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Initiative to strengthen auditing and financial reporting in US

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18 May 2007

US Secretary of the Treasury Henry M. Paulson Jr. has announced initiatives "to enhance US capital markets' competitiveness, focused on strengthened financial reporting and a more sustainable and transparent auditing profession".

The initiatives are part of an ongoing effort to address the issues affecting US capital markets competitiveness. Initiatives announced by Mr Paulson are set out below and include elimination of the IFRS-US GAAP reconciliation:
  • Provide Investors with A Transparent and Sustainable Auditing System. The Treasury Department intends to charter a non-partisan committee to develop recommendations to consider options available to strengthen the industry's financial soundness and its ability to attract and retain qualified personnel. Treasury has asked former SEC Chairman Arthur Levitt, Jr. and former SEC Chief Accountant Donald T. Nicolaisen to serve as co-chairs for this public forum.
  • Gain Better Understanding of Reasons for Increasing Financial Restatements. Restatements have soared during the past decade from 116 in 1997 to 1,876 in 2006. Treasury intends to commission a rigorous analysis of the factors driving financial restatements and their impact on investors and the capital markets. Results of the analysis will be made public upon completion.
  • Enhance Financial Reporting US Generally Accepted Accounting Principles are comprised of more than 2000 individual pronouncements issued by various regulatory bodies. Investors often seek information not provided under financial reporting requirements. The Treasury Department is supportive of the SEC and the Financial Accounting Standards Board's efforts to enhance financial reporting transparency and accessibility for investors.
  • Streamline Accounting Requirements to Encourage International Companies to List on U.S. Exchanges and Increase Investor Opportunities US public markets should not be closed off to companies that adhere to high quality internationally accepted accounting standards. The Treasury Department is supportive of the SEC's action to eliminate the US GAAP reconciliation requirement by 2009 of International Financial Reporting Standards reporting companies and the continued convergence of US GAAP and IFRS.

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