In 2009, The U.S Securities and Exchange Commission (SEC) stated that all publicly held companies should start using eXtensible Business Reporting Language (XBRL) as one method of disclosing their financial statements. XBRL is based on XML, and can be used to define financial information and exchange it.
Using XBRL to generate Financial Statements should make it easier for auditors (in our case) to analyze financial information, which adds transparency, makes it easier to compare data, and implement risk management to avoid potential scandals. (Frankel, 2013)
David A. Frankel. Why Companies Should Care About XBRL Data for Financial Reporting. October 7, 2013. http://data-informed.com/companies-care-xbrl-data-financial-reporting/ (accessed January 26, 2014).
The accounting firm KPMG will be paying an $8.2 million dollar fine for providing auditing and non-auditing services to three undisclosed clients, which violated independence rules. The non-auditing services included bookkeeping, restructuring, payroll services and corporate finance. The $8.2 million fine was issued by the Security and Exchange Commission. The SEC prohibits the practice of auditing firms providing Auditing and non-Auditing services to the same client because it could cause a conflict of interest and influence the results of the audit. (Lynch, 2014)
One of the topics covered this week was the need for independence in Auditing functions. The SEC’s justification for the fine can be found in the Security Exchange Acts of 1933 and 1934, and the Sarbanes-Oxley Act of 2002.
In 1933, Congress passed the Securities Exchange Act of 1933. This act is often referred to as the “truth in securities” law and prohibits fraud, misrepresentation or deceit when selling securities.
The Securities and Exchange Commission was created by the Securities Exchange Act of 1934, and gave the SEC disciplinary powers over regulated companies. The Sarbanes-Oaxley Act of 2002 was passed by Congress in an effort to combat corporate fraud, such as the kind that occurred with Enron and Worldcom, and as a way to enhance corporate responsibility. The roots of KPMG’s $8.2 Million fine can be found in the Securities Exchange Acts of 1933 and 1934, as well as the Sarbanes-Oaxley Act of 2002. (Commission, 2013)
Commission, U.S. Securities and Exchange. The Laws That Govern the Securities Industry. October 01, 2013. http://www.sec.gov/about/laws.shtml (accessed 01 25, 2014).
Lynch, Sarah N. UPDATE 2-KPMG to pay $8.2 mln to settle charges over auditor independence. January 24, 2014. http://www.reuters.com/article/2014/01/24/sec-kpmg-idUSL2N0KY17P20140124 (accessed January 25, 2014).