Attestation Update – A&A for CPAs. – Page 24 – Technical stuff for CPAs providing attestation services.

More background on revision to nonprofit reporting

Leave a Comment / Accounting / Jim Ulvog

The new rules revising not-for-profit financial reporting are a significant change although they are not as dramatic as what we saw a long time ago with SFAS #116 and #117.

ASU 2016-14, Presentation of Financial Statements of Not-four-Profit Entities, was issued August 18, 2016. You can find the document here.

I will write a series of articles going into detail on the new rules. In the meantime, here are a few more articles providing background.

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

8/18 – AICPA – FASB’s standard Aims to Improve Not-for-Profit Financial Reporting – good overview of most changes

8/18 – Journal of Accountancy – FASB modifies not-for-profit accounting rules – High level overview. Article also provides some background on the process. Revision of GAAP to require operating measures is still under consideration but will be part of the next phase.

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More background on revision to nonprofit reportingRead More »

More background on revision to nonprofit reporting Read More »

Two new SSARS documents, #22 and #23

Leave a Comment / Compilations & reviews / Jim Ulvog

There are two new SSARS pronouncements. Most likely they will not be a big deal for most accountants, but if you work in the comp or review arena, you need to know they exist and you really ought to have a vague idea what is in them.

First, a tip on staying out of trouble on nonattest services…

11/1 – Journal of Accountancy – Nonattest services quiz – A great six question quiz on nonatttest services. Take the quiz to find out how well you are doing on independence and documentation requirements. By the way, if you miss some questions you probably taking out some really serious risk in your audit practice that you didn’t even know about.

This is a great opportunity to find out what you don’t know, which can hurt you.

9/23 – Journal of Accountancy – ARSC complete clarity project with issuance of SSARS No. 22 – …

Two new SSARS documents, #22 and #23Read More »

Two new SSARS documents, #22 and #23 Read More »

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

2 Comments / Audits, Compilations & reviews / Jim Ulvog

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

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

More data points on pay for Roman Legionnaires

Leave a Comment / Other stuff / Jim Ulvog

Roman soldiers in Testudo, or turtle, formation. If you lived 1000 years ago and happened to see one of these moving in your direction, you were about to have a very bad day. Photo courtesy of Adobe Stock. — Roman soldier reenactors in Testudo, or turtle, formation. If you lived 2000 years ago and happened to see one of these moving in your direction, you were about to have a very bad day. Photo courtesy of Adobe Stock.

Got interested again in how much a Roman soldier was paid. Browsed Wikipedia and found a few more reference points.

One of my main goals of blogging is to learn and stretch my brain. My brain stretching on financial issues is revealed on this blog. If you wish to wander along, please join me as I meader through Wikipedia, learning what I can.

Sestertius article from Wikipedia

At one point, the soldiers in the Rhine army rebelled against Tiberius. I think this was shortly after Tiberius became emperor, which was in 14 AD when he was about 56 years old (b. 42 BC – d 37 AD). His reign ended in 37AD, or after about almost 15 years in power.

Legionnaire soldiers who were part of the Rhine Army were paid equivalent to a denarius a day (10 asses) according to the Wikipedia article. Out of that they had their food and uniforms deducted. They demanded several things, including getting paid a denarius a day. If I read that slender sliver of information correctly, they went from 1 denarius minus food and clothing per day to 1 denarius per day net.

The Sestertius article goes on to say that in the first century legionnaires were paid around 900 sesterii a year. That would be about 2.5 sesterii per day for a 365 day year. I’m not sure how to reconcile that comment to the immediately preceding paragraph which mentioned the 10 asses per day, which is the basis for a denarius. Since a sestertius is a quarter of a denarius, that would be just over half a denarius a day.

This rose to around 1200 when Domitian was the emperor (81-96AD). That would be about 3.3 sesterii a day, or about three-fourths of a denarius.

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More data points on pay for Roman LegionnairesRead More »

More data points on pay for Roman Legionnaires Read More »

More news on the Wells Fargo fake account fiasco

Leave a Comment / Other stuff / Jim Ulvog

Concord stage coach at Wells Fargo museum in San Diego. Painting at top is of Old Town San Diego in its prime time. Photo by James Ulvog. — Concord stage coach at Wells Fargo museum in San Diego. Painting at top is of Old Town San Diego in its prime time. San Diego harbor is visible on left with Point Loma at the top. Photo by James Ulvog.

A few more articles on the fake account mess at the bank:

Wells Fargo is trying to get back on track.
Other banks are getting inquiries from the OCC about incentives to open accounts.
SEC is looking at possibility of missing disclosures.

On October 24 the bank ran a full-page color ad in the Wall Street Journal on the back of the A section. Article ran again a few days later. I’ll guess that is a rather expensive page anyway, especially for the whole page, even more so for a very pretty color photo. Nice shot of a Concord stage on the open prairies, by the way. Cool photo!

Several comments from the ad, which I will quote under fair use, which in any event I’m sure Wells Fargo is perfectly fine with me quoting.

Putting your interest first: We have eliminated product sales goals for our Retail Banking team members who serve customers in our bank branches and call centers. This means that their focus will be a meeting your financial needs, not meeting sales goals.

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More news on the Wells Fargo fake account fiascoRead More »

More news on the Wells Fargo fake account fiasco Read More »

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

2 Comments / Audits, Other stuff / Jim Ulvog

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:

When hidden in this:

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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In relation to the revenue Wells Fargo generates, the fees from fake accounts were trivialRead More »

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

More news on the Wells Fargo fake account fiasco

Leave a Comment / Other stuff / Jim Ulvog

October 2016 photo at Wells Fargo's museum in San Diego by James Ulvog. Yeah, when I was there last week I got a bunch of new photos. — October 2016 photo at Wells Fargo’s museum in San Diego by James Ulvog. Yeah, while on vacation last week I got a bunch of new photos.

Lots of news to catch up on the Wells Fargo unauthorized account mess from when I was on vacation last week.

A few articles for your consideration:

What, if anything, should have been disclosed about the investigation while it was underway?
Disclosures likely in the next round of filings with SEC.
Hints the fake account fiasco could extend into the small business division.
Bank’s CEO resigns.
The Congress and CFPB were late to the party.
California AG opens investigation of possible identity theft.

9/29 – Michael Rapoport at Wall Street Journal – To Disclose or Not to Disclose? Wells Fargo Woes Shine Light on a Knotty Problem – Wells Fargo did not disclose the existence of the investigation and settlement talks regarding the fake account scandal.

Interesting question for companies and auditors arises: should it have been disclosed?

Article provides a good non-technical explanation of materiality:

Generally speaking, materiality depends on whether a reasonable investor would consider the information important enough to affect the investor’s decision to buy a company’s securities.

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More news on the Wells Fargo fake account fiascoRead More »

More news on the Wells Fargo fake account fiasco Read More »

“Be Prepared – A Comprehensive Peer Review Update”

1 Comment / Audits, Compilations & reviews, Peer Review / Jim Ulvog

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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“Be Prepared – A Comprehensive Peer Review Update”Read More »

“Be Prepared – A Comprehensive Peer Review Update” Read More »

“Compilation of Pro Forma Financial Information”

Leave a Comment / Accounting, Compilations & reviews / Jim Ulvog

SSARS #22 addresses Compilation of Pro Forma Financial Information. This document rolls SSARS #14 into the clarified format. This is the last section of the old SSARS to be rewritten as a clarified document.

You can find the document here.

It will be effective for compilations of pro forma info dated on or after May 1, 2017.

Charles Hall has a superb recap of the document at his blog, CPA-Scribo: Are You Up to Speed on the New Pro Forma Information Standards? If you want to get up to speed really fast, check out his article.

“Compilation of Pro Forma Financial Information” Read More »

Great survey of Peer Review program

Leave a Comment / Peer Review / Jim Ulvog

The California Society of CPAs has a superb article on the Peer Review program in their October 2016 newsletter: Be Prepared – A Comprehensive Peer Review Update.

Here is the link again: http://californiacpa.calcpa.org/?issueID=65&pageID=15

I will check to see if I can get permission to reprint the article.

Update: CalCPA graciously gave me permission to reprint the article. You may find it here.

Great survey of Peer Review program Read More »

Guess we might want to reallocate blame for that $5 billion trading loss at Societe Generale

Leave a Comment / Fraud, Other stuff / Jim Ulvog

Sometimes it's complicated. Photo courtesy of Adobe Stock. — Sometimes it’s complicated. Photo courtesy of Adobe Stock.

One thing I’ve learned while being in leadership at my church is that a conflict that appears simple to outsiders is usually far more complicated and messy and ugly than it appears, with blame for a conflict sometimes belonging to the party that appears innocent.

I’m slowly catching on that maybe that idea sometimes applies to massive financial fiascos. (Yeah, yeah, I know. I usually catch on really slow.)

Who is at fault?

Back in January 2008 a trader, Jérôme Kerviel, engaged in €50B of unauthorized trades for Société Générale and hid his trades. That’s fifty billion euros. He admits to making fake entries to hide his admittedly unauthorized trades.

Unwinding the trades cost the bank €4.9B.

I recall at the time that the story line was he was a rogue, a scoundrel, etc., doing all this by himself, etc., single handedly pulling off a huge scam, etc, cleverly wending his way between those tight internal controls, etc.

Criminal sentence

Previously, Mr. Kerviel was tried and convicted on criminal charges. His initial sentence was five years, which was reduced to two years (I think it was 2 but maybe was 3).

He served five months in prison, according to the following article.

Wrongful termination

Well, multiple parts of the French judicial system are saying that allocating the blame is a bit more complicated.

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Guess we might want to reallocate blame for that $5 billion trading loss at Societe GeneraleRead More »

Guess we might want to reallocate blame for that $5 billion trading loss at Societe Generale Read More »

Another fiasco at Wells Fargo and another round of hearings

Leave a Comment / Other stuff / Jim Ulvog

Interior of Concord stagecoach at Wells Fargo's San Diego museum. Imagine sharing that bench for the 24 day run from St. Louis to San Francisco. Photo by James Ulvog. — Interior of Concord stagecoach at Wells Fargo’s San Diego museum. Imagine sharing that bench for the 24 day run from St. Louis to San Francisco. That’s round the clock for 24 days with the only stops to change horses and drivers. Photo by James Ulvog.

Wells Fargo got some more visibility this week for violating federal law on repossessing property from servicemembers on active duty. The CEO got another round of public thrashing, this time from the House of Representatives. The CEO and former head of community-banking forfeited a bunch of future compensation.

9/29 – Bloomberg – Wells Fargo Troubles Mount With Penalty for Soldiers’ Loans – Federal law has been in place since about 1940 that provides protection to servicemembers from collection efforts. The law currently says lenders have to get a court order before they repossess property from anyone who is on active duty. The law was rewritten in 2003 and has been updated since then.

The protections for servicemembers have only been around for, oh, about 75 years. Need I point out that is plenty of time for the compliance staff to catch on to the pertinent laws?

The Pentagon has a list of all active duty service members which lenders may access if they wish.

Two separate enforcement actions within two years against Wells Fargo for violations of that law suggests the bank may just have a systemic compliance issue.

The newest issue involves 413 alleged violations of the law. The bank agreed to pay $4 million for unlawful repossessions during a seven-year run. That’s an average restitution of about $10,000 each. In addition the OCC ordered the bank to pay a $20M fine for a decade’s worth of violations.

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Another fiasco at Wells Fargo and another round of hearingsRead More »

Another fiasco at Wells Fargo and another round of hearings Read More »

Wells Fargo gets public whipping

Leave a Comment / Other stuff / Jim Ulvog

Wells Fargo museum in San Diego's Old Town State Park. Photo by James Ulvog. — Wells Fargo museum in San Diego’s Old Town State Park. Photo by James Ulvog.

The Wells Fargo CEO got a good whuppin’ yesterday. The Senators each took their turn striving for the lead quote in the evening news.

As usual, the comments on Twitter are entertaining. Deep thoughts range from wanting to throw all the bankers in jail to one person lauding one senator for having personally discovered and exposed the fake account fiasco. Really. One of the senators found this mess.

If your knowledge of Cold War history extends to knowing what a show trial is, ponder the visuals and theatrics of the hearing. As I browsed through my twitter feed looking at the linked photos, show trial is what came to mind.

9/20 – Wall Street Journal – Whipping Wells Fargo / The bank blundered, and the politicians will make it pay – Editorial provides valuable perspective. Opening paragraph brings together multiple ideas, which I’ll quote under fair use:

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Wells Fargo gets public whippingRead More »

Wells Fargo gets public whipping Read More »

Prep reading for today’s hearings on Wells Fargo fiasco in Senate Banking committee

Leave a Comment / Other stuff / Jim Ulvog

Wells Fargo Concord stagecoach. April 2012 photo by James Ulvog.

Before you tune in to the headlines generated by Senators striving for the best one-liner in hearings which will appear in the evening news, check out these background articles.

So far looks like there is stiff competition in the race for most outraged Senator. At the moment, Senator Warren is in the lead.

9/16 – CNN Money – Wells Fargo drumbeat grows louder. House launches investigation – The House Financial Service Committee will start hearings late in September. The Wells CEO has been called to testify.

The rhetorical trap already set by the minority chair of the Senate Banking Committee is that if senior management did not know this was going on then the bank is too big to manage. The choice, as she infers: senior management is complicit or the bank ought to be broken up.

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Prep reading for today’s hearings on Wells Fargo fiasco in Senate Banking committeeRead More »

Prep reading for today’s hearings on Wells Fargo fiasco in Senate Banking committee Read More »

Pondering on the Wells Fargo fiasco and more news

Leave a Comment / Audits, Other stuff, Pondering / Jim Ulvog

Original finish on mud wagon used by subcontractor to Wells Fargo on San Diego-Julian run in 1870s. Wagon is housed at the Seeley Stable Museum in Old Town San Diego Historic Park. April 2012 photo by James Ulvog. — Original finish is visible on mud wagon used by subcontractor to Wells Fargo on the San Diego-Julian run in 1870s. Lighter and cheaper than the Concord wagon, this was useful in desert and mountain areas. Wagon is housed at the Seeley Stable Museum in Old Town San Diego Historic Park. April 2012 photo by James Ulvog.

Here’s a few articles that were interesting to me in the last two days about the Wells Fargo fiasco, previously discussed here, here and here.

First, a digression into the ethics and audit issues of systemic faking of accounts and coding diesel engines to cheat.
Next, pondering whether there will be any clawback of the $124M bonuses from the senior executive who managed the retail banking area.
Finally, two articles describing the DoJ opening a preliminary investigation.

9/14 – Prof. Mike Shaub at Bottom Line Ethics – Plausible deniability and the insulation of upper management – Prof Shaub ponders two fiascos in the news for the deeper ethical issues. Both the Volkswagon diesel engine scheme and the Wells Fargo fake account fiasco reflect poorly not only on the companies and their culture, but the state of ethics in business and our society.

We, collectively, need to grapple with those issues.

The article raises unsettling issues for auditors. Let’s ponder for a moment…How can we detect corporate cultures and entity tone-at-the-top environments which allow building a cheating code into the core operation of a company’s software? How can we detect an environment that incentivizes staff to cheat customers or risk losing their jobs for not hitting sales targets? Those are sobering questions.

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Pondering on the Wells Fargo fiasco and more newsRead More »

Pondering on the Wells Fargo fiasco and more news Read More »