January 25, 2005
Principals Based Judgments are Uncharted Territory
CPA's are used to making judgments based on a calculation of risk called materiality. This has led to loop holes which follow the letter of the law but not the spirit. Robert Herz, Chairman of the Financial Accounting Standards Board, wants companies to follow principals not just rules. This calls for judgment that could be questioned in court. It also means that real ethical calls have to come in, not some arbitrary calculation that will account for a decision. Uncharted territory for those who have always followed rules but not the spirit of the law. Time for a change and a good one at that.
An excerpt of an article is here:
"Auditors afraid of making judgments, says FASB chief
By Andrew Parker in New York Jan 23 2005 18:49
Companies and their auditors are reluctant to exercise more judgment in work on accounts despite the Securities and Exchange Commission's call for a principles-based approach.
They fear challenges by regulators, lawyers or the media, according to the head of the body that writes US financial reporting rules.
The statement by Robert Herz, chairman of the Financial Accounting Standards Board, underlines the scale of the task if the US is to switch to a financial reporting regime based on principles rather than rules.
The SEC, the chief US financial regulator, published a report in 2003 that called on the US to ditch its tradition of complex accounting rules and adopt financial reporting standards rooted in principles." For the complete article, click here.
To find out how your company can follow Sarbanes-Oxley legislation, spirit and rules, in a cost effective manner, see www.issuescentral.com to tour the Sarbanes-Oxley Compliance Playbook(tm).
An excerpt of an article is here:
"Auditors afraid of making judgments, says FASB chief
By Andrew Parker in New York Jan 23 2005 18:49
Companies and their auditors are reluctant to exercise more judgment in work on accounts despite the Securities and Exchange Commission's call for a principles-based approach.
They fear challenges by regulators, lawyers or the media, according to the head of the body that writes US financial reporting rules.
The statement by Robert Herz, chairman of the Financial Accounting Standards Board, underlines the scale of the task if the US is to switch to a financial reporting regime based on principles rather than rules.
The SEC, the chief US financial regulator, published a report in 2003 that called on the US to ditch its tradition of complex accounting rules and adopt financial reporting standards rooted in principles." For the complete article, click here.
To find out how your company can follow Sarbanes-Oxley legislation, spirit and rules, in a cost effective manner, see www.issuescentral.com to tour the Sarbanes-Oxley Compliance Playbook(tm).
