Accy 303: Accounting Institutions and Regulation Bulletin Board<br> Spring 2000

Announcements are listed in *reverse* order: latest first!

4/12/00: Final exam schedule: Fri May 5, 1:30-4:30 pm, 141 CW. Conflict (check rules): Sat May 6, 1:30-4:30, 319 Greg.
2/29/00: Today's WSJ report that EY has sold its consulting practice. The fallout from PWCs independence fiasco continues as the SEC notifies PWC clients about the need for reaudits ... read about it here. Finally, the EU decides to permit fair value accounting.
2/18/00: Wuxtry! Wuxtry!! Wuxtry!!! PWC says its going to break up its practice. Read all about it here. Also read today's front page WSJ article about PWC's problems with a major client, Emcore. Finally how close are you to you family? The powers-that-be say you better not be too close ... (read this and you *will* weep).
2/14/00: On Valentine's day what could be more romantic than the comforting notion that the market isn't totally losing its marbles over internet stocks. Our very own Tim Evans suggests we take a look at this article from CNN Financial News. What you say ... this is NOT what I want to think about on St. Val's day? Aw grumps! Warmed the cockles of my heart it did all right. What with market officially being in the midst of a correction and the Nasdaq down and all that, if the market does have it right then we don't have to worry about big losses on our (hopefully sensibly diversified) stock portfolios :). See also the article linked on 2/3/00.
2/11/00: The fallout continues for PWC: Cisco systems, the computer giant is said to be "affected" (whatever *that* word of art means -- or doesn't mean) by the SEC's probe into auditor independence problems at PwC. Read all about it here. Also read about the headaches of a market maker.
2/9/00: WSJ article on AIMR disclosure rankings
2/3/00: Powerpoint for day 6. There is no powerpoint for day 5.

Are internet stocks overvalued? Are investors irrational? At least one analyst seems to think no. Read all about it here
2/2/00: Articles on AICPA's new independence rules and one on hedging. The second article is somewhat relevant to our class discussion on whether employee stock options have value when they are granted. I noted in class that when I claimed that even the restricted stock options granted to employees have value (often a great deal of value), I wasn't able to convince many of you (I know -- I saw it in your eyes). This article shows that the restricted stocks that dot.com ipo executives hold (and cannot sell for a while) have value and can be used to raise millions of dollars in cash. The article does not talk about options, but the same basic principles of valuation should apply.
2/1/00: Two recent press clippings from the WSJ on the Role of capital markets in the economic boom we're experiencing and on the proposed spinoff of KPMG's consulting practice
1/30/00: As we start reading about the SEC's enforcement activities, read this WSJ article about the recent SEC action against the auditors of California Micro.
Many of you have reported problems with reading the articles. You probably need to install Adobe Acrobat Reader. Download.
How to tell people what you're *really* doing with their money. Read the IPS Fund prospectus.
1/27/00: Powerpoint for day 4
More FASB activism? FASB takes aim at creative (dare we say imaginative) financial reporting by e-com firms -- see the WSJ article. Visit the FASB website.
Two scholarships you may be interested in: the FEI offers grants of up to $2500 to accy and fin majors while the AICPA Minority Accounting Student Awards offer up to $5000 to qualified students. Applications from the Accy office in 360 CW.The FEI deadline is Feb 1.
1/25/00 Powerpoint for day 3
1/25/00 Two ongoing themes in our discussions will be the need for credibility in effective financial reporting and the accounting profession's central role in ensuring such credibility by remaining independent. Here are some very recent press clippings that you might find thought-provoking. First, a recent article from the Economist magazine on the costs of insider trading (relate this to the Lev reading). Next some links to readings on auditor independence. An article in the Economist magazine about auditors' conflicts of interest and the report to the SEC on independence rules violation at PriceWaterhouseCoopers. And finally, links to the Independence Standards Board (ISB) website and a report comissioned by the ISB on perceptions of auditor independence.
1/21/00: WSJ commentary on conflicts created by current CPA independence rules and a recent Journal article on the use of investment income to sustain reported profit growth.

Some folks in class yesterday mentioned how internet firms were apparently being valued in spite of their lack of profits. Is this changing? An article from yesterday's WSJ on recent trends in the valuation of Internet stocks.

The powerpoint for day 2 has been updated with some minor modifications to the last slide.
1/20/00: Powerpoint for day 2
1/18/00: Powerpoint for day 1

Please bring a passport-size picture of yourself to class on Thursday 1/20 -- photocopies of your student id (with privileged information edited) are acceptable.
1/16/00: Welcome!
Browse the following at your leisure or as topics come up in class.

A number of popular press stories/regulatory speeches which made for interesting reading and class discussions in Fall 1999.

An article on truth in accounting
How to lose a spacecraft 101
A speech by Art Levitt, chairman of the SEC on earnings management (Sep 28, 1998)
Levitt speech on audit effectiveness (Oct 7, 1999)
Levitt speech on the future of financial markets (Sep 23, 1999) plus reports and interpretation by the NYT staff here and here
Levitt speech on role of information quality in financial markets (Oct 18, 1999)
SEC's initiative to ensure equitable disclosure to financial markets and to enahnce effectiveness of the audit committee
More generally, check out the SEC's website once a week or so to see what's new.
What does the SEC really do? Browsing the news digests will also familiarize you with the general scope of the SEC's "daily life" as it were.

In case your background in how financial markets function and the role of derivatives needs a refresher, you can browse these articles from the Economist magazine on the financial system and its role, large institutional investors, stock markets, derivatives, share valuation and the future of financial markets. These are non-technical articles but they will get you started. These are background reading meaning you will be assumed to have a passing familiarity with this material.