Tag Archives: Audit

PCAOB: Protecting Investors and the Public Interest — The Harvard Law School Forum on Corporate Governance

Small business of-interest, need-to-know and news-to-watch.   Article gives you a good background and review of PCAOB, its charter and works in progress.  Good information and insights.  Recommended for leadership and accounting management.

  Excerpt:  Since the Public Company Accounting Oversight Board was created 10 years ago by the Sarbanes-Oxley Act, the U.S. system of auditor oversight has been fundamentally reformed to better protect investors and the public interest.

In addition to creating the PCAOB, the Act also vested audit committees with expanded oversight of financial reporting and audit processes.

Initially, the Act was seen as an effort to address problems that appeared to be unique to the U.S., but after numerous financial reporting scandals erupted around the world, the U.S. model of audit regulation was adopted in varying forms in many other countries.

Following the recent financial crisis, we find ourselves in an era with new stresses on financial reporting and auditing around the world, and we are once again evaluating how best to protect investors in this environment.

This is what we are working on at the PCAOB. I would like to tell you about a few “hot topics” related to our core mission of protecting investors through audit oversight, including: ….

Read full article via PCAOB: Protecting Investors and the Public Interest — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Filed under Accounting, Bookkeeping, GAAP, IFRS, Leadership, Operations & Innovation, Management, Small Business, Taxes & Audit

Accounting for Revenue Recognition | PwC

How is your understanding of revenue recognition?  In compliance?   Are you ready for the pending changes that are supposed to make this volume(s) topic easier for all to adopt one standard?   Here are some basic small business need-to-know.

Excerpt:  The accounting for revenue recognition is one of the most important and complex challenges facing companies today. Revenue recognition has been and continues to be one of the top accounting and auditing areas of risk. Failure in internal controls over revenue recognition remains one of the most significant causes of material weakness in internal controls over financial reporting.

Many companies offer multiple solutions to their customers’ needs. Those solutions may involve the delivery or performance of multiple products, services, or rights to use assets, and performance may occur at different points in time or over different periods of time. There are many complex rules for recognizing revenue when contracts / arrangements have more than one revenue generating activity. Further, there is increasing complexity of revenue recognition for software; since many products include embedded software, this complexity can apply to a broad range of industries.

While current rules are detailed and rapidly evolving, additional major changes are on the horizon.

Read full article via Accounting for revenue recognition: PwC.

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PCAOB Adopts New Audit Standard on Communications with Audit Committees — The Harvard Law School Forum on Corporate Governance

Small business of-interest, need-to-know and news-to-watch.  Accounting and audit

Excerpt:  Auditing Standard No. 16 is the first standard that the PCAOB has adopted following enactment of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, a new PCAOB standard will not apply to audits of “emerging growth companies” (“EGCs”) unless the SEC determines that the application of the standard is “necessary or appropriate in the public interest, after considering the protection of investors and whether the action will promote efficiency, competition, and capital formation.” At its August 15 meeting, the PCAOB expressed its view that the SEC should approve the application of the new standard to EGCs.

Read full article via PCAOB Adopts New Audit Standard on Communications with Audit Committees — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Filed under Accounting, Bookkeeping, GAAP, IFRS, Taxes & Audit

Auditors to Increase Your Financial Credibility

Accounting, finance and audit.  The article is written from the view of internal audit committee but the advice and takeaways hold true for the small business using external auditors for the role.

Excerpt: The key is communication on all sides in order to understand risks and decisions that are being recommended and approved, including with board members who are not financially oriented. Don’t wait until a meeting to communicate what is happening. The decision-making processes should be transparent, with no surprises. If you encounter dissent, it should be noted and discussed thoroughly at approval time, whether it’s from auditors or audit committee members

Read full article via How to build and run an effective audit committee to increase your financial credibility | Smart Business.

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Ernst & Young Risk Management Internal Audit

Small business takeaways.  Risk management is more than buying insurance, as I am sure everyone is now aware.  Auditors, whether internal or external, need to increase their role in assisting business with the missing and the required — as well as the why.

Excerpt:  As stakeholders inside companies seek more cross-functional coordination on risk, internal audit also has to improve its communications to executive management and other departments. The E&Y survey found that 46% of respondents perform only annual updates or no updates at all to their risk-related audit plans. That can leave a company unprepared for events that arise throughout the year, like new product launches or retirements, new market entry, and litigation.

While audit plans used to be “set in stone,” the trend now is to take periodic “fresh looks” at them, says Schwartz. “Risk profiles change as companies make acquisitions or move into emerging markets,” he points out.

Read full article  ernst & young risk management internal audit erm brian schwartz.  via CFO.com

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Effective Consolidated Audit Trail: Keeping the Door Open — The Harvard Law School Forum on Corporate Governance

Small business need-to-know, of-interest and news-to-watch.  This study addresses the long awaited rule’s faults.   Interesting read.

Excerpt:  In my remarks at the Commission’s May 26, 2010 meeting considering the CAT proposal, I quoted from a 1980 Commission report that spoke about the need for a comprehensive market oversight surveillance system. [1] Flash forward over three decades from that report, and not much has changed. We have seen enormous growth in the capital markets, and the SEC still does not have access to comprehensive market data. As a result, I have been a consistent and vocal supporter of a consolidated audit trail. [2]

It has taken over 30 years for the Commission to be poised to act on this issue. Accordingly, it is important that the Commission get it right. If the first steps in establishing this national market oversight framework are flawed, the system will not be comprehensive, and it will not serve the needs of the American public.

Unfortunately, as currently structured, today’s rule falls short of establishing the process that investors deserve.

Read full article via Effective Consolidated Audit Trail: Keeping the Door Open — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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IRC 409A After Three Years: It’s Not Just About Tax

Small business need-to-know and news-to-watch.   Accounting and taxes  — financial reporting.

Excerpt:  The best advice is to assume that any valuation report obtained to support stock option issuance (IRC 409A / ASC 718) will be scrutinized someday. There is only a small probability that scrutiny will come from the IRS. But there is a near certainty that scrutiny will come from an audit firm.

So, a company obtaining a valuation report should do three things

Read full article via IRC 409A After Three Years: It’s Not Just About Tax | Proformative.

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Pension Funds as Owners and Investors — The Harvard Law School Forum on Corporate Governance

Small business need-to-know and news-to-watch.  Cash management

Excerpt: …. acknowledging the important role of public pension funds.

As significant investors, public pension funds are a needed voice in the ongoing public dialogue involving the issues facing investors today, including corporate governance and audit quality. As fiduciaries, public pension plans can be a powerful voice on behalf of their beneficiaries, working men and women whose voices are often drowned out. You and your beneficiaries have a direct stake in the results. You should speak out on behalf of investors, and you should hold the SEC accountable to act on behalf of investors

Read full article via Pension Funds as Owners and Investors — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Keep Your Sarbanes-Oxley Off My CFO – HBR

Important read.  Detailing the extensions proposed on corporate regulations, namely CFO role.  Leadership, management and board of directors

Excerpt: Self-proclaimed shareholder advocates have extended Sarbanes-Oxley reforms deeper and deeper into the business. Now some are going too far, pushing those regulations into areas that intrude on effective corporate administration. The latest and most misguided attempt to “improve” corporate governance in this way comes from Nell Minow, founder of the corporate-risk rating firm, GMI Ratings, who was recently quoted in The Wall St. Journal arguing that CFOs should report directly to the audit committee of the board.

Not “report regularly.” Not “report in executive session, without the presence of the CEO.” Both of these are common enough practices today. No, Minow is suggesting that CFO essentially work for the audit committee. As she puts it, when she’s evaluating a company, “the most important thing I look for in a CFO is someone who reports directly to the audit committee, because what I want is a CFO who is absolutely clear that his or her job depends on telling the truth to the board.”

There are four main problems with her proposal.

Read full article via Keep Your Sarbanes-Oxley Off My CFO – Bob Frisch – Harvard Business Review.

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The Relevance of Audits and the Needs of Investors — The Harvard Law School Forum on Corporate Governance

This article is first, a wonderful tribute to Ken Levanthal, and second, VERY audit practices informative, to include expectations, misconceptions, standards, need to change, and more.  Small business need-to-know and takeaways, accounting and audit.

Excerpt: I am also concerned that the public knows little about how audits are conducted. In this regard, the PCAOB proposed last fall new requirements to disclose to investors how a multi-firm audit was accomplished. I expect to ask the Board to act on it in the near future.

With sunlight on how the audits are done, they may improve in coordination and quality as well. If darkness persists, I fear some auditors will find themselves on the wrong side of the debate when the lights go on and they are called to account for how a fraud could have eluded a vast network of soldiers in what is supposed to be a fight for truth. These are choices we make today, but will need to explain tomorrow.

Read full article via The Relevance of Audits and the Needs of Investors — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Audit Checklist for Public Cloud

Small business need-to-know.  If you are into the cloud or planning to be so, read how in 7 steps to ensure your “cloud” move will still pass an audit.

Excerpt: Your auditors worry about the cloud. So should you. As your organization begins its cloud flight, has it fastened its auditing seatbelts? Here’s a seven-step checklist to ensure a safe landing. Buckle up.

Read full article via audit checklist for public cloud.  From CFO.com

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Filed under Business Intelligence, IT, Data Management, Metrics, Cloud & Mobile, Small Business, Taxes & Audit

Search for Auditors; Don’t Rotate — The Harvard Law School Forum on Corporate Governance

An update and opinion on the PCAOB proposed auditor rotation……read the pros and cons presented.   What do you think?  Rotation would indeed keep everyone on their toes and that isn’t a bad thing,  but I well understand the costs and ramp-up time involved for each rotation.

 Excerpt…….In short, advocates of auditor rotation identify a real problem: a potential conflict of interest that could dissuade auditors from vigilantly exercising professional skepticism. Although auditor rotation could mitigate this conflict, a mandatory approach would be very expensive and could undermine the role of the audit committee.

Instead, the PCAOB should require the audit committee to issue an RFP for the auditor engagement every 15 years, but allow the existing auditor to participate in the bidding process. Without imposing a rigid system of mandatory rotation, this process would enhance the auditor’s willingness to make tough calls and reinforce its primary allegiance to the independent audit committee

Read full article…….via Search for Auditors; Don’t Rotate — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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New PCAOB Auditing Standards — The Harvard Law School Forum on Corporate Governance

Small business need-to-know and news-to-watch…….   Accounting and audit

Excerpt……..The Public Company Accounting Oversight Board is proposing a new auditing standard that relates to the auditor’s evaluation of a company’s relationships and transactions with related parties, and amendments to existing auditing standards that relate to significant unusual transactions and financial relationships and transactions by a company with its executive officers (including incentive compensation arrangements). The new and amended standards are intended to focus auditors’ efforts on areas that may pose an increased risk of material misstatement to a company’s financial statements……….

Subject to SEC approval, the new and amended standards would be effective for audits of financial statements for fiscal years beginning on or after December 15, 2012

Read full article………..via New PCAOB Auditing Standards — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Proposals for Auditor Independence and Audit Firm Rotation — The Harvard Law School Forum on Corporate Governance

Small business of-interest and news-to-watch…….   Opinion and information.

Excerpt……..It is an honor for me to participate in the Public Company Oversight Board’s public meeting to discuss proposals to enhance auditor independence, objectivity and professional skepticism, including the potential of imposing rules setting a maximum term limit for audit relationships.

Read full article…….via Proposals for Auditor Independence and Audit Firm Rotation — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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At Large and Small Companies, Internal Controls Matter

More information and cautions……..Small business help with time to implement mandates but cautions slackness…..

Excerpt………The JOBS Act passed by Congress last week and being signed by the president on Thursday helps smaller public companies avoid for a few years the internal controls reporting and audit requirements put in place in 2002 in the wake of prominent accounting scandals.

Read full article…….via At Large and Small Companies, Internal Controls Matter – NYTimes.com.

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Filed under Accounting, Bookkeeping, GAAP, IFRS, Leadership, Operations & Innovation, Small Business, Taxes & Audit