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Paulson's Plans

Location: Blogs AAO Weblog (Public)
Posted by: Jack Ciesielski	5/21/2007 6:22 AM
Last week, the Treasury Department Secretary Henry Paulson unveiled his initiatives for enhancing U.S. capital market competitiveness - most of which are focused on financial reporting and the accounting profession. Highlights of the plans: Provide Investors with A Transparent and Sustainable Auditing System. A non-partisan committee to be headed by former SEC chair Arthur Levitt and former chief accountant Don Nicolaisen will "develop recommendations to consider options available to strengthen the industry's financial soundness and its ability to attract and retain qualified personnel." Hopefully, competition among auditing firms and the accounting education system are considerations. Gain Better Understanding of Reasons for Increasing Financial Restatements. While the Treasury intends to study why restatements have gone from 116 in 1997 to 1,876 in 2006, this path has already been well-trod by others. Glass Lewis has done a fine job of analyzing restatements over the years. And the SEC has too. Consider this clip from a speech given by then-deputy chief accountant Scott Taub last November on the subject of errors and restatements: "... disclosures we reviewed that accompanied restatements over the past three years suggest that well over half of the errors that resulted in restatements were caused by ordinary books and records deficiencies or by simple misapplications of the accounting standards." [Emphasis added.] Enhance Financial Reporting. The Treasury Department supports "SEC and the Financial Accounting Standards Board's efforts to enhance financial reporting transparency and accessibility for investors," citing the 2,000 pronouncements comprising GAAP. Sounds awful when you hear about "2,000 pronouncements." But not all of them apply to every company. Streamline Accounting Requirements to Encourage International Companies to List on U.S. Exchanges and Increase Investor Opportunities. The Treasury Department is planting itself squarely behind convergence of international accounting standards. This is one topic that everyone in the regulatory and government arenas seem to be pushing lately. If it's going to happen, it'll need that kind of push.

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