Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Posts Tagged ‘audit methodology

Updates for CPAs: going concern and location of debt issue costs

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Image courtesy of DollarPhotoClub before they merged into Adobe Stock.

Image courtesy of DollarPhotoClub before they merged into Adobe Stock.

The accelerating pace of change doesn’t slow down merely because I have multiple audits in progress plus more that just started. Here are a few articles to help keep all of us up to date on two newly effective standards:

Going concern

For a long time the professional requirements for addressing going concern issues have been located in the audit literature. Yeah, the accounting requirement was in the audit standards.  There has been an effort for several years to this guidance out of the SASs and into GAAP. Two articles show the substantial progress:

11/8/16 – Charles Hall at CPA-Scribo – It’s Time to Apply FASB’s New Going Concern Standard –  ASU 2014-15 creates a requirement in GAAP for management to assess whether there are conditions or events which raise substantial doubt about ability to continue as going concern.

This is effective for financial statements ending on or after December 15, 2016. Translation: 12/31/16 financial statements. That would be the ones you’re auditing or reviewing or compiling at the moment.

If you haven’t tuned into this new requirement, check out Mr. Hall’s article before you download the ASU for study. Hint: the new requirements on management will seem remarkably familiar.

In case you hadn’t thought about it, having a GAAP-based going concern requirement placed on management means that there is now a specific need to address going concern in a review or comp.

2/22/17 – Accounting Today – AICPA changes going concern audit standard – Now that the going concern requirements are in GAAP, the ASB has modified the rules in the audit literature.

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Written by Jim Ulvog

February 23, 2017, 9:14 am at 9:14 am

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

Tagged with

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

Pondering on the Wells Fargo fiasco and more news

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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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Written by Jim Ulvog

September 16, 2016, 8:05 am at 8:05 am

One of three major cases against PwC is settled.

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Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

Of the three lawsuits against PwC that are large enough to potentially be life threatening, one was settled by PwC after several weeks of the trial. I previously discussed Litigation cases that could possibly take down a Big 4 firm.

On 8/26, the Wall Street Journal reports PricewaterhouseCoopers Settles $5.5 Billion Crisis Era Lawsuit.

Francine McKenna has repeatedly pointed out on Twitter that this is the first major case in a long time against an accounting firm which actually got into court. There are a few weeks of testimony which will likely be a good source for researchers and journalists wanting to understand how audits of large companies can go sour.

Amount of settlement is confidential. This settlement still leaves a $1B suit by the FDIC over the failed bank that was audited by PwC.

Let me give a thumbnail picture of this suit. My simplification will obviously show my confusion. Yeah, my bias will probably be visible too.

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Written by Jim Ulvog

August 29, 2016, 6:07 am at 6:07 am

Posted in Audits, Pondering

Tagged with ,

Good reads for accountants: Twelve minute CPE courses. Big data AI taking over audit work?

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Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

In the near term, your CPE options will include twelve-minute courses.

In the long-term, ponder how much of your audit work could be replaced by artificial intelligence. I can grasp the idea of automating a large portion of detail testing. I can’t see the possibility of replacing the entire audit function. Stretch your brain with two articles from Jim Peterson.

8/11 – Journal of Accountancy – CPE standards update accommodates new forms of learning – It will be a while before you see this in a CPE class, but the AICPA and NASBA changed the CPE rules to allow for nano-learning and blended learning.

Nano-learning is a short course, say 12 minutes that will allow CPE credit in 0.2 hour increments. Picture a 24 or 36 minute course on how to conduct an inventory observation. Or a 12 minute class on how to prepare the planning materiality worksheet.

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Written by Jim Ulvog

August 25, 2016, 8:08 am at 8:08 am