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The “Red Flags” Rule is Still Useless for CPAs

In more government bureaucracy news, the FTC is granting a reprieve to CPAs when it comes to a new law that deals with identity theft, one which some CPAs say is useless given professional responsibility.

The new FTC rules requires businesses to “develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities -– known as ‘red flags’ — that could indicate identity theft.” The problem with that, of course, is that the AICPA Code of Professional Conduct already deals with the issue of identity theft in that there is an iron-clad confidentiality rule by which all CPAs must abide. Seems simple, right?


The US District Court has ordered an FTC delay of the rule for AICPA members in public practice, says the Maryland Association of CPAs. Barry Melancon, AICPA President said in 2009 when the AICPA filed a lawsuit against the FTC, “We do not believe that there is any reasonably foreseeable risk of identity theft when CPA clients are billed for services rendered. As trusted advisors, CPAs are personally acquainted with their clients and already adhere to strict privacy requirements governing identifying information.”

Don’t take it personal, Barry, the FTC is just trying to do its job, even if that means overreaching its authority and attempting to place restrictions on professionals who already go above and beyond the intent of the FTC on a daily basis.

In the meantime – and just in case the rule cannot be delayed indefinitely (as is, implementation has been put off until June 1, 2010) – the AICPA has some guidance for CPAs on creating an identity theft prevention program. Keep in mind the new requirements, if implemented, only affect CPAs who bill their clients on a monthly or revolving basis as it is meant to place additional controls in client billing.

The American Bar Association is also fighting the rule.

Another ‘Red Flags’ delay: CPAs get 90 more days [CPA Success]

Let’s Meet the News Corp. Audit Committee

By now you’ve probably heard that Rupert and James Murdoch had a little Q&A with some Members of Parliament in London today. You may have also heard that things got a little interesting when a man opted to put a cream (origin unknown) pie in the elder Murdoch’s face only to have his wife, Wendi Deng, get a little medieval on the Three Stooges impersonator.

Before all the excitement, things were getting a little awkward, as Rupes came off as very unprepared and on at least one occasion, was slapping the table not unlike your own octogenarian grandfather wanting to know if someone could pass the goddamn mashed potatoes. At one point, the questioning turned to legal settlements and MP Therese Coffey asked the Murdochs if they knew “how much has been paid out in legal settlements.”

James Murdoch [said] he [did] not know total number but said its customary to try to reach out-of-court settlements in many cases. Rupert Murdoch points out News Corporation had a strong audit committee to review all these things.

Right! The audit committee, that’s who you want to talk to. Of course, that’s a pretty lame answer, as Dennis Howlett noted:

Who, exactly, are these capable audit committee members? Here’s the crew from the company’s most recent proxy:

• Sir Roderick I. Eddington, Chairman – currently the non-executive chairman for Australia and New Zealand of J.P Morgan. Also former CEO of British Airways. Director since 1999.

• Peter L. Barnes – Chairman of Ansell Limited. Director since 2004.

• Andrew S.B. Knight – Chairman of J. Rothschild Capital Management Limited. Was also the Chairman of News International (James Murdoch’s current position) from 1990 to 1995. Director since 1991.

• Thomas J. Perkins – Partner of Kleiner Perkins Caufield & Byers, a venture capital company. Director at News Corp since 1996.

I’m sure all these dudes (News Corp has one woman on their board – Natalie Bancroft) are all quite capable but it doesn’t strike me a terribly robust audit committee. Having said that, it’s been reported that News Corp’s independent directors have retained Debevoise & Plimpton to represent them. The audit committee is comprised entirely of independent directors (calling Mr. Knight “independent” seems like a stretch but whatevs) and maybe they could rattle off the laundry list of legal settlements but at least it appears they’re sorta on top of things now.