Accounting News Roundup: PwC's Auditing Got Worse; Revenue Recognition Still on the Stove; More PKF, BDO Love | 11.13.12

PwC Takes Hit in Latest Inspection, Asks PCAOB to Act [CW, Report]
PwC is taking more condemnation from the Public Company Accounting Oversight Board in its newest inspection report, but not without a little pushback. The PCAOB's 2011 inspection of PwC shows problems with 41 percent of the audits inspected, prompting PwC to summarize its efforts internally to address regulators' concerns and ask the board to accelerate its own efforts on some auditing standards that might clarify expectations in some of the toughest areas of auditing. The 2011 inspection of PwC took a close look at 60 audits, plus three additional audits where the firm played a critical role but didn't issue the final audit report. Inspectors found fault with 26 audits, or 41 percent, including three cases where issuers restated their financial results or announced their intention to do so after the inspection, according to the report. Last year, PwC saw 37 percent of its audits called out for problems by PCAOB inspectors.

Looking Past Fiscal Cliff to Fixing Taxes [WSJ]
Let's imagine you just landed from Mars and discovered that America's political system is in gridlock, and its economy is being held hostage. What, you would ask, is the giant problem creating all this trouble? The big dispute, you would discover, is over whether the top individual marginal tax rate should be 35% (the rate established under George W. Bush) or 39.6% (the rate under Bill Clinton). That is an oversimplification of the issues that are driving Washington toward the so-called fiscal cliff, of course. Still, that top rate is at the heart of the roaring economic debate. And while establishing the top tax rate is an important issue, the paralysis over settling that seemingly modest question shows just how sterile the economic-policy debate has become in Washington. The broader question that really ought to be the subject of serious debate is how to take an outdated tax system—one essentially created in 1913 and last seriously updated in 1986—and revamp it for the 21st century.

Accounting Rulemakers Still Simplifying Revenue Recognition [CFOJ]
While accounting rulemakers aim to simplify already complex rules for revenue recognition, they are trying to avoid forcing companies to spend more time valuing revenue or treat sales contracts the same way they treat financings, where companies record a liability and reduce it as the contract is completed, Kristin Bauer, a Financial Accounting Standards Board practice fellow, said at a Financial Executives International conference in New York on Monday. “When we talk to [financial statement] users and regulators, people want that revenue number to be a good number,” Bauer said at the conference. “They don’t want it to be subject to future reversals.”

Olympus Rises After Raising Full-Year Net Income Forecast [BBW]
Olympus raised its full-year net income forecast 14 percent as it sells assets to boost capital while cutting expected operating earnings amid losses at its camera unit. Investors are more comfortable with the new forecasts as the company recovers from a 13-year accounting fraud, said Tomoki Komiya an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. “The revision is reassuring as the previous forecast for its digital camera business had been unrealistic,” Komiya said by telephone today. “Olympus showed us its attitude towards its restructure and that’s comforting.”

PKF Chinese firm to join BDO [Accountancy Age]
A large part of the PKF network in China will join the local BDO firm. Some 350 PKF staff will join BDO Li Xin, giving the firm strength in the state-owned Assets Supervision & Administrative Committee (SASAC) and the National Audit Office (NAO). The move follows the merger agreement between BDO and PKF in the UK, as well as a merger of the two firms on the Australian east coast.

Nate Silver on the Election, Pundits, and His Drunk Alter Ego [CM]
KPMG ennui sufferer Nate Silver once tried to determine the best burrito in Chicago's Wicker Park using a statistical model. He did not complete the task: "Even I managed to get a little sick of Mexican food eating it basically every day for a month in row."

Ratings Agency Liability -- The Aussies Turn the World Upside Down [Re:Balance
Jim Peterson writes that an Australian legal decision against S&P may open the Big 4 to even more litigation.

Norquist pledge takes election hit [The Hill]
Fewer incoming members of the House and Senate have signed the pledge against tax increases run by Norquist’s Americans for Tax Reform, in a reflection not only of the seats that Democrats gained but of the success they’ve enjoyed in vilifying Norquist. About a dozen newly elected House Republicans refused to sign the anti-tax pledge during their campaigns, and another handful of returning Republicans have disavowed their allegiance to the written commitment.

Pizza offered after car slams into Southeastside house [IS]
William Kise, 41, crashed into the home's garage on the 7900 block of Cross Willow Boulevard near Brookville and Franklin roads at 10:15 p.m. Thursday, police said. Indianapolis Metropolitan Police Department officers found a pizza box and bottle of hot sauce in the back of Kise's car after the accident. Kise told police he drank five beers while waiting for the pizza at a friend's house. He then left the house and was eating a slice when his foot somehow became stuck on the gas pedal, he told officers. He could not brake to stop the vehicle, he told police, causing him to crash into the home. The homeowner said he heard the sound of an engine racing and then felt his house shake, according to an IMPD report. The homeowner walked in his garage and found Kise in the driver's seat of his 2004 Ford Mustang. Kise then stepped out of the car and asked the homeowner if he wanted some pizza, according to the IMPD report.

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