Business acumen is keenness and quickness in understanding and dealing with a business situation in a manner that is likely to lead to a good outcome. For CPAs in public accounting this means performing higher quality audits. But who has the time to compile a list of relevant and timely accounting news relevant to CPAs? We do! Here are a few articles, blog posts, and publications designed to help increase business acumen in the profession.

All my bags are packed (August 15, 2015) – The Economist (@TheEconomist)

All companies must pay taxes, but more companies are looking for ways to avoid higher tax burdens. Companies based in the U.S., which is well known for having one of the highest corporate tax rates in the world, are using an active M&A market as an impetus for inversion, another name for merging with or buying foreign firms to shift their domicile to countries with lower tax rates. With cost cutting continuing to be a focus for companies not experiencing top line growth, this trend may have wider reaching effects throughout industries as lower taxes could prove to be a competitive advantage.

How It’s Relevant: Income taxes are a complex accounting area that only gets harder if a company is operating in more jurisdictions! Companies hoping to move tax domiciles may also need to clear certain hurdles to actually make the change. In these inversion situations, consultation with international tax experts is critical to understand the operational and regulatory constraints that exist and also to ensure the impact to financial statements and disclosures are approached thoughtfully.

The Hot Thing for Wall Street Banks: Capital-Relief Trades (August 17, 2015) – Wall Street Journal (@WSJ)

As a result of the recession, the Dodd-Frank Act and other regulation has required banks to increase their levels of capital. A Bank’s capital is used to calculate certain thresholds and ratios that determine how “safe” a bank would be in the event of another economic collapse. With all of the increased scrutiny of a bank’s capital ratios, banks have sought ways to increase these ratios. There are certain ways that a bank can manipulate its capital ratios, including entering into credit default swaps which transfer risk to outside investors.

How It’s Relevant: Regulators constructed the new capital ratio system to ensure banks are not participating in the same risky lending or investing strategies that bring about severe economic collapse. While using different swaps and trades to manage risk is currently allowed under the capital monitoring constructs, it may be an area that regulators look to influence in the future, either leading to additional disclosure requirements or disallowing certain arrangements all together.

PCAOB urges broker-dealer auditors to reexamine approaches (August 18, 2015) – Journal of Accountancy (@AICPA_JofA)

The PCAOB published its annual report on interim inspections of broker-dealer audits. The results were not encouraging. Around 87% of the audits inspected had deficiencies and all firms inspected, 66 in total, had at least one audit with a deficiency!

How It’s Relevant: Audits of broker-dealers are getting lots of attention from the PCAOB. These results show that continued improvements must be made for audit firms engaged in this industry. The PCAOB stresses reconsidering risks specific to broker dealers and the effect these risks should have on audit procedures. Appropriate training of engagement team members is also an area that the PCAOB believes will increase the effectiveness of these audits. Read the report and make sure your firm is addressing the concerns proactively!

SEC Charges BNY Mellon With FCPA Violations (August 18, 2015) – SEC (@SECNews)

BNY Mellon will pay $15 million for violations alleged by the SEC. The regulator found that children of important foreign officials were granted valuable internships, some of which that stretched longer than typical terms for other students. The SEC determined that these interns were hired outside of the normal HR process and that the hiring decision had the intent to influence these foreign officials to continue, or start, investing with BNY Mellon. Internal control weaknesses were cited as a reason for this violation.

How It’s Relevant: A few weeks after the Mead Nutrition settlement, the SEC charges BNY Mellon with FCPA violations. The use of internships, considered a position “of value” to the SEC, is a new twist in these investigations, which typically focuses on monetary gifts or rewards. With this new interpretation and focus on the FCPA on the rise, it is important to understand the impact of hiring decisions and customer relationships!

Time to End Quarterly Reports, Law Firm Says (August 19, 2015) – Wall Street Journal (@WSJ)

Quarterly reporting has been a U.S. corporate tradition since the 1970s, but some law firms and investing companies believe it should be stopped. The reason? Quarterly financial reports place too much emphasis on short-term performance and goals and distract U.S. companies from long-term strategies. Studies published by academics have found this to be true while others support the regulatory of quarterly updates, citing investors will take on more risk if they have access to more information.

How It’s Relevant: The creation of quarterly earnings reports and Form 10-Q’s by company management can take a lot of time and effort. For auditors of U.S. issuers, reviews of this interim financial information can also divert energy away from important planning or risk assessment procedures. Will regulators and analysts allow the move to annual or semi-annual reporting? It seems unlikely right now, but it makes an interesting situation to ponder, one that would allow more focus on long-term objectives – for companies and auditors alike!