GAAP Flash! News For CPAs in Public Accounting - 9.11.15
GAAP Flash! News For CPAs in Public Accounting - 9.11.15

GAAP Flash! News For CPAs in Public Accounting - 9.11.15

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.

Moody’s: IRS Mortality Decision to Save Corporate Pensions $18B in 2016 (September 2, 2015) – The Wall Street Journal (@WSJ)

The Internal Revenue Service decided to delay until 2017 the requirement to use new mortality tables for calculating corporate pension obligations. According to Moody’s Investors Service, this decision could save companies a combined $18 billion in 2016.

How It’s Relevant: Obviously, people are living longer and the new mortality tables reflect this fact. Under federal law, companies must keep their pension plans fully funded. Using the new mortality estimates adds about $126 billion to companies’ pension obligations, but companies have seven years to close the gap, thus the $18 billion that is saved by delaying the use of the tables for one year. However, companies will eventually have to “pay the piper” so, although delayed, the pain is coming! Rising interest rates could help the situation, but this is less than certain given the current state of the global economy.

PCAOB Reveals Focus for Inspections of Broker-Dealer Auditors (September 1, 2015) – Journal of Accountancy (@AICPA_JofA)

PCAOB inspectors will focus on five areas of audit firm performance in their 2015 inspections of auditors of brokers and dealers. These are:

  1. Financial statement audit areas that had deficiencies identified in past inspections, including revenue recognition and use of information produced or used by brokers or dealers,
  2. The examination of compliance reports and the review of exemption reports under newly applicable PCAOB standards,
  3. Audit procedures on the supplemental schedules to the financial statements,
  4. The engagement quality review, and
  5. Auditor independence.

How It’s Relevant: As we discussed in a previous edition of the GAAP Flash, the PCAOB noted an 87% deficiency rate related to their 2014 interim inspection of auditors of broker-dealers. Obviously, this is not good; especially considering these audits were performed under U.S. generally accepted auditing standards (U.S. GAAS), which are less onerous than PCAOB auditing standards. As a result, the PCAOB issued an Inspection Brief to provide information about its inspections for the current year. Auditors of broker-dealers would be wise to read this Inspection Brief and provide training to engagement teams to prevent another embarrassing report by the PCAOB!

Failure to Monitor Third Parties Heightens Bribery and Corruption Risks, KPMG Survey (September 8, 2015) – KPMG International (@KPMG)

Although most bribes are actually paid by third parties, rather than by the companies themselves, many companies are not monitoring their intermediaries for anti-bribery and corruption (ABC) risk, according to the results of a new survey by KPMG International, Anti-Bribery and Corruption: Rising to the challenge in the age of globalization. While companies are performing due diligence when bringing third parties aboard, the majority of the survey respondents at U.S.-listed companies are not taking the steps to monitor these intermediaries on an ongoing basis. In fact, only 23% of U.S.-listed companies exercise their right to audit third parties and fewer than three-quarters identify risky intermediaries.

How It’s Relevant: As more than 75% of all corruption cases involved third parties, companies should have an ongoing monitoring program in place. However, this lack of ongoing monitoring is not limited to companies’ review of third parties. While 9 in 10 U.S.-listed companies said their companies have a formal, written ABC compliance program in place, only 68% said these programs include continuous monitoring and internal audit protocols. Given the regulatory focus on such compliance programs and the fact that violations of the Foreign Corrupt Practices Act can be steep, not to mention embarrassing, it is essential that companies improve their ABC risk compliance programs.

China and the World Economy Taking a Tumble (August 29, 2015) – The Economist (@EconBizFin)

It started with the Shanghai stock exchange plummeting, down some 40% from its highs, rippling through stock exchanges worldwide. However, the effect has been felt beyond the stock markets. A basket of commodities, including everything from steel to wheat, has fallen to its lowest level this century; oil is at six-and-a-half year lows. Emerging market currencies have been hammered. Investors are wondering where it all ends.

How It’s Relevant: This is one of the most thorough, well-written articles we’ve seen on the current state of the global economy and its impact outside China. For example, did you realize that the Brazilian Real has fallen by more than a third against the U.S. dollar, and by almost half since May 2013? This might be important if your clients have Brazilian subsidiaries or sell goods and have receivables in Real. We recommend all accountants, especially audit teams currently planning for their 2015 audits, read this article to better understand the impact of the risks and the impact on their clients.

T100 Extra: The Most Important Issues Facing the Profession (September 3, 2015) – Accounting Today (@AccountingToday)

Accounting Today recently released the Top 100 most influential people in accounting, an annual listing of the change-makers and thought leaders who are shaping the profession. As part of this report, these influencers were asked “What is the most important issue currently facing the accounting profession?” and this article provides their responses.

How It’s Relevant: This is a “must read” article for practicing CPAs. Although the responses are varied, some common themes include:

  • Improving audit quality and being a “trusted advisor”
  • Recruiting, retaining, and developing talent
  • Adapting to a changing world, especially as it relates to technology, in order to remain relevant

We found the following responses from the world’s standard setters particularly relevant to auditors. Russell Golden, Chairman of the FASB, said auditors should embrace professional judgment over a “check the box” mentality. Hans Hoogervorst, Chairman of the IASB, said the profession is struggling with a perceived lack of independence and that audit firms should invest in a culture of professional skepticism.

PCAOB Inspection

Comments (0)


Add a Comment




Allowed tags: <b><i><br>Add a new comment:


Ready To Make a Change?

Cookies on the GAAP Dynamics website

To give you the best possible experience, this website uses cookies. By continuing to browse this website you are agreeing to our use of cookies. For more details about cookies and how to manage them, please see our privacy policy.