Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Rationalization in action is frightening to see

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It is scary to see the power of rationalization. We humans can exert great effort to persuade ourself that wrong is right. With enough effort, we can persuasively argue that wrong is a positive good, the noble alternative.

It is unsettling to me when I see a client deeply believe that tax or accounting fraud is perfectly legitimate and I am the one who is in the wrong to suggest otherwise.  Worrisome is a watching a friend who believes that hurtful or destructive or nasty or evil behavior is Godly. Even more upsetting is when I catch my brain in full rationalization mode.

No, I’m not about to give any examples from clients, friends, or my life.

Unfortunately, we have a sad public example of rationalization racing at full power (sad pun intended).

Some background on Lance Armstrong’s massive doping schemes

Many public sources report that Lance Armstrong has been found to use performance enhancing drugs for a very long time. He won seven consecutive Tour de France races.

According to Wikipedia, in 2012 he received a life-time world ban on all competitive events in all sports. His seven wins were revoked. He was found to have engaged in sophisticated doping schemes for many years.

In 2013, he admitted massive doping in an interview with Oprah Winfrey. He admitted using a long and specific list of banned substances and did so in each of the 7 Tour de France races.

Rationalization on display

Having set the background, let’s look at an article in The Guardian:  Lance Armstrong: I would probably cheat again in similar circumstances. Thanks to Professor Mike Shaub (twitter @mikeshaub) for pointing out the article.

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Written by Jim Ulvog

January 27, 2015, 9:23 am at 9:23 am

Posted in Audits, Fraud

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I get the concept of radical changes in our near future. I am blind to see how it will affect my firm. (Radical change #1)

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We are in the midst of radical change. I’m writing this blog (Outrun Change) to sort out the change around us. (cross-posted from Outrun Change, obviously.)

I get it in terms of tech change obliterating newspaper want ads, count of first class mail pieces for the Post Office, and devastation to bookstores (remember Borders?).

I totally get the concept that you can be your own book publisher with a cost of under $200 per title if you have the skill to use Adobe Acrobat along with Microsoft Excel and Word. Major publishers are dinosaurs.

Run your own digital publishing company? Been there. Done that. Three times. And publishing the Nook version is literally one extra click, one click, in the on-line production cycle.

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Written by Jim Ulvog

January 26, 2015, 10:55 am at 10:55 am

More good stuff on banking fiascos

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No massive publicity on the banking front, but there are ongoing issues in getting money laundering under control and the ongoing investigations of manipulating foreign exchange rates.

1/14 – Wall Street Journal – Forex Probe Finds New Signs of Potential Wrongdoing – Scope of the Forex fiasco and related U.S. Federal investigation is growing. Investigators have found new issues and that the manipulation of exchange rates may go beyond trading desks.

There is also a wider investigation running that I’ve seen mentioned: Read the rest of this entry »

Written by Jim Ulvog

January 23, 2015, 9:12 am at 9:12 am

Posted in Other stuff

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My first baby steps to understand dark pools and high frequency trading

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I’m blogging to learn. Writing means you need to understand, which means you need to read and think, which means you learn and then you can write.

One item on a really long list of things I don’t get is dark pools and high-speed trading. I understand the basic concept, but know there is a lot I’m missing. If you don’t get it either, join me for a few steps in the journey to get a clue.

Here’s an article that tells me there is a problem: Read the rest of this entry »

Written by Jim Ulvog

January 22, 2015, 8:40 am at 8:40 am

Posted in Other stuff

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Yet another embarrassing tech error – sending a text message to the wrong person

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Double check who is getting your texts.

We’ve all heard the stories of hitting ‘reply all’ instead of ‘reply’ when discussing something in an e-mail that shouldn’t go to ‘all’.

Here’s a new oopsie I learned about personally but at low cost. (Cross posted from Nonprofit Update.)

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Written by Jim Ulvog

January 15, 2015, 7:49 am at 7:49 am

Posted in Other stuff, Social media

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Extraordinary change in GAAP: No more extraordinary items

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FASB has issued ASU 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20) – Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This eliminates the extraordinary item treatment we have known since we were in college.

The requirement to disclose unusual or infrequent items remains.


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Written by Jim Ulvog

January 14, 2015, 8:04 am at 8:04 am

Posted in Accounting

Auditors need to be incorporating the new Code of Ethics into audit work that is in planning stage right now

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I don’t have time to write a full post, so will just caution auditors that the new Code of Ethics codification went into effect on December 15, 2014. That means it is in play right now for the audit work you are planning. Will apply to engagements in the field as soon as you pack up for the client’s office.

CPA Charles Hall has a very brief into at his blog, CPA-Scribo:  New AICPA Code of Professional Conduct Effective December 15, 2014.

You need to make some changes to your engagement letters, if you haven’t already. Need to do a few other things in terms of documenting threats to independence and take a few steps to make sure you keep your independence.

If you haven’t read through the new rules to figure out the impact on your practice, now would be a really, really good time to do so. That’s a not very subtle hint, by the way, that your workpapers need be a bit different from last year.

Written by Jim Ulvog

January 13, 2015, 11:02 am at 11:02 am

Posted in Audits


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