CPAs Issue Assessment Of Risk Factors For 2001 Financial Statements.

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 9, 2002

Financial statement preparers, audit committees and auditors urged

to consider risk factors in current financial reporting environment

The five largest accounting firms and the American Institute of Certified Public Accountants (AICPA) today released a detailed list of "risk factors" that should be considered as companies prepare their 2001 financial statements.

The current economic downturn, events of September 11, and recent business failures have combined to create a troubled financial reporting environment that poses significant challenges for U.S. business and management, boards of directors, audit committees, and auditors. The five firms and the AICPA have identified the specific financial reporting issues that are especially relevant in these times, and recommend actions that can be taken to address such financial reporting risks.

Key Financial Reporting Issues

- Liquidity and Viability - In the current environment, the presence of certain
conditions, in the aggregate, may create questions about a company's ability to
continue as a going concern. These conditions are detailed in the report.

- Changes in Internal Control - In addition, the presence of certain other
conditions may compromise internal control over financial accounting and
reporting systems. These are also detailed in the report.

- Unusual Transactions - Among the most frequently cited sources of financial
reporting risk are significant adjustments or unusual transactions occurring at
or near the quarter-end or year-end.

- Related Parties - Increased pressure on management to hit financial targets
has heightened the risk of improper treatment of related party transactions,
which lack the independent qualities that are intrinsic in transactions with
unrelated parties.

- Off-balance Sheet Arrangements - Transactions intended to shift assets or
liabilities off the balance sheet, including those with special purpose
entities, require special attention because of the complicated accounting and
disclosure rules applicable to many of those transactions.

- Materiality - Management may consider materiality in preparing a company's
financial statements, but it is generally inappropriate to permit known errors
to remain in the statements based merely on their immateriality. Both
quantitative and qualitative factors should be considered when assessing the
materiality of misstatements.

- Adequacy of Disclosure - It is important to assess not only whether the
technical accounting and disclosure requirements have been met in a company's
financial reports, but also the depth, nature and transparency of the
disclosures. In addition, while the presentation of pro forma earnings has
become relatively common, there is a growing concern that such financial
information can mislead investors if it obscures GAAP results.

- Specific Financial Statement Risks - The profession has outlined additional
financial statement areas that merit consideration in the current environment.

Recommended Action

Company management, audit committees and auditors have separate roles and responsibilities, but share a common goal: financial reporting of the highest quality. To achieve this goal, they must commit fully to execute their own responsibilities and work together by sharing information through ongoing communication. The profession has outlined thirty actions to be taken by management, auditors, and audit committees to achieve high quality financial reporting in the 2001 reporting year.

(THE FULL RISK ASSESSMENT DOCUMENT IS AVAILABLE AT THE AICPA WEBSITE AT http://ftp.aicpa.org/public/download/news/risk_factor.doc)