The UK is lagging behind the US in protecting end users from Year 2000 software problems. It has emerged that existing good auditing and accounting practice, and even new laws in some states, will be enforced to ensure companies are Year 2000-compliant.
Generally accepted accounting principles in the US conform to rules drafted by the American Institute of Certified Public Accountments (AICPB) and the Financial Accounting Standards Board (FASB). In July this year the two bodies decided that companies implementing plans to correct a Year 2000 problem should deduct that cost rather than capitalise it.
Officers and directors of a US company may become liable if Year 2000 problems are not reported in the accounts, the bodies say. According to the FASB, the Securities Exchange Act of 1934 makes it unlawful for any person to sell security in interstate commerce while using a ?manipulative or deceptive device?. That includes making any untrue statements.
The FASB, in one of its standards for auditors, says that contingencies that are reasonably possible must be disclosed in financial statements. According to other standards, 53 and 59, auditors must also review Year 2000 compliance plans.
There are also regulations covered by section 11(b) of the Securities Act of 1933, which oblige auditors to report whether, in their opinion, there is a misrepresentation or omission in a company?s financial statements. Both US bodies believe that they are bound to include Year 2000 compliance.
Another US act, the Model Business Corporation Act, imposes rules on directors that are likely to apply to companies if they do not operate due diligence. There are some variations in different states of the US.
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