Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Recap of fines for major banking fiascos.

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Image doing that to seventy billion dollars. Intentionally. Image courtesy of Adobe Stock.

It is so sad to say, but a reality never-the-less, there are so many major banking fiascos with such a wide range of willing participants that it is impossible to keep straight the players and disasters and fines based just on memory.

So, that means I have a spreadsheet to track the willful disasters I’ve been following.

My tally does not include all the billions of dollars paid to settle mortgage issues arising from the Great Recession. That is another massive set of disasters all by itself.

Here is my running tally of the amount of stockholder equity wasted for a range of different debacles. Amounts in millions of dollars:

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Written by Jim Ulvog

October 26, 2020, 7:00 am at 7:00 am

Posted in Fraud, Other stuff

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Yet another banking fiasco. This time Goldman Sachs

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Image courtesy of Adobe Stock.

There is a long list of banking scandals in the last decade or so with a long list of banks choosing to play in each of the fiascos.  Plenty of banks have joined multiple schemes.

The time I’ve allocated to watching the apparently unending disasters has been concentrated on the money laundering and interest rate / exchange rate / pricing manipulation messes, along with the unending variations of cheat-your-customer plans at Wells Fargo.

Until now I’ve not been focused on the bribery disaster involving 1MDB’s shenanigans in Malaysia. If you’ve not tuned in, you can categorize this mess in the international corruption and bribery sector of bank fiascos.

Goldman Sachs was apparently full-in with the bribes and corruption. Wall Street Journal on 10/22/20 summarizes the mess:  Goldman Pays Billions – And Takes Millions From Top Execs – To End 1MDB Scandal.

On 10/23/20 Goldman settled up with the U.S. and several other national governments. The bank agreed to clawback $174M from several executives.

They also admitted breaking U.S. corruption laws, specifically with a plea of guilty to charges of conspiring to violate antibribery laws. To keep the parent company in business it was actually a subsidiary of Goldman who entered a guilty plea. Only two executives have been hit with criminal charges.

The feds say billions were stolen from 1MDB and bribes aggregating $1.6B were paid to various government officials around the world.

Financial penalties paid by Goldman:

  • $2.9B – US Department of Justice and other regulators around the world
  • $2.5B – government of Malaysia
  • $0.154B – Federal Reserve Bank
  • $5.545B – total of above

From browsing headlines it looks like there are a few other fines but those are in the mere $50M or so range. Chump change for the big banks.

So, five and a half billion dollars of stockholder money burned by bribery and corruption. The irritated populists will loudly remind us that only two executives, merely two, have drawn criminal charges in the U.S.

Written by Jim Ulvog

October 23, 2020, 11:51 am at 11:51 am

Posted in Fraud

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New audit report under SAS 134.

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Image courtesy of Adobe Stock.

In May 2019, the Auditing Standards Board issued Statement on Auditing Standards Number 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements.

SAS 134 will make a lot of changes to auditing standards. The most visible impact likely will be complete revision of the audit report.

You can download a copy of SAS 134 at this link

SASs 135 through 140 also make lots of changes in audit procedures. A lot.

All of the documents are interrelated and will be effective at the same time.

Over the next year or two I will probably write more posts talking about the changes. For the meantime here’s an illustration of what the new report will look like.

Effective date

As issued initially, the effective date would have been for audits of years ending on or after December 15, 2020. First financial statements affected would be December 31, 2020.

Then the pandemic hit.

In May 2020, the ASB issued SAS #141, Amendment to the Effective Dates of SAS Nos. 134-140.

You can download a copy here. This pronouncement defers effective dates of SAS 134 through 140 by one year.

All of them will now be effective for years ending on or after December 15, 2021. That means the long series of SASs will first be required for audits of December 31, 2021 financial statements.

Another change made by SAS 141 is the series of SAS may now be early implemented. This allows firms who were well underway towards implementation on 12/31/20 audits to continue their transition.

Sample of revised audit report

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Written by Jim Ulvog

October 21, 2020, 9:47 am at 9:47 am

Posted in Audits

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Economic destruction from the shutdown is expanding.

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Image courtesy of Adobe Stock.

Economic damage from the shutdown is becoming more obvious as more reporters spend time covering the destruction. Here are two articles each on the overall economic impact, specific impact on individuals, and concentrated impact on two cities:

  • GDP in Italy expected to shrink to the level it was 23 years ago
  • Airline CEOs expect it will take years for the airlines to recover
  • Additional 8 million Americans drop below the poverty level, joining the 55 million who were there before the pandemic
  • All 1,600 orchestras in the country have gone dark; their 160K musicians are unemployed
  • San Francisco has 14% vacancy rate in commercial office space
  • Impact on employment in New York City is more severe than the national average

How long will we let this go on?

 

Broad indication of the damage:

10/11/20 – India Today – Italy’s GDP in 2022 shrink back to the same level as 23 years ago: ReportRead the rest of this entry »

Written by Jim Ulvog

October 20, 2020, 10:03 am at 10:03 am

Why I talk about economic indicators so often.

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Image courtesy of Adobe Stock.

One of the frustrations I have experienced as an auditor is the statistical information made visible by the AICPA and publications from others is the economic data lags behind two or three quarters.  Another trade association reports giving trends in the religious communities, but the survey information usually is provided late in the year for the prior calendar year.

Long time ago I came across a comment that CPAs ought to start tracking key economic indicators on their own.

What a great idea!

(Cross-post from my other blog, Nonprofit Update.)

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Written by Jim Ulvog

October 19, 2020, 14:00 pm at 2:00 pm

Posted in Economics

Status of players in KPMG fiasco from leaked PCAOB inspection lists.

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Image courtesy of Adobe Stock.

As refresher, some time back senior level staff from KPMG worked to illegitimately gain access to the list of engagements which were going to be subject to inspection by PCAOB. You can catch up on the news by reading my posts with tag of Big 4.

This is old news at this point. Those of us interested in the ethical failure still want to monitor the status of the players. Previous list, found here, has been reworked since it was getting a bit cumbersome to update and confusing to read.

The five KPMG staff and one PCAOB staff who were charged are listed below with their status at various times. Updates will be mentioned as time passes and this page updated with new status.

Overall status:

  • 10/19/20 – 1 released from prison, 1 sentenced & awaiting deportation, 2 awaiting sentencing, 2 convictions on appeal.
  • 12/13/20 – 4 sentenced (of whom 1 released from prison, 1 to serve house arrest after deportation, 2 on probation/supervised release) and 2 convictions on appeal.

Updates:

  • 10/18/20 update – David Britt was sentenced to six months home confinement to be served from his new home in Australia after he is deported from the United States.
  • 12/13/20 update – Thomas Whittle sentenced to two years supervised release and Brian Sweet sentenced to time serviced, three years probation, and to-be-determined restitution.

 

Participants and their status:

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Written by Jim Ulvog

October 19, 2020, 9:06 am at 9:06 am

Posted in Audits, Fraud

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Increased disclosures for gifts-in-kind required by new accounting rule.

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Image courtesy of Adobe Stock.

In September 2020 the Financial Accounting Standard Board issued ASU 2020-07.  Formal title for the document is Not-for-Profit Entities (Topic 958) – Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets.

Contributed nonfinancial assets means gifts-in-kind. The ASU does not apply to donated services or donated financial assets such as stocks and bonds.

ASU 2020-07 will only change the presentation of GIK on the statement of activity and require additional disclosures in the notes. It will not require any change to the valuation of donated pharmaceuticals (accountants call that recognition).

You can get your own copy of ASU 2020-07 here.

(Cross-posted from my other blog, Nonprofit Update, since this issue is of interest to auditors of charities.)

Statement of activity

The total of GIK will need to be presented as a separate line within the revenue & contribution section of the statement of activity, separate from donated cash and any donated financial assets.

Note disclosures

There are a number of new note disclosures which will be required for gifts-in-kind:

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Written by Jim Ulvog

October 16, 2020, 8:21 am at 8:21 am

Posted in Accounting, Audits

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New claims for unemployment rise for week of 10/10/20.

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The number of new claims for unemployment for week ending 10/10/20 increased, which offset net declines of the preceding five weeks. New claims are 898K, a 53K increase over the revised tally for previous week of 845K.

Since 8/29/20 the new claims have been in the mid- to high 800 thousands. Change in the last six weeks, starting with 9/5/20 are +9K, -27K, +7K, -24K, -4K, +53K.

Keep in mind before the government induced shutdown of the economy new claims averaged about 220K per week so we are still running about four times the previous norm.

The number of continuing claims for unemployment is continuing to drop. I’m not sure why this is. Part is due to people going back to work. Part of it is people dropping off the state-level unemployment rolls after the 13 weeks of coverage.

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Written by Jim Ulvog

October 15, 2020, 9:27 am at 9:27 am

Posted in Uncategorized

Health damage caused by the shutdown is becoming more visible.

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There are consequences from the shutdown. Image courtesy of Adobe Stock.

The damage to health caused by the lockdown is becoming more visible. The damage has been there from the beginning of the shutdown; it is just becoming more obvious. A growing number of news articles are describing the deteriorating health outcomes. A growing number of reporters are noticing the devastation.

A few recent articles for your consideration:

  • ‘Years of life lost’ caused by the shutdown is calculated in one analysis to be seven times the number of ‘years of life lost’ which are prevented by the shutdown
  • Frightening increase in suicide ideation by young adults
  • Mental health services pulled off line because of the shutdown
  • Seniors at one nursing home protest the shutdown and the loneliness it causes

Make a mental note that a large number of governors, state-level health officials, federal health officials, and county health officials are forcefully, willfully continuing the lockdowns.

5/5/20 – Washington Examiner – Stress from virus response will destroy 7 times more years of life than lockdowns save: study – Several studies are cited by the article.

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Written by Jim Ulvog

October 15, 2020, 8:52 am at 8:52 am

Posted in Other stuff, Pondering

Economic damage from shutdown continues to spread.

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Image courtesy of Adobe Stock.

Summarized below are a few of the recent articles pointing to expanding economic damage from the shutdown. Destruction in the movie business is noticeable in recent days:

  • Second largest movie chain in the US closes all its theaters
  • Wonder Woman director worried the entire theater industry may die
  • Disney restructures in order to increase focus toward direct-to-consumer distribution channel and away from theatrical release
  • Sales tax collections in San Francisco collapse
  • Passenger cruise ships are getting scrapped

10/5/20 – Wall Street Journal – Regal Cinemas Suspending Operations at All US Locations – The chain with the second largest number of theaters in the U.S. has closed all of its US theaters after having reopened only two months ago. Article does not indicate when any of the theaters will be reopened.

Article says release dates for a dozen movies have been postponed.

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Written by Jim Ulvog

October 13, 2020, 8:48 am at 8:48 am

Posted in Economics, Pondering

New claims for unemployment again drop slightly for week of 10/3/20 (corrected from 10/8).

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The number of new claims for unemployment for week ending 10/3/20 continues to decline a bit. Since 8/29/20 the new claims have been in the mid- to high 800 thousands. Change in the last five weeks, starting with 9/5/20 are +9K, -27K, +7K, -24K, -9K.

To again put this in context, before the government induced shutdown of the economy new claims averaged about 220K per week.

The number of continuing claims for unemployment is continuing to drop. I’m not sure why this is. Part is due to people going back to work.

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Written by Jim Ulvog

October 9, 2020, 10:16 am at 10:16 am

Posted in Economics

Education – More reports on devastating impact from the shutdown.

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Status of public education across the country two months into the new school year. Image courtesy of Adobe Stock.

Increasing numbers of reports describe the damage to education of our youth.  Students of every age group being hurt by the lockdown. Impact on poor or disadvantaged or previously struggling students is even more severe.

I am heartbroken that the damage will continue for the near future. The compounding effect will be terrible.

9/28/20 – ProPublica – The Students Left Behind by Remote Learning – Keep in mind this article describing the devastating impact of the lockdown on students from disadvantaged families is from ProPublica, a far-left news organization and not from some wild eyed Libertarian organization that wants people to have the freedom to make their own decisions on absolutely every issue in their lives.

Article goes into great lengths describing the struggles experienced by one particular student who has been trying to learn in virtual classes. As a starting point, there’s a grand total of four hours online teaching per week. Four hours – one hour per day on Monday through Thursday. That is the only teaching time. For all his class subjects.

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Written by Jim Ulvog

October 8, 2020, 9:04 am at 9:04 am

Posted in Other stuff, Pondering

One report indicates overall charitable giving is up for the first half of 2020.

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Image courtesy of Adobe Stock.

This is the first report I have seen on overall giving trends during the pandemic. Preliminary indications are giving was down in the first quarter but strong enough in the second quarter that year-to-date giving is up compared to prior year.

10/6/20 – Philanthropy Today – Giving Was Up 7.5% in the First Half of 2020, New Report Says.

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Written by Jim Ulvog

October 7, 2020, 9:33 am at 9:33 am

Posted in Other stuff

Why I talk about economic indicators so often.

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Image courtesy of Adobe Stock.

One of the frustrations I have experienced as an auditor is the statistical information made visible by the AICPA and publications from others is that the economic data mentioned routinely lags behind two or three quarters on the date it is published.  Another trade association reports giving trends in the religious communities, but the survey information is provided late in the year for the prior calendar year.

The result is when I’m working on an audit or review several months later, the readily available economic data is from the start of the fiscal year I’m analyzing. Sometimes the data is for the prior fiscal year I’m considering. That doesn’t do me much good.

Long time ago I came across a comment that CPAs ought to start tracking key economic indicators on their own.

What a great idea!

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Written by Jim Ulvog

October 6, 2020, 8:36 am at 8:36 am

Posted in Audits, Economics

Tagged with ,

Did the lockdowns have any beneficial impact on the rate of new infections?

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Enough time has passed that there is enough information to start analyzing the lockdowns. Preliminary info is not pretty. Image courtesy of Adobe Stock.

Indications are starting to emerge that the answer to the question may actually be no.

Previously mentioned one analysis which found a weak statistical correlation between weaker lockdown requirements and lower infection rate. The study found no correlation between the date that states started releasing the lockdown restrictions and subsequent infection rates.

The rate of infections accelerates rapidly and then hits an inflection point where the rate of infections either plateaus or the rate slows dramatically.

The following study suggests the lockdowns have no correlation to when the infection rates hit that transition point. In fact, the inflection point normally is reached before the lockdowns could have had any impact.

10/4/20 – National Review – Stats Hold a Surprise: Lockdowns May Have Had Little Effect on Covid-19 Spread

Authors pulled the daily infection rate for 13 states and graphed the data on a logarithmic scale. Seeing infections on a log scale makes it easier to see trends. There are visible transitions in every state from rapid acceleration to a flattened or greatly reduced infection rate.

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Written by Jim Ulvog

October 5, 2020, 9:32 am at 9:32 am