Accountants are required to provide information on a publicly traded corporation's looming losses. They now have the power to sink this market by reducing expected earnings. Will they do this? Will they obey the law or, for public relations' sake, hide the evidence?
Some Big Six accounting firms have sold computer software to large corporations. What if their software is not compliant? Who becomes liable then?
The Securities & Exchange Commission here reminds accountants of their responsibilities and liabilities. But the Commission is careful to say that it has issued no guidelines for y2k. No sanctions are threatened here. Watch for weasel words, such as "it would appear."
Do you think the regulators are protecting investors or the brokerage industry?
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The Federal securities laws recognize the importance of independent audits by requiring, or permitting the Commission to require, that financial statements filed with the Commission by public companies, investment companies, broker/dealers, public utilities, investment advisers, and others, be certified (or audited) by independent public accountants, and by granting the Commission the authority to define the term "independent."
Although specific guidance regarding Year 2000 is not set forth in the Commission's independence regulations, the independence issues can be addressed using existing guidance applicable to auditing firms providing other nonaudit services. The staff generally does not object to an auditor's provision of nonaudit services to SEC audit clients unless provision of services results in one of the following conflicts for the auditor: . . .
It would appear that a pending failure of an entity's computer system in the year 2000 would constitute a contingency that would require consideration by entities and their auditors that would fall under the accounting and disclosure requirements of FAS 5.
Disclosure by Public Companies
The disclosure provisions of the rules and forms applicable to public companies are intended to provide information that will enable the investing public to make informed investment or voting decisions. The Division of Corporation Finance has considered whether the rules, as they currently stand, are adequate with respect to companies whose filings are processed by that Division. The Division believes that the rules are adequate, and has given guidance to companies about the extent to which Year 2000 compliance issues should be disclosed in their public filings.
When Year 2000 issues are material to investors, they must be addressed in filings with the Commission, principally, as discussed below, in "Management's Discussion and Analysis of Financial Condition and Results of Operations," which appears in companies' annual reports and quarterly reports filed with the Commission, as well as in many registration statements.