Here are a few more articles of interest to auditors. Fragility of the Big 4, big/little GAAP, brain stretcher on revenue recognition when oil prices have collapsed.
1/28 – Clifton Larson Allen – CLA Talk Video: FASB to Simplify Nonprofit Financial Statements – Discussion of some downsides to the expected revisions to NPO accounting.
Digital currencies are radical change on the horizon for banking and credit cards. (Radical change #2)
There is radical change all around us and more on the way. I know that. My blind spot is figuring out how that will affect my audit firm.
(Cross-posted from my other blog, Outrun Change.)
Here’s one part of radical change I can see on the horizon:
1-24 – Wall Street Journal – Bitcoin and the Digital-Currency Revolution / For all bitcoin’s growing pains, it represents the future of money and global finance.- For a brain stretcher on digital currency, check out the article. Focus is on Bitcoin, which is merely the starting point in a revolution of disintermediation.
Just like money funds disintermediated (that means cut out of the picture) bank deposits in the distant ‘80s, bitcoin and other yet-to-be-invented digital currencies will disintermediate a huge portion of the financial system.
Picture the long series of transactions when you buy a cup of coffee at the corner shop with your credit card (this is a long quote cited under fair use, oh, also to promote the book it is extracted from): Read the rest of this entry »
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.
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)
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.
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 »
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 »