Accounting Board Faults Audits of Brokerage Firms

The following is an excerpt from an article in 

The New York Times
Tuesday, August 21, 2012

Accounting Board Faults Audits of Brokerage Firms

By FLOYD NORRIS

The many auditors who inspect the financial statements of brokerage firms appear to be cutting corners and not doing all the work they should do, a worrisome sign after the collapse of the Peregrine Financial Group, a leading commodities brokerage firm, where a fraud had gone undetected for many years.

Having completed the first review of such brokerage firm audits, the Public Company Accounting Oversight Board said on Monday that it had found deficiencies in every audit its inspectors reviewed.

“The auditors,” said Jeanette M. Franzel, a member of the board, “were not properly fulfilling their responsibilities to provide an independent check on brokers’ and dealers’ financial reporting and compliance with S.E.C. rules.”

That does not mean that any of the statements misrepresented the financial conditions of the 23 brokerage firms whose audits were reviewed by inspectors from the board. In most cases, the accounting board concluded that the audit firm had failed to do the necessary work to ensure that the financial statements were accurate or that the firms had sufficient capital.

“In 13 of the 23 audits,” the board reported, auditors “did not perform sufficient procedures to identify, assess and respond to the risks of material misstatement of the financial statements due to fraud.”

Lynn Turner, a former chief accountant of the Securities and Exchange Commission, called the report “mind-boggling” and said it indicated that audit firms had failed to respond to the disclosure of Bernard Madoff’s Ponzi scheme. It was that fraud that led Congress to authorize the oversight board to review audits of brokerage firms.

The Peregrine fraud was uncovered after the National Futures Association, a self-regulator, stopped relying on paper copies of bank records in its own inspections. Peregrine had forged such records for years. Its independent auditor, a one-person firm, did not discover the fraud even though bank accounts are supposed to be confirmed.

For more, visit www.nytimes.com.

CA Technologies Adds Aspera Software License Management to its Service Management Portfolio

Press Releases

CA Technologies Adds Aspera Software License Management to its Service Management Portfolio

OEM Agreement Helps Customers Address Complexities of Software Licensing and Mitigate Audit Risk

ISLANDIA, NY and AACHEN, Germany—August 16, 2012—CA Technologies (NASDAQ: CA) and Aspera GmbH (“Aspera”), a wholly-owned subsidiary of USU Software AG (“USU”), today announced an OEM agreement under which CA Technologies will embed Aspera’s industry-leading SmartTrack license management technology in its industry-leading CA IT Asset Manager software.

CA IT Asset Manager helps organizations reduce the risk of license compliance and optimize the cost, management and distribution of existing assets.

Findings from the latest annual survey conducted at Gartner's IT Financial, Procurement and Asset Management Summit again show higher numbers of audits year over year.  In the same research note, Gartner recommends that “CIOs should invest the funds needed to ensure that robust asset management is in place and effective, and that asset management staff are empowered to ensure compliance."

Software license agreements with vendors can also be highly complex, making it difficult for customers to get maximum business value from them while also rigorously maintaining compliance with licensing terms.

According to Gartner analyst Patricia Adams, “Correlating license entitlement with installed software is not an easy task.  Therefore, vendors specializing in software license optimization are emerging to address this market niche.”**

“Aspera lives and breathes software license management,” said Christof Beaupoil, president of Aspera Technologies Inc., the U.S.-based sister company of Aspera GmbH. “By providing CA Technologies with both our technology and expertise, Aspera can help CA Technologies customers more quickly and easily achieve their efficiency and compliance goals.”

Aspera’s software license management technology complements the broader CA Technologies Service Management solutions portfolio, which addresses all aspects of software, hardware and network resource ownership on-premise and in the cloud—along with associated IT operations.

Aspera also delivers its technology as a cloud-based service, which aligns well with the CA Technologies IT Management-as-a-Service (ITMaas) strategy.

"IT organizations are under intense pressure to get the most out of every dollar of IT spend, even as their environments are becoming increasingly complex," said Lokesh Jindal, senior vice president, Service and Portfolio Management, CA Technologies.  "Our relationship with Aspera will help our customers worldwide fulfill this core objective by empowering them to improve utilization of all the assets that support their service delivery."

*Gartner, Inc., Software Vendor Auditing Trends: What to Watch For and How To Respond by Jane B. Disbrow, Alexa Bona, Frances O’Brien, Frank DeSalvo, Ted Friedman, Jo Ann Rosenberger, Joseph Neapolitan, Victoria Barber, Stewart Buchanan, May 23, 2012

**Gartner, Inc., Software License Optimization Vendor Overview by Patricia Adams, July 3, 2012

About Aspera

Aspera is a highly specialized provider of software license management solutions. Our unique, entitlement-centric approach has been successfully implemented in international projects for over a decade. SmartTrack is the tool of choice for large companies wishing to effectively manage software assets governed by significant volume license agreements. More than 130 world class businesses – including 20 Fortune Global 500 companies – rely on Aspera’s expertise for license management. Aspera has partners in Scandinavia, Germany, Netherlands, the UK, and Australia.

Following the industry standard ISO/IEC 19770-1 our services include but are not limited to: LaaS, software recognition engineering, license clearing, interface monitoring, and application troubleshooting, master catalog, extended catalog, ITIL certified organization and process consulting, project management, integration, and customer support.

Aspera was founded in 2000 in Aachen, Germany and currently employs 65 professionals. It is registered in the USA under Aspera Technologies Inc. Aspera GmbH and Aspera Technologies Inc. are wholly owned subsidiaries of USU Software AG. More information is available at www.aspera.com.

About CA Technologies

CA Technologies (NASDAQ: CA) provides IT management solutions that help customers manage and secure complex IT environments to support agile business services. Organizations leverage CA Technologies software and SaaS solutions to accelerate innovation, transform infrastructure and secure data and identities, from the data center to the cloud. Learn more about CA Technologies at www.ca.com.

All IRS Tax Audits Not Created Equal

All IRS Tax Audits Not Created Equal
H&R Block advises compliance contacts don’t have to be costly

FOR RELEASE MAR 26, 2012

Data for last year shows the IRS audited the tax returns of approximately 1 percent (1.6 million) of taxpayers. However, further inspection indicates that the tax returns of an additional 6.5 percent (9.2 million) of taxpayers were subjected to recently defined type of compliance contact. The National Taxpayer Advocate called these compliance contacts “unreal” audits in a recent blog post¹.

No matter what an IRS notification or compliance contact is called, H&R Block advises on the benefits of having professional assistance when responding to an IRS notification. 

The 9.2 million taxpayers who were notified the IRS had recalculated their taxes due, also could have been assessed added penalties and late fees. The notifications happened for the following reasons:

• 4.7 million returns were corrected for math errors
• 3.9 million returns were determined to have underreported income based on third-party reporting, which is done by employers, banks, etc.
• 600,000 substitute returns were filed by the IRS on behalf of taxpayers based solely on income reported by third parties, perhaps resulting in taxpayers not claiming the tax credits and deductions to which they are entitled.

 “While it might seem the only appropriate response to an IRS notification is to pull out the checkbook, it’s important to understand the request,” said Elaine Smith, H&R Block tax professional and enrolled agent. “The IRS has several ways it corresponds with taxpayers to correct underreporting errors. So, not all audits are created equal.”

H&R Block, which prepares approximately 1 in 7 tax returns nationally, also provides audit services to current and new clients. Only enrolled agents, certified public accountants and lawyers may represent taxpayers through the entire IRS audit process. H&R Block employs the nation’s largest single staffing of enrolled agents, who have experience with audits involving hundreds to millions of dollars. In fact, in an audit situation H&R Block is able to reduce the overall tax liability for 3 out of 5 taxpayers whose returns were not prepared by H&R Block.

Audits hit all income levels
The primary targets of audits are no longer small business owners and those whose income exceeded $1 million; 64 percent of the 1.5 million taxpayers audited in 2010 earned $50,000 or less, including taxpayers who claimed the Earned Income Tax Credit, but were not eligible. This means an overwhelming majority of taxpayers subjected to audits and other forms of compliance contact are low- and middle-income taxpayers. Following are other factors that may make taxpayers attractive audit candidates:

• Handwritten returns
  • Miscalculations and omissions that could be avoided by using tax preparation software and e-filing can cause even the most straightforward returns to be audited
    
• Unreported income and inconsistencies
  • A document-matching program makes it easy for the IRS to check income stated on a tax return against what is reported on forms W-2 (wages), 1099-MISC (self-employment income),1099-INT (interest paid), 1099-B (sale of stock), etc.
  • The IRS also uses a program to compare taxpayers’ deductions (e.g., mileage and charitable contributions) with others in the same tax bracket to check for inconsistencies
    
• Schedule C (self-employment form)
  • Returns are more likely to be audited if they include claims for expenses not within the IRS’s guidelines and include a majority of cash business transactions.

Like audits, not all tax preparation companies are created equal. Only H&R Block’s guarantee provides free audit support for returns prepared by its tax professionals in tax offices, and free, full audit representation for returns filed by taxpayers who used its digital, online and mobile filing solutions. IRS notifications are sent year-round, and these services are available year-round.

“Avoiding errors on tax returns starts with choosing the right tax prep method based on individual needs, and it can help a taxpayer avoid an audit situation,” Smith said. “Taxpayers shouldn’t panic or ignore IRS notices. Instead, they should seek professional assistance to make sure the changes the IRS made to their return are accurate. H&R Block may find you actually owe less than what the IRS indicated.”

H&R Block tax professionals are offering free Second Look® reviews on 2008-2011 tax returns not prepared by H&R Block to identify overlooked tax breaks, such as the Earned Income Tax Credit. Free Second Look reviews are available at participating H&R Block retail tax offices through April 30 to new and existing clients. To find the nearest H&R Block office, visitwww.hrblock.com or call 800-HRBLOCK.

H&R Block’s tax professionals provide guaranteed tax return preparation services in-person at retail tax offices open year-round and through Block Live^SM, the only face-to-face online tax preparation experience available in the industry. Do-it-yourself filers benefit from the expertise and guidance of The Tax Institute at H&R Block when using H&R Block At Home™ on their computers, tablets and smartphones. Because understanding taxes is an integral part of managing personal finances, H&R Block keeps the conversation going with clients all year via blogs, tweets and Facebook status updates.

¹What’s an Audit, Anyway? Jan. 25, 2012

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