VSCPA Requests Amendment to Bill on Auditors of Broker-Dealers

On November 19, 2009, the VSCPA sent a letter to Sen. Mark R. Warner urging him to offer an amendment to modify the problematic Section 982 of Chairman Chris Dodd’s financial regulatory reform package.

Section 982 would extend the registration and inspection by the Public Company Accounting Oversight Board (PCAOB) to the auditors of all non-public broker-dealers. The VSCPA believes an expansion of PCAOB authority to register and inspect auditors is absolutely appropriate and necessary to build public confidence and avoid further investor scams, such as the Ponzi scheme notoriously committed by Bernard Madoff.

To achieve this balance, it is important to distinguish between broker-dealers who actually control client funds (clearing and custodial broker-dealers) versus those broker-dealers who never touch investors’ monies (introducing broker-dealers). The VSCPA does not support the language as written. However, if it is modified to expand PCAOB registration and inspection to auditors of clearing and custodial broker-dealers, but not introducing broker-dealers, the VSCPA would endorse its passage.

Read the VSCPA’s full comments for more information.

VSCPA Opposes Private Right of Action for Allegations of Aiding and Abetting Under Securities Exchange Act

On November 10, 2009, a Senate discussion draft titled the “Restoring American Financial Stability Act of 2009” was released. Section 984 in the draft, to create a new private right of action for allegations of aiding and abetting violations of the Securities Exchange Act of 1934, is of particular concern, which is why the VSCPA is opposed to this language.

According to a letter the VSCPA sent Sen. Mark R. Warner on November 23, 2009, Section 984 will not only permit private rights of action for aiding and abetting under securities laws, but will also lower the current legal standard for conduct in aiding and abetting cases brought by plaintiffs’ attorneys from a standard of “knowingly” committing a violation to mere “reckless” behavior. Because recklessness is not defined, and as a practical matter is a vague standard, this change alone would result in a significant increase in litigation, the VSCPA said. Read the full letter for more information.

The VSCPA urged that Section 984 be stricken from the Restoring American Financial Stability Act, thereby leaving enforcement for aiding and abetting with the SEC, whose focus will be on those parties who engaged in fraudulent conduct rather than exposing a sizeable portion of the economy to expanded liability simply because of their “deep pockets.”

Volunteerism as a Path to Leadership

A recent Journal of Accountancy article, “Teach Young CPAs Well: Partners, CFOs must instill leadership skills to find their successors,” demonstrates how valuable volunteering can be to a young CPA in his or her development into the future leaders of the firm and the profession. Volunteering is a great way to develop leadership skills — not only technical skills, but those “soft” skills like communication which are so valuable in today’s market.

This article also proves very timely to the VSCPA as we are currently offering our members more than 30 volunteer opportunities from which to choose for our 2010–2011 fiscal year. If you’re interested in using your skills to help Virginians, students or your community, please take a look at our volunteer opportunities here. Active engagement in extracurricular opportunities is a valuable time investment.

Article on Efficient Month-End Closing From John L. Daly

If you deal with the month-end closing process, this is an interesting article from a former CFO, John L. Daly, CPA, MBA, CMA, CPIM. His explanations as to why “fresh” information is important and how most companies attempt to implement quick closing procedures are interesting. Reconciliations seem much more evil after one statistic: “many organizations spend large portions of their costs, perhaps 30%, fixing things not done correctly the first time.”

It’s a relatively short article. Click here for the full text.

If you’re interested in learning more about shortening your closing times, John will be teaching a four-hour seminar on the subject at the VSCPA CPE Cluster at Wintergreen. It’s in February, so don’t forget your skis.

AICPA Files Lawsuit Challenging Application of 'Red Flag' Rules to CPAs

In the latest news surrounding the U.S. Federal Trade Commission's (FTC) "Red Flags" Rule, the AICPA announced this afternoon that it has filed a lawsuit in the U.S. District Court for the District of Columbia seeking an injunction barring the FTC from applying the Rule, which would impose onerous and unnecessary requirements on CPAs.

“We do not believe that there is any reasonably foreseeable risk of identity theft when CPA clients are billed for services rendered,” said AICPA President and CEO Barry Melancon. “As trusted advisors, CPAs are personally acquainted with their clients and already adhere to strict privacy requirements governing identifying information.”

The AICPA’s complaint, filed by law firm Fried, Frank, Harris, Shriver & Jacobson LLP, alleges that the FTC is exceeding its congressionally granted powers under the 2003 law by interpreting its Red Flags Rule to apply to accountants. The AICPA’s complaint alleges that the FTC has acted arbitrarily, capriciously, and contrary to law by failing to articulate a rational connection between the profession of public accounting and identity theft. The FTC failed to explain how the manner in which public accountants bill their clients in the normal course of business constitutes an extension of credit. The FTC further failed to identify any legally supportable basis for applying the rule to accountants.

Due to urging from Congress, the FTC announced Friday, October 30, that it had delayed enforcement of the Rule until June 1, 2010, for financial institutions and creditors subject to enforcement by the FTC. Read more online at http://www.vscpa.com/.

In related news, HR 3763, which recently passed the House of Representatives, grants only certain sized businesses an exemption Red Flags Rule. One of the professions identified for exemption criteria in this legislation is the accounting profession, but only if a firm has 20 or fewer employees. On November 3, the VSCPA mailed a letter to Sen. Mark R. Warner stating that the current exemption criteria would provide relief to just a small percentage of accountants and accounting firms from the burden of complying with the Rule. The VSCPA said the exemption should be expanded to all CPA firms.

Also, check out an earlier post on this issue, and read a letter the VSCPA sent to Sen. Jonathan D. Leibowitz on August 5, 2009, detailing several reasons CPAs should be exempt from the Rule.

Cloud Control

In our annual communications survey to a random sample of VSCPA members, respondents consistently reveal they want technology-related articles in Disclosures.

So the November/December issue of Disclosures features a hot tech topic for CPAs — especially those who are small business owners: cloud computing.

In "Keep Your Head Above the Clouds: Stay on Top of Cloud Computing Trends," veteran Disclosures author Haven Pope, CPA, CFE, explores, in layman's terms, how cloud computing works, and then breaks down the benefits and risks.

Two technical articles provide food for thought for CPAs working in business and industry as well as tax practitioners: "Cash Is King: Utilize Cost Segregation Studies to Increase Cash Flow," by Dennis Diersen, CPA; and "Just Passin' Through: A Primer on Virginia's Pass-Through Entity Withholding Rules," by Jay Bethard, CPA, J.D., LL.M.

In the hopper:

The January/February issue is in production, and we have two new standing columns that will appear in each 2010 issue. "Today's CPA," to be authored by different VSCPA members, will tackle topics related to getting ahead as a CPA. "Leader's Edge," a column from VSCPA member, speaker and author Brian Kush, CPA, CISA, CITP, will focus on management, leadership and interpersonal skills essential for CPAs.

Feedback or thoughts? Contact me anytime.

FTC Postpones Enforcement of Red Flag Rule to June 1, 2010

Due to urging from Congress, the U.S. Federal Trade Commission (FTC) announced late Friday, October 30, that it has delayed enforcement of the “Red Flag” Rule until June 1, 2010, for financial institutions and creditors subject to enforcement by the FTC. Read more online at www.vscpa.com.

Check out an earlier post on this issue, and read a letter the VSCPA sent to Sen. Jonathan D. Leibowitz on August 5, 2009, detailing several reasons CPAs should be exempt from the Rule.