Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Growing complexity will increase. That will make auditing even more challenging.

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The overall rate of change today is increasing. This carries over to the business world. Commerce is getting more complex with every quarter that passes.

That will carry over to us as practitioners.

That’s the comment from a speaker at a recent conference.

Disclaimer:  I attended an A&A update a few months ago (yes, yes, I know – this series of posts has been on the back burner for a long while). Since I’m going to paraphrase comments from speakers who were presenting their personal opinion, I’m not going to mention their names. Just know that these aren’t my original ideas, but you can blame me if you don’t like the way I phrase them.

That increasing complexity is going to make audits harder. Risk management will be increasingly difficult for our clients and also for us as we run our CPA practices.

The past will also be a less reliable predictor of the future.

When I was in grad school one idea that really sunk in is the concept that the past is the best predictor of the future. One student presented a case study that showed his recommendations would save the company and make the owner rich. The prof blew apart the analysis by asking what would get the owner, who was the cause of the problem in the case, to do things different. Moral of that presenter’s fiasco? Unless something changes, the past is the best predictor of how someone will behave or how a company will operate, or how a situation will turn out.

That is changing. The past is a shrinkingly less reliable predictor of the future.

This affects us as CPAs.

Predictive tests may not work. Ratios that helped in the past may shape-shift.  Assumptions about valuation may collapse.

The assumptions behind recoverability or profitability or liability realization could complete transform in a quarter or two.

Any accounting or auditing issue related to valuation will be more complex and risky.

I don’t have any ideas on how to cope. By being aware we can be better prepared. Maybe.

Written by Jim Ulvog

January 31, 2014, 8:23 am at 8:23 am

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