrats might back the idea. The Senate’s No. 3 Democrat said yesterday that his caucus is exploring the potential of using the short-term revenue a repatriation holiday would generate to fund an infrastructure bank. The focus on infrastructure, he said, would “guarantee” job creation and address a key line of Democratic opposition.

Women CFOs: Still at 9% [CFO]
As of June 1, there were 45 female finance chiefs in the Fortune 500. That’s just one more than in 2010 and 2009, for a percentage of 9%.

Challenges in Chasing Fraud [WSJ]
Some legal experts said the SEC’s struggles reflect the difficulty of going after specific individuals and companies when so many more made decisions that backfired into catastrophic losses during the financial crisis. Corporate executives argue that the crisis was caused by good-faith moves that went sour rather than by the desire to short-change investors. Some lawyers say that the agency’s enforcement lawyers haven’t done enough to prove that high-ranking executives bore the ultimate responsibility for the most controversial mortgage-bond deals.

CFOs Say Corporate Cash Levels Are Appropriate [CFOJ]
“People have cash because there is a strategy,” said Suresh Senapaty, CFO at Wipro. He added that CFOs know cash has one of the lowest returns on investment for shareholders. “There are good reasons why they have it — otherwise they’re not doing their job as CFOs,” he said during a group discussion at The Wall Street Journal’s annual CFO forum held in Washington, D.C. Tuesday.

Senators call on IRS to clear up rules for same-sex couples [MSNBC]
This week, eight Democratic U.S. senators sent a letter to IRS Commissioner Douglas Shulman, calling on the IRS to clear up confusion for same-sex couples who encounter problems trying to file accurate tax returns. […] In the letter, the senators noted that some state tax laws recognize same-sex marriages or domestic partnerships, even though the federal government does not. That’s creating confusion for couples who want to file accurate returns but are classified differently by state and federal tax regulators, they said. They asked the IRS to offer guidance.

The IRS’s Charity Purge [WSJ]
The Internal Revenue Service announced this month that 275,000 nonprofit groups—around 18% of the country’s tax-exempt organizations—have lost their federal exemptions because they failed to file Form 990s. The announcement was a long time in the making, but it’ll take even longer for the IRS to dig itself out of the administrative and policy mess that it represents.

Hong Kong’s Li Says Exchange Will Avoid Worst of China Accounting Scandals [Bloomberg]
The MSCI China Index of 147 stocks available to foreign investors is down 10 percent since reaching a five-month high on April 21. That compares with a 28 percent plunge by Chinese companies that went public through U.S. reverse mergers, in which a closely held company buys a publicly traded shell and retains the U.S. listing. While bearish bets on the MSCI China have climbed to a record, Li says companies listed in Hong Kong are subject to too much scrutiny to deceive the market for long.

FedEx Joins Ford in House Tax Chief’s Portfolio, Panel Witness Chairs [Bloomberg]
Since becoming chairman of the House Ways and Means Committee in January, Representative Dave Camp has invited executives from 13 publicly traded companies to testify on tax and trade policy. The chairman owned shares in six of them. Camp, a 57-year-old Michigan Republican, owned stocks and bonds issued by dozens of individual companies, according to his annual personal financial disclosure form, which was filed June 15 and covers the year ending Dec. 31, 2010.

Rep. Camp Wary of Repatriation Tax Holiday [CFOJ]
“We did repatriation a few years ago, and here we are with the same problem,” Camp said. He made similar complaints about other tax proposals, including an extension of the payroll tax holiday which is currently set to expire.

Geithner Says Corporate Tax Reform to Follow Deficit Talks [CFOJ]
“Our hope and our expectation is that after we get this deficit reduction done, we can move to corporate tax reform,” Secretary Geithner told the CFO Journal Conference in Washington D.C. Tuesday morning. He added that corporate tax reform would not be part of the deficit reduction negotiations, because dealing with the budget “requires all the oxygen there is in this town.”

Why Won’t the SEC Investigate Motorola … Again? [Accounting Onion]
Tom Selling digs in on the KPMG inspection report, “Why has the SEC apparently not followed up on the PCAOB’s findings? For one thing, the PCAOB inspection report provides highly credible evidence of very large accounting misstatement made by a high-profile registrant with the apparent complicity of its Big Four auditor. It doesn’t necessarily mean that the PCAOB is correct in its allegations as a matter of course, but someone should called to account by the SEC: if not Motorola and/or KPMG, then the PCAOB for a faulty inspection report.”

Say Anything: The Big 4 Defense Of Overtime Exemptions [Re:The Auditors]
Meanwhile Francine McKenna digs in more on Campbell v. PwC.

Fired Marc Jacobs Employee Demands Robert Duffy Personally Address Sexual-Misconduct Accusations [NYM]
Yes, the pole dancing. And the porn.

Former federal accountant sentenced for embezzling $1.4 million [LAT]
Kathy Stamps, 39, of Rancho Cucamonga, an accountant at the Angeles National Forest office in Arcadia, fabricated internal records to receive tax refunds, authorities say. From 2002 to 2004, Stamps received six checks from the U.S. Treasury totaling $1.4 million. She spent nearly $1.1 million on personal items ranging from cars and mortgage payments to jewelry and plastic surgery, authorities said.

Unhappy Workers Stay In Current Jobs, for Now [WSJ]
Only 1.4% of employees voluntarily left their jobs in April, the most recent month for which data are available, down from seasonally adjusted monthly rates of more than 2% before the recession started, according to the U.S. Department of Labor. Overall, voluntary turnover is still nearly at its lowest point since the Labor Department began to track it in 2000.

Merck Can’t Recoup $473 Million in U.S. Taxes, Court Rules [Bloomlough argued that funds it received as the result of two interest-rate swap transactions weren’t taxable as proceeds of loans from foreign subsidiaries and that the company was being treated unfairly by the IRS, which hadn’t demanded the same taxes from other companies that were in similar situations. U.S. District Judge Katharine Hayden ruled after a five- week non-jury trial in 2008 that Schering-Plough failed to prove it deserved a refund, and in April 2010 she denied the company’s request for a new trial. The U.S. Court of Appeals in Philadelphia upheld Hayden’s ruling today, saying the transactions were loans and that the IRS may treat taxpayers differently.

A Reboot for Internal Controls [CFO Journal]
A group of accountants and corporate executives met in New York on Monday to hash out some of the details of a proposed update to the nearly twenty-year-old internal control framework created by the Committee of Sponsoring Organizations (COSO). The reboot is expected to add in controls for information technology commonly used in business operations today, such as email and automated work processes, as well as address more theoretical issues, like how risk management and internal controls should work together. The update will also incorporate newer ideas about governance to better define the current role and responsibilities of audit and compensation committees.

Thomson Reuters Acquires CorpSmart From Deloitte [MW]
CorpSmart provides multinational corporations (MNCs) in South Africa with intelligent corporate tax compliance software. Using this web-based solution, MNCs are able to prepare monthly, quarterly and annual income tax computations as well as file South African IT14 tax returns.

Mandatory Auditor Rotation — Further Thoughts on PCAOB Chairman Doty’s Bad Idea [Re:Balance]
Jim Peterson continues to pick apart rotation.

Insurers fear volatility of IFRS ‘black hole’ [Accountancy Age]
Insurers have met to discuss fears surrounding the possible impact of phase II of International Financial Reporting Standards, saying the move “would introduce very significant but really meaningless volatility.”

Fraud at senior management level is highlighted in KPMG report [Guardian]
When it comes to “white collar” crime, finance directors, chief executives and other senior management are far more likely to be involved in fraud – such as the mis-statement of financial results, theft and expense abuse – than junior staff. The economic downturn has also made it a lot easier to commit fraud, according to research by KPMG, which warned that scams go undetected for longer.

Japanese manufacturers ‘need more time’ for IFRS switch [Accountancy Age]
The Japanese Financial Services Agency and Financial Accounting Standards Federation initially proposed a three-year switch over period, after which use of IFRS would become mandatory for listed companies. They argued holding off on IFRS adoption would make Japanese companies look guilty of failure to disclose adequate information at a time when many other countries were switching. However, last month 22 companies and organisations – including heavyweights Mitsubishi, Nippon and Toyota – wrote to the head of the FSA asking for more time, and describing the change over as “a significant burden.”

Lawyers and Accountants Once Put Integrity First [NYT]
It will take decades to fully untangle the causes of the 2008 financial crisis, but as our economy fitfully heals, it would be prudent to ask whether lawyers and accountants offer the same protection against corporate misconduct that they once did.

Dems are lukewarm on Obama’s push for a payroll tax holiday [The Hill]
“The extended tax credits will help stimulate the economy, and giving tax credits to businesses will in fact help with the unemmes Clyburn of South Carolina, the House’s No. 3 Democrat, said on MSNBC on Wednesday. But other Democrats and liberals say the current payroll tax break for employees, which passed Congress in December, has not given the economy much of a spark. They also expressed concerned about what augmenting the holiday would do to both the revenue stream and Social Security, which is funded by the payroll tax.

Companies Push for Tax Break on Foreign Cash [NYT]
“For every billion dollars that we invest, that creates 15,000 to 20,000 jobs either directly or indirectly,” Jim Rogers, the chief of Duke Energy, said at the conference. Duke has $1.3 billion in profits overseas. But that’s not how it worked last time. Congress and the Bush administration offered companies a similar tax incentive, in 2005, in hopes of spurring domestic hiring and investment, and 800 took advantage. Though the tax break lured them into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research. This money comes from overseas operations and in some cases accounting maneuvers that shift domestic profits to low-tax countries. The study concluded that the program “did not increase domestic investment, employment or research and development.”

Happy Father’s Day to 1.8 million single dads & their head of household tax status [DMWT]
Ties not mandatory.

D.A.: Man stole $110,000 tax refund deposited in error [OCR]
A Laguna Beach man who received someone else’s $110,000 federal tax refund in error spent the money on foreclosure debt and student and car loans, prosecutors said.

Chinese Firms Need to Open Up Books [WSJ]
The Securities and Exchange Commission is investigating accounting and disclosure issues at a number of U.S.-listed Chinese companies that acquired backdoor listings through so-called reverse mergers, and even top-name Chinese companies are inviting new scrutiny. Renren Inc., a social-networking site that launched its shares to much fanfare in early May, now trades at about half its IPO price. Renren itself stirred controversy when it lowered the growth rate of its user base without explanation in its IPO prospectus and the head of its audit committee resigned just before the listing. Shares of Toronto-listed Sino-Forest Corp. have plunged 80% since late May after a short seller alleged problems in the forestry company’s accounting, which the company denies. Hong Kong-listed Chinese companies, too, are drawing new scrutiny over their accounting. Not all Chinese companies are shady. But investors are right to ask: How do you know which aren’t?

An Actor, Inventor, Accountant, and Now, a 9/11 Victim [NYT]
Mr. Borg died last Dec. 15 of complications of pulmonary sarcoidosis, an inflammatory disease of the lungs. The New York City medical examiner ruled that he had died from inhaling toxic substances in the dust cloud thrown up by the collapsing twin towers, and on Friday, Mr. Borg, who was 63, became the 2,753rd official victim of the Sept. 11 attack on the trade center.

China Regulator ‘Aware’ of Concerns on Chinese Firms’ Accounting [Bloomberg]
“We have been in touch with other foreign regulators regularly as usual,” Yao Feng, deputy director general of the CSRC’s department of accounting, said today while attending a conference held by the Hong Kong Institute of Certified Public Accountants. “We are aware of the concerns.”

PricewaterhouseCoopers Will Go To Trial In California Overtime Case [Forbes]
Francine’s take on this week’s decision in the 9th Circuit.

Ramseyer & Rasmusen: IRS Had No Authority to Waive NOL Rules for GM [TaxProf]
GM did not make many cars anyone wanted to buy, but it did have $45 billion in NOLs. Unfortunately for the firm, if the Treasury now sold the stock it acquired in bankruptcy it would trigger those § 382 NOL limitations. Suppose the newly reorganized GM did start making cars that consumers wanted. It would be able to use only a modest portion of its old NOL’s — if any.

House Panel Endorses Budget Cuts at IRS, Consumer Bureau [Bloomberg]
A U.S. House Appropriations subcommittee approved a spending bill that would cut funding for the Internal Revenue Service, limit the budget of the Consumer Financial Protection Bureau and deny a spending increase sought by the Securities and Exchange Commission. The $19.9 billion bill was approved today in Washington on a voice vote by the subcommittee on financial services and general government, and heads to the full committee. It includes funding for the Treasury Department, the White House, the District of Columbia, the federal courts, the Consumer Product Safety Commission and the General Services Administration.

No Parties After IFRS Adoption in Canada [CFO Journal]
If U.S. regulators want to get a sense of what the transition to International Financial Reporting Standards might be like, they may only have to look to their neighbors to the north where companies were required to switch from Canadian GAAP this year. But they should be prepared for some rather negative reviews.

IFRS doubters stung by government audit report verdict [Accountancy Age]
Haters gonna hate. Or something.

Europe Faces ‘Lehman Moment’ as Greece Unravels [Bloomberg]
The European Union’s failure to contain the Greek debt crisis is sending fresh shockwaves through currencies, money markets, equities and derivatives. The euro lost more than 2 percent against the dollar in the past two days and the cost of protecting corporate bonds soared to the highest level since January, with credit-default swaps anticipating about a 78 percent chance that Greece won’t pay its debts. Equities declined around the world, while a measure of fear in fixed-income markets jumped the most since November.

What Should Be Int? Would Users Know When They Saw It? [Re:Balance]
Red flags aren’t very useful if everyone is color blind.

Audit Firm Term Limits: Nothing Else Left to Try [Accounting Onion]
Speaking of things that aren’t proven useful.

Still Writing, Regulators Delay Rules [NYT]
Regulators overseeing financial reform are delaying many of the planned changes in the $600 trillion market for complex securities known as derivatives because they are running drastically behind schedule in writing their new rules. The Securities and Exchange Commission said on Wednesday that market participants would not have to comply with many aspects of derivatives reform scheduled to take effect in mid-July. It declined to specify how long the delay would be in the equity derivatives it oversees.

Rangel Sold Condo, Report Shows [WSJ]
Mr. Rangel, the New York Democrat, sold his condo at the Punta Cana beach villa for somewhere between $250,000 and $500,000 last year. He was censured by the House last year for, among other things, failing to pay taxes on rental income from the resort property over a 17-year period. Mr. Rangel was required to repay those taxes and forced to relinquish his chairmanship of the Ways and Means Committee.

Golfer Goosen’s Tax Court Case Tests Principle That Image Is Everything [Bloomberg]
The international golfers at this week’s U.S. Open in Bethesda, Maryland, will be watching for two-time champion Retief Goosen on the leaderboard. Their lawyers will be studying Goosen’s U.S. Tax Court decision. The South African native challenged the Internal Revenue Service’s analysis of the endorsement income he earned from such companies as Electronic Arts Inc. (ERTS), Adidas AG (ADS) and Rolex Group. The case will affect golfers, tennis players and pop stars from around the world who tour in the U.S., license their images for advertising and hawk perfumes, cars, and jewelry.

‘Convergence’ Hits a Bump [WSJ]
The Financial Accounting Standards Board and International Accounting Standards Board said they will issue a revised proposal to overhaul the rules on revenue recognition, updating a proposal they first made last year. The revised proposal is planned for the third quarter, and companies, investors and other observers will have 120 days to comment on it after it is issued.

Adelphia’s Rigases, Jailed for Fraud, Lose Bid to Block Criminal Tax Case [Bloomberg]
Adelphia Communications Corp. founder John Rigas and his son Timothy, who are in prison for securities fraud, failed to persuade a U.S. judge to dismiss a pending criminal tax case against them. John Rigas, 86, is serving 12 years and Timothy Rigas, 55, 17 years for looting the cable company and lying about its finances. After a federal jury in New York convicted them in 2004, U.S. prosecutors in Pennsylvania charged the two with conspiring to dodge taxes on $1.9 billion they stole from Adelphia, a cable-television company that collapsed in 2002.

Accountant accused of embezzling $392,000 [ArgusLeader]
A Sioux Falls man who recently served as a watchdog for city finances is accused of embezzling almost $400,000 while working as an executive at SDN Communications.

Florham Park accountant indicted in trying to meet two underage girls in Atlantic County [NJSL]
A 56-year-old Florham Park accountant was indicted yesterday in connection with trying to meet with two underage girls earlier this year in an Atlantic County hotel, officials said. Stephen Bubniak, was indicted on 23 counts, including attempted luring, attempted sexual assault and attempted criminal sexual contact, said Atlantic County Prosecutor Ted Housel yesterday. Bubniak had arranged to meet the two girls, ages 13 and 14, on Feb. 3 and 4, after a series of online chats, Housel said.