In the near term, your CPE options will include twelve-minute courses.
In the long-term, ponder how much of your audit work could be replaced by artificial intelligence. I can grasp the idea of automating a large portion of detail testing. I can’t see the possibility of replacing the entire audit function. Stretch your brain with two articles from Jim Peterson.
8/11 – Journal of Accountancy – CPE standards update accommodates new forms of learning – It will be a while before you see this in a CPE class, but the AICPA and NASBA changed the CPE rules to allow for nano-learning and blended learning.
Nano-learning is a short course, say 12 minutes that will allow CPE credit in 0.2 hour increments. Picture a 24 or 36 minute course on how to conduct an inventory observation. Or a 12 minute class on how to prepare the planning materiality worksheet.
Image courtesy of DollarPhotoClub.com before they closed their doors.
The massive volumes of change you see surrounding you everywhere you look isn’t going to stop. In fact the pace of change is going to increase.
Each of us have a choice. Either figure out how to cope with and embrace the change or ignore it.
The cost of ignoring massive change is that you and your organization will get left behind. That doesn’t just mean you will be a laggard as you continue doing next month what you did last year. Instead that means your organization will radically shrink and before you know it, will disappear.
The downsides are serious. There is an upside and it is exciting.
Four articles I’ve seen lately focus the mind. While these articles are written in either the accounting or church context, they also fully apply in the church and accounting context. They also apply to every individual and organization.
This article will be posted across all my blogs because it applies to all of them.
The odds are really high that tax preparation will be completely automated in the next two decades. Estimated odds are almost as high that both accounting and auditing will be fully automated.
Consider my business and my core tasks of auditing charities. There is a real possibility those types of audits could be heavily automated in 10 or 15 or 20 years. I am not old enough to bank on retiring before that massive change starts eating away the entire audit profession.
Automation will take over an increasing number of tasks. The world of tax, accounting, and audit will be affected. Mr. Sheridan explains the shelf life of education and experience we have is shrinking.
As the Maryland Association of CPAs routinely points out our learning needs to be greater than the rate of change; L>C is their formula.
We need to understand what those two comments mean and how to cope with the implications. Tom Hood’s article points toward those waves that are soon to crash down on our heads.
It’s a VUCA world
Major changes we are in can be summarized by that phrase: …
Here are a few recent articles of interest to auditors:
Charles Hall discusses common deficiencies in government audits. Issues also apply to single audits for NPOs and all pension audits.
FASB removes the effective dates from PCC alternatives, which means they can be applied at any time by a private company without going through the preferability analysis.
FASB starts to think about whether to record expenditures for intangible assets on the balance sheet.
First, the AICPA pulled in a selection of peer reviews performed on “must-select” engagements. The oversight was performed by highly experienced peer reviewers, meaning it is our calling CPAs who looked at the audit workpapers and peer review workpapers.
That may be how the vast majority of CPAs perform all the time, but some CPAs miss the target completely. Image courtesy of DollarPhotoClub.com
Previously mentioned that I looked disciplinary actions reported in the last four newsletters from the California Board of Accountancy (CBA). Want to better understand what happened with firms that got in trouble for audit quality or for not getting a peer review when one was required.
Will continue that discussion by looking at sanctions imposed on smaller firms and then self-imposed trouble generated by some larger firms.
That may be how the vast majority of CPAs perform every day, but some CPAs miss the target completely. Image courtesy of DollarPhotoClub.com
Three times a year the California Board of Accountancy issues a newsletter. It contains a variety of information useful for CPAs. If you are a CPA, you really ought to be reading the newsletter.
That newsletter is also where the board publicizes disciplinary actions against CPAs.
In the last few newsletters I’ve noticed a number of cases where firms are sanctioned for substandard audits. Have also noticed a number of firms sanctioned for not getting a peer review when it was required or fibbing to the board whether they had complied with the peer review standards.
I wanted to understand better what I’ve noticed in passing so decided to dive into the disciplinary reports to get a better picture of the extent of sanctions for audit quality and peer review issues. I looked at the Fall 2014, Winter 2015, Summer 2015, and Fall 2015 newsletters.
That covers 16 months of reporting for disciplinary actions by CBA.
I focused on sanctions for audit issues excluding anything that was a follow-up to PCOAB or SEC sanctions. That rules out quite a few cases.
Also ignored a long list of social misbehavior such as DUIs (several incidents), fabricating Form E (once – fabricating the experience report? – really??), embezzlements, disbarment (once), and other such human foibles. Also excluded a variety of contingency fee violations, breaches of client trust, and sundry tax fiascos.
For context, the Fall 2015 newsletter had 28 disciplinary actions of which 5 were of interest for this little bitty research project. Of those 5 cases, the public notices refer to 2 firms which had substandard audits, 1 had a substandard compilation, and 4 included failures to get a peer review when required of which 2 fibbed to CBA about compliance with the peer review requirement.
The PCAOB finally approved a proposal to require the lead engagement partner on a public company audit to be disclosed. The name of the partner will have to be listed in a separate form filed with the SEC.
If you would like to compare the various definitions in play for materiality, then Emily Chasan has the article for you at the Wall Street Journal on 11/3: Definition of Materiality Depends Who You Ask.
The definition readers of this blog have incorporated deep into their brain is from FASB, as follows:
If I got it straight, the international consortium of Grant Thornton is writing the check to settle up for the fiasco on the Parmalat audit.
You may vaguely recall that mess. In two sentences, Parmalat had a fake bank account in the Cayman Islands that supposedly held €3.95B (yes, four billion Euros, that’s 4,000,000,000) which was around half of the consolidated balance sheet of about €8B as of 12/31/03. The auditors in the Italian affiliate (if I recall correctly) of GT sent a confirm to the address the client gave them for the bank in the Caymans which was, of course, intercepted, signed by company staff, and returned to the auditor.
The scheme fell apart and has been rattling around in the legal system for just over a decade, in and out of the US and bouncing between circuits when here.
Checklists are great tools to help get audits done. They can be superb reminders of something you forgot or hadn’t thought about. They can also be a constraint on actual thinking, leading us into cookie-cutter audits.
The idea is to start with a blank sheet of paper and ask some questions about the audit. Ponder what has changed in the economy, the accounting & audit rules, what problems might be encountered, and what work from the prior audit isn’t needed anymore.
This might get you out of the mental rut of doing things the same as every other audit and avoid the inefficiencies of hanging out with SALY all the time.
High level overview on the how-to of laundering money and using tax havens. Will leave you curious for more details, but it’s a good intro. Also, article on another couple of billion in another settlement from the Great Recession.
4/7/13 – ICIJ – Tax Havens 101: the high cost of going offshore – Good 4 minute primer on how to set up and run an offshore operation to hide assets, whether from the taxman, your spouse, or creditors.
