Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Archive for the ‘Audits’ Category

More on the ‘tipping point’ for Big 4 firms

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Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

If you casually pay attention to what is going on in the land of Big 4, a world far, far away from most of us in the accounting world, you might have interest in two recent articles from Jim Peterson, pondering the survivability of the huge firms. I will summarize what I think are a few highlights.

2/13 – Jim Peterson at Re:Balance – If the Big Four Went “Ex-advisory” – Deja Vu? Or Worse? – Regulators don’t like the huge consulting practices in the Big 4 and the partners in the Big 4 consulting arms don’t like the constraints on their growth, opportunities, and compensation from being tied to the audit & tax practices.

Article speculates on the impact if the consulting work were to be spun off, as happened back in 1998 through 2001.

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Written by Jim Ulvog

February 17, 2017, 9:30 am at 9:30 am

Posted in Audits, Pondering

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Common findings on audits during peer review

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Image is from AICPA. Used under Fair Use since, after all, I am promoting three of their products.

Image is from AICPA. Used under Fair Use since, after all, I am promoting their products.

The AICPA’s annual Audit Risk Alert General Accounting and Auditing Developments—2016/17 provides a useful summary of common peer review findings on audits.

What I like about this particular list is that it is short enough to actually provide focus. Frequently such lists have the filter set so broadly that the list covers practically all the findings that have surfaced during all peer reviews. Sometimes I’m left with the feeling that a list of findings reads like a list of every single step you need to perform during an audit.

Here is the short list provided in the risk alert, along with my explanation:

Incorrect dating of audit report – The auditor’s report needs to be dated no earlier than when sufficient appropriate audit evidence has been obtained to support the opinion. This means Read the rest of this entry »

Written by Jim Ulvog

January 20, 2017, 8:09 am at 8:09 am

A few highlights from 2017 Audit Risk Alert

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Image is from AICPA. Used under Fair Use since, after all, I am promoting three of their products.

Image is from AICPA. Used under Fair Use since, after all, I am promoting their product.

The AICPA’s annual audit risk alert had been out a little while. There is a lot of good stuff covered that all auditors really ought to check out. I heartily recommend reading the annual update before you get very far into your 12/31 audits.  The document is Audit Risk Alert General Accounting and Auditing Developments—2016/17.

I will mention just a few highlights.

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Written by Jim Ulvog

January 19, 2017, 7:36 am at 7:36 am

Posted in Accounting, Audits

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2017 Risk Alerts available

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Image is from AICPA. Used under Fair Use since, after all, I am promoting three of their products.

Image of Audit Risk Alert is from AICPA. Used under Fair Use since, after all, I am promoting three of their products.

The 2017 audit season is about to begin. Planning is well underway for all those 12/31 clients.

To help you get ready, the annual updates to AICPA risk alerts are available. Consider:

I read the risk alerts every year. They are great for reminding me of what I already knew and even better for pointing out what tidbits I had missed.

You might want to check them out in the lull before the rush of field work hits.

Written by Jim Ulvog

December 19, 2016, 7:18 am at 7:18 am

More disciplinary action from California Board of Accountancy over peer review messes.

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Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

The Fall 2016 Update newsletter from the California Board of Accountancy shows CBA continues to be deadly serious about CPAs avoiding the peer review program.

I previously went into detail on disciplinary actions in one newsletter:  If you have been blowing off Peer Review, you really ought to get with the program. This time I will just give an overview.

Revocations of license

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Written by Jim Ulvog

November 11, 2016, 7:43 am at 7:43 am

Posted in Audits, Compilations & reviews

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In relation to the revenue Wells Fargo generates, the fees from fake accounts were trivial

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October 2016 photo at Wells Fargo's museum in San Diego by James Ulvog.

October 2016 photo at Wells Fargo’s museum in San Diego by James Ulvog.

Let’s take a look at the income generated by Wells Fargo from the dummy accounts their staff opened in relation to the revenue the bank generates. Let’s even consider the fine in relation to income over the four years the schemes were running. I have not spared criticism of the bank previously. But let’s look at this mess from another perspective.

Here’s the bottom line – Finding the fake account fiasco means finding this:

Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

When hidden in this:

Image courtesy of Adobe Stock.

Image of 16 one hundred dollar bills courtesy of Adobe Stock.

That’s one penny of false revenue for every one thousand six hundred dollars of legitimate revenue.

To start the discussion, consider Michael Rapoport’s article at the Wall Street Journal on November 1: Wells Fargo: Where Was the Auditor – Several of the Senators sent KPMG a letter last week suggesting the audit should have caught the fake account fiasco.

Article explains that audits aren’t designed (and aren’t capable of) finding frauds that don’t have a material impact on the financial statements.

Article makes the very important point that an audit designed to catch frauds as small as the fake account mess would have a cost so high as to make the audit completely unaffordable.

So let’s take a look at materiality in relation to the massive size of Wells Fargo.

Amounts for materiality discussion

Let’s look at some numbers for perspective.

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Written by Jim Ulvog

November 1, 2016, 10:51 am at 10:51 am

Posted in Audits, Other stuff

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“Be Prepared – A Comprehensive Peer Review Update”

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Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

The following article provides a superb update on recent developments in the peer review program. The article is graciously provided by the California Society of CPAs and the information described here applies in all jurisdictions across the U.S.

Because the entire article is quoted verbatim without any additional comments from me, none of the article will be placed in quotation marks.

Originally published by CalCPA (www.calcpa.org) in the October issue of California CPA magazine.

Used with written permission of the California Society of CPAs. 

 

Be Prepared – A Comprehensive Peer Review Update

By Linda McCrone

 

Peer review is a successful program that helps firms improve their quality control systems and elevate the quality of accounting and auditing engagements. The AICPA contributed the software program that tracks peer reviews and the staff that manages the program. AICPA member volunteers contribute their time to oversee the program, keep the peer review program forms current and make certain that the peer review standards remain relevant. But like any successful program, peer review must continue to evolve to keep up with events.

 

Background

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Written by Jim Ulvog

October 18, 2016, 8:54 am at 8:54 am