Audits – Page 24 – Attestation Update

The new Audit Guide’s here! The new Audit Guide’s here!

Leave a Comment / Accounting, Audits / Jim Ulvog

(cross-posted from my other blog, Nonprofit Update.)

Well, maybe the release of the draft Not-for-Profit Entities Audit and Accounting Guide isn’t quite as exciting as those ancient commercials announcing the release of the new phone book by showing people running around celebrating that it arrived. (The line was also in the movie The Jerk, starring Steve Martin.) For auditors of NPOs, the arrival of the long-expected audit guide is far better than what the old commercials would have you think about a new phone book.

The draft guide can be found here. The AICPA’s page for the draft is at Overhaul of the Not For Profit Entities Audit and Accounting Guide.

The AICPA’s announcement can be downloaded here. Some highlights, as described in their announcement: …

The new Audit Guide’s here! The new Audit Guide’s here!Read More »

The new Audit Guide’s here! The new Audit Guide’s here! Read More »

Initial analysis on faked financial statements

2 Comments / Audits, Fraud / Jim Ulvog

If you are an auditor, you really ought to be watching the story unfolding in New Mexico about the allegedly faked 6-30-11 financials for the New Mexico Finance Authority. Is it okay to drop the alleged when the person submitting the report said it isn’t the real audit report? My previous posts here and here.

If you want an evaluation of the quality of the forgery, you can check out Jim Scarantino’s post on July 19: The Cheap Forgery That May Cost New Mexico Millions. He has an extended discussion of the report. He’s talking photocopies and whiteout.

One more thing to watch for is the idea of photocopies being present when originals are expected. Look at the visual quality of the accountant’s reports. Typically those would be printed originals, if not electronically generated. In the copy on the web site, the accountant’s reports appear to be a second or third generation copy. The pages in the basic financials are not as ‘dirty’ as the opinion. That should be odd to an auditor’s eyes.

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Initial analysis on faked financial statementsRead More »

Initial analysis on faked financial statements Read More »

Accountant who allegedly fabricated audit report appears on camera

2 Comments / Audits, Fraud / Jim Ulvog

The New Mexico State Auditor claims audited financial statements for the New Mexico Finance Authority were fabricated in their entirety. I mentioned this in my previous post, Faked audit report in New Mexico.

This has been the cause of an uproar in Santa Fe and Albuquerque, as you can imagine. The local news station, KOB 4, found the controller allegedly behind the fiasco at his home on Friday. They spoke to him before the investigators did. You can read KOB’s report at NMFA Comptroller on bogus audit: Not malicious.

His explanation at the moment is that he prepared a draft report for the audit. This would be fine up to a point. The concept is that the client ought to prepare the financial information, including all necessary notes. Even the single audit schedules ought to be prepared by the auditee.

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Accountant who allegedly fabricated audit report appears on cameraRead More »

Accountant who allegedly fabricated audit report appears on camera Read More »

Audit fees for private companies started increasing in 2011

Leave a Comment / Audits / Jim Ulvog

Financial Executive Institute has an executive summary of their most recent survey of audit fees – FEI Audit Fee Survey: Companies’ Audit Fees and Hours Slightly Increase in 2011.

Results from private companies is of most interest to readers of this blog:

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Audit fees for private companies started increasing in 2011Read More »

Audit fees for private companies started increasing in 2011 Read More »

Faked audit report in New Mexico

4 Comments / Audits, Fraud / Jim Ulvog

Wow. Check out the report in the Albuquerque Journal – State finance authority audit faked, officials say. The New Mexico Finance Authority issues bonds to raise funds and then loans the money to public entities.

The state auditor says the audited financial statements for the agency’s year ended June 30, 2011 were fabricated. From the Journal’s article:

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Faked audit report in New MexicoRead More »

Faked audit report in New Mexico Read More »

More info on the financial condition of the city of San Bernardino

Leave a Comment / Audits / Jim Ulvog

The city of San Bernardino is the fourth in California to file for bankruptcy protection. That city is not too far from where I live.

Part of the news about the bankruptcy filing is accusations by the city attorney that budgets have been falsified in 13 of the last 16 years. That story has gotten lots of play. Check out this article from my local paper.

A couple of days after the story blew up, the city’s auditor had some comments. We CPAs would typically be quiet in such a situation so I found it interesting and encouraging that the auditors are saying something.

Keep the discussion in this post in the back of your mind when you start to hear the Where was the auditor? questions.

I describe the following article because it is a rare illustration of an auditor explaining to a reporter what an audit involves.

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More info on the financial condition of the city of San BernardinoRead More »

More info on the financial condition of the city of San Bernardino Read More »

Japanese regulators slightly criticize Olympus auditors then say the corrective action plan they require wouldn’t have found the fraud anyway

Leave a Comment / Audits, Fraud / Jim Ulvog

Reuters reports that the Japanese regulator, Financial Service Agency, criticized KPMG and Ernst & Young for their audits of Olympus. Then they partially retracted their criticism.

The Reuters article, Japan regulator raps KPMG, Ernst & Young for Olympus work, says the two firms

…lacked operational management systems to ensure proper auditing that would spot and flag dubious transactions.

The regulators didn’t find any “intentional acts of grave negligence” according to the article.

I guess that means they should have had the foresight to develop some unidentified management system that would have identified the fraud.

The two firms have to develop a business improvement plan and report on their progress every six months.

An official then essentially retracted the criticism. Check out this comment:

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Japanese regulators slightly criticize Olympus auditors then say the corrective action plan they require wouldn’t have found the fraud anywayRead More »

Japanese regulators slightly criticize Olympus auditors then say the corrective action plan they require wouldn’t have found the fraud anyway Read More »

AICPA Webcast on NPO audit risk alert…

Leave a Comment / Accounting, Audits / Jim Ulvog

…will be this next Friday, June 15, 2012, from 2:00 pm until 4:00 pm Eastern time. Two hour update for auditors of nonprofits. Cost is fairly steep for CPE at $89 but worthwhile if you concentrate on NPOs.

Course is Non For Profit Organization … Are You Ready for Audit Season?

Product # WBC12173I

(cross post from my other blog, Nonprofit Update.)

AICPA Webcast on NPO audit risk alert… Read More »

Should churches disclose open tax years? Probably not.

Leave a Comment / Accounting, Audits / Jim Ulvog

I previously discussed that NPOs should disclose open tax years – TIS 5250.15.

TIS 5250.15 says that NPOs without any uncertain tax positions still have to disclose open tax years.

ASC 740-10-55-217 suggests this wording:

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-US income tax examinations by tax authorities for years prior to 20×1.

Does that apply to churches?

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Should churches disclose open tax years? Probably not.Read More »

Should churches disclose open tax years? Probably not. Read More »

Olympus will settle claim from fired chief executive. Also expected layoffs at Olympus.

Leave a Comment / Audits, Fraud / Jim Ulvog

The Wall Street Journal reports Olympus and Ex-CEO Woodford Settle Lawsuit with expected payment to Michael Woodford for approximately $15 million.

The article, behind a pay wall, indicates the settlement is moving towards approval by the Olympus board.

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Olympus will settle claim from fired chief executive. Also expected layoffs at Olympus.Read More »

Olympus will settle claim from fired chief executive. Also expected layoffs at Olympus. Read More »

Need to develop an audit methodology? Check out the perfomance audit chapters in the Yellow Book

Leave a Comment / Audits, Other stuff / Jim Ulvog

Do you need to develop an audit methodology and don’t want to rely on the entire body of knowledge that exists in the SASs?

How could you wind up in that situation?

You might need to develop an audit model for your church denomination, or field programs of an international relief and development organization, or local affiliates of a national organization. Obviously you could just tell your local programs to find a CPA and have them comply with GAAS.

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Need to develop an audit methodology? Check out the perfomance audit chapters in the Yellow BookRead More »

Need to develop an audit methodology? Check out the perfomance audit chapters in the Yellow Book Read More »

Summary of changes from the clarified SASs

Leave a Comment / Audits / Jim Ulvog

The AICPA has a good summary of the changes created by the complete rewrite of audit rules.

It goes into a moderate level of detail, which is a good way to dive into the new standards. The summary is 22 pages long.

You can find the summary at:

Summary of Changes in Requirements Resulting from Issuance of Clarified SASs No. 117 through No. 120 and No. 122 through No. 125

Summary of changes from the clarified SASs Read More »

Dump the timesheets? Not so fast.

Leave a Comment / Audits, Pondering / Jim Ulvog

There is a movement afoot in the CPA world to get rid of timesheets. A major part of the concept is to move away from billing by the hour and move toward “value billing.”

Instead of charging based on how many hours you spend, bill the client for what your services are worth or what you can negotiate in a lump sum.

In my tiny part of the accounting world, I’ve been billing on a fixed price basis for the vast majority of work for around 20 years or more. (So does that mean I was a value-biller before value-biller was cool?)

Getting rid of the timesheets entirely is an idea I have been highly uncomfortable with, but hadn’t thought through why.

Until now.

Ed Mendlowitz, CPA, has a great article at CPATrendlines explaining the reasons I’m uneasy. He explains 13 Reasons Timesheet Will Never Die.

In one sentence, look at the opposite side of the income statement – timesheets are a cost control.

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Dump the timesheets? Not so fast.Read More »

Dump the timesheets? Not so fast. Read More »