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:
…
Multiple definitions of materiality are in play Read More »
Chicago Business reports on 10/30 that Grant Thornton settles lawsuit for $4.4 million. Another quick survey: Reuters – 11/2 – Parmalat settles dispute with Grant Thornton.
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.
…
For some reason, my article two years ago describing A Halloween costume that would make any CPA pass out from fright – an auditor performing one pension plan audit, has been getting extra visits this week.
Check out the post above. It will be funny for accountants.
The joke is based on how frightening the idea is for an auditor to perform one or two pension audits. The risk is astronomical of doing something seriously wrong. Just as frightening is the idea of an accountant only doing one or two audits.
Yesterday, at the Accounting and Auditing Conference presented by CalCPA, I heard the statistics that made the Department of Labor so upset.
…
Why you see so much discussion of quality in pension plan auditsRead More »
Why you see so much discussion of quality in pension plan audits Read More »
Previously mentioned FASB has released two exposure drafts to change the definitions of materiality. I am just beginning to understand the issue. Most of the significance plays out in the world of publicly traded companies, which is light years removed from my practice. Most readers of this blog likely stay far away from that world. Yet what goes in that distant galaxy will have a large impact on private companies.
Here are a few articles to fill you in on the implications and behind-the-scene issues. Will also touch on the current definitions of materiality and how to dispose of immaterial misstatements.
…
More background on FASB’s proposed changes to materialityRead More »
More background on FASB’s proposed changes to materiality Read More »
A group of CPAs in France believe there is so much value in the Andersen brand that they have formed a new consulting firm which claims worldwide rights to the name.
The firm will launch in 2016. They will do consulting but no audit or tax work.
Here are their two registered names, according to their website, www.arthurandersen.international: …
Uncle Arthur’s name rises from the dust. Again. Read More »
I’ve taken a look inside one of the hundreds of Deferred Prosecution Agreements that the current Department of Justice has negotiated with corporate felons. It is not a pretty sight.
The value for me in looking at this particular DPA is the admitted criminal behavior is on a small enough scale that I can actually wrap my little brain around the situation.
This particular DPA has been denied by a federal judge instead of getting his automatic rubber stamp approval. The DoJ and now-confessed felon both appealed. The case will soon be heard on appeal. There are ripple effects if the judge’s denial is ratified at appeal.
There is an old saying you should never look at how sausage or legislation is made. Reason is the details can turn your stomach.
Here is what I’ve learned of this particular sausage making effort:
8/8, print edition – Wall Street Journal – Corporate Prosecution Deals Headed for a Legal Test / Justice Department worries judges may gain sway over agency’s pacts with firms under criminal investigation
…
I previously mentioned to my Fellow CPAs, we need to step up our audit game. Unfortunately, I found another indicator of the same idea at the Journal of Accountancy – PCAOB urges broker-dealer auditors to re-examine approaches.
…
Another indicator that we CPAs need to step up our gameRead More »
Another indicator that we CPAs need to step up our game Read More »
A touch of humor before more serious thinking.
5/9 – Reddit – “These auditors are tying things out just for the sake of doing more work. They’d tie their shoelaces together to test the existence of both their feet.” – Humor you will only appreciate if you have audit experience. If you’ve been an auditor, this is superb.
5/4 – Edward Trott at CFO magazine – Exceptions for Private Companies Are Damaging the GAAP Brand – …
Update for auditors Read More »
Today I listened to the rebroadcast of 2015 Peer Review Update. Check out the class if you have the chance.
Update 7/7: The next rebroadcast will be July 20, 2015. Link is here. If that link has expired or disappeared, this page has a long list of all upcoming events in peer review.
Heard several few things that distressed me.
In particular, we CPAs collectively need to improve the quality of the work we are doing in the audit arena.
Consider a few points. This is what I heard from the presentation. I haven’t gone back to source documents to verify the numbers or explanations. This is what I heard and jotted down in my notes while listening to the session.
…
Fellow CPAs, we need to step up our audit game Read More »
The Bureau of Prisons inmate locator shows that Scott London is currently under supervision of the Long Beach Residential Reentry Management office. His scheduled release date still shows at July 23, 2015.
I don’t know when he was released from the Lompoc United States Penitentiary. My last check on February 20 showed he was still in Lompoc. He reported to prison on July 19, 2014, so he is currently at about the nine-month point of his sentence. He has about three months until his scheduled release date.
…
Scott London moved from prison to half way house Read More »
Big 4 firms moving into legal work, how state based regulation is slowing the profession’s responsiveness to change, and tax situations when you should refer a client to an attorney.
4/13 – Journal of Accountancy – 10 situations when a CPA should call “timeout” – When a client’s situation starts getting dicey, a CPA needs to call a timeout so the client can retain legal counsel. A list of 10 situations in the article doesn’t just apply to CPAs preparing individual tax returns. Some of them apply to auditors.
…
More good stuff for auditors – 4-20 Read More »
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.
My friend Charles Hall, writing at CPA-Scribo, suggests How to Overcome 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.
Here are his ideas for questions to ponder: …
One fresh idea for fresh thinking on your audits: A blank sheet of paperRead More »
One fresh idea for fresh thinking on your audits: A blank sheet of paper Read More »
Just how big are the Big 4? They are really big.
If we took our magic wand and split up each firm along 3 product lines, the resulting firms would be larger than the currently fifth largest firm.
If we took those Big 12 firms and waved our magic wand again to split each of the 4 audit firms in half, the former Big 4 would make up 16 of the 18 largest firms.
Here is some more info. The breakout of the seven biggest firms along product lines, as reported by the Accounting Today magazine I mentioned earlier. …
The Accounting Today magazine that arrived yesterday had a supplement with info on the 100 largest CPA firms. It is available on line here with subscription and explicit permission for vendors to contact you.
Look at the revenue info for the ten largest firms: …
Concentration of accounting firm revenue, 2015 versionRead More »
Concentration of accounting firm revenue, 2015 version Read More »
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.
[youtube=https://www.youtube.com/watch?feature=player_detailpage&v=gy2RgjIIZyA]
For under 4 minutes, it is a good explanation.
A few places to expand the ideas:
…
Primer on money laundering and tax havens Read More »