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SEC Unanimously Approves New Final Rules on Auditor Independence

Securities and Exchange Commission unanimously approved rules concerning auditor independence requirements and market structure issues.

SEC chairman Arthur Levitt acknowledging the profound changes sweeping the markets and the importance of safeguarding the public trust voiced his appreciation of the feedback he received during the process. "As many know well, the process of working towards an effective but workable final rule has been a long, and often difficult one. Along the way, there have been some heartfelt differences of opinion on how best to handle certain issues. The Commission's staff has heard the specific concerns of all of the Big 5 firms and the AICPA, and the final rule reflects, to a great extent, their concerns."

Big 5 firms and the AICPA, and the final rule reflects, to a great extent, their concerns." "Specifically, the rule would reduce the number of audit firm employees and family members whose investments in, or employment with audit clients would impair the auditor's independence. The rule also identifies certain non-audit services that, if provided to an audit client, would impair independence. I believe the scope of these prohibitions is targeted, sensible, and in many cases, consistent with the current restrictions on the profession's and the SEC's books." [Read More]

Ten Steps Towards Preparing a More Effective Form 990 & Audit

Preparing a "Return of Organization Exempt From Income Tax", Form 990, can be an arduous experience. Besides filing the Form 990 with the Internal Revenue Service, a copy is required most states to be filed by the Non-Profit or charity, whether the engagement specifies a compilation, review, or audit. The task becomes more demanding upon involving a professional fund raiser.

A federal income tax deduction by the donors is only allowed toward 501(c)(3) organizations. Their reporting requirements are more detailed than the other 501(c) group. The information not required of certain portions of this group, such as the "statement of functional expenses", may be required by most state filings. Therefore, a generic approach to the subject is taken. Hopefully, you will find "Ten Steps Toward Preparing a More Effective Form 990 & Audit" useful and helpful.

Reporting offsets or net amounts derived by an NPO are prohibited. Obtaining sufficient evidence for an audit may prove to be elusive or not forthcoming since PFR's typically do not open their books to outside agencies. However, by most state laws, the onus is upon the charity. How does the charity cope with this dilemma?

The typical answer to getting around this problem is to insist the PFR opens their books to the NPO for audit purposes. But what happens when this is not forthcoming? The NPO may insist upon the PFR having the primary account in the NPO's name. This is the account for initial deposit of receipts for all receipts. This is fine as long a the NPO controls the account. But what if there is a reluctance by the PFR to do this? [Read More]

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