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.

Walmart, Toshiba, and the Audit Firms: Wake Up SEC! (September 16, 2015) – Fortune Magazine (@FortuneMagazine)

The article argues that unless the Securities and Exchange Commission (SEC) steps up and supports auditors’ top watchdog, the Public Company Accounting Oversight Board (PCAOB), public companies’ financial statements won’t be worth the paper they’re printed on. It discusses the importance of the PCAOB as an independent overseer of accounting firms and the need for reform, citing recent accounting and control issues noted by companies like Walmart and Toshiba.

Why It’s Important: Some of the changes proposed are VERY radical. Lynn Turner, former chief accountant of the SEC, recommended the PCAOB be able to demand companies change auditors if problems were noted in an audit. We disagree. Companies and their audit committees are capable of their own oversight, including the selection of their auditors. On the flipside, some auditors and companies are complaining of the burdens imposed by the PCAOB. Certainly, the PCAOB has added additional “burdens” to companies and accounting firms, but we believe the PCAOB has increased the quality of audits through their standards and inspection process.

Stein Mart Settles with SEC for $800,000 on Inventory Valuation and Accounting Controls (September 23, 2015) – Accounting Today (@AccountingToday)

The SEC charged Stein Mart Inc. with materially misstating its pre-tax income due to improper valuation of inventory subject to price discounts and for having inadequate internal accounting controls. In its investigation, the SEC found the retailer often offered its merchandise to customers at retail price reductions referred to as Perm POS markdowns and that merchandise subject to such a markdown never reverted back to its original retail price. Stein Mart reduced the value of inventory subject to these markdowns at the time the item was sold, rather than immediately at the time the markdown was applied. Stein Mart agreed to settle the SEC’s charges by paying an $800,000 penalty.

Why It’s Important: Although accounting for inventory in accordance with ASC Topic 330 is some of the oldest GAAP out there, we still find companies that have issues with it and the Stein Mart case is yet another example. In its press release, the SEC noted the lack of internal controls over the inventory valuation process, specifically that the department in charge of valuation and merchandising did not understand the proper accounting for inventory in accordance with U.S. GAAP. This is a perfect example of why we recommend that companies provide at least basic U.S. GAAP training for all areas of the business, not just accounting and finance.

Groupon to Slash 1,100 Jobs, Close in 7 Markets (September 22, 2015) – CFO Magazine (@cfo)

Groupon announced it is cutting about 10% of its workforce and shutting down its operations in Puerto Rico and six countries as part of its strategy for long-term growth. “We saw that the investment required to bring our technology, tools, and marketplace to every one of our 40-plus countries isn’t commensurate with the return at this point”, said Rich Williams, Chief Operating Officer. “We believe that in order for our geographic footprint to be an even bigger advantage, we need to focus our energy and dollars on fewer countries.”In its regulatory filing, the company said it would take a pre-tax charge of $35 million.

Why It’s Important: Groupon is just the latest company to take a “hit” as a result of its exposure to emerging markets. Reuters noted that a strong dollar “has hurt companies with a large presence in markets outside the United States.” Markets outside North America accounted for about 43% of Groupon’s revenue in 2014. In addition to ensuring the proper timing of restructuring charges in accordance with U.S. GAAP (ASC Topic 420 and ASC Topic 712) or IFRS (IAS 19 and IAS 37), auditors need to be aware of the current risk environment with respect to emerging markets, especially as a result of the devaluation of the currencies in these economies.

Caterpillar, Crunched by Commodities Collapse, To Slash 10,000 Jobs (September 24, 2015) – Forbes (@Forbes)

Caterpillar issued disappointing sales and revenues forecasts for 2015 and 2016 and, as a result, announced that it will undergo “significant” restructuring and cost savings initiatives. In addition to layoffs of as many as 10,000 people, Caterpillar’s plans include: a “voluntary retirement enhancement program” for qualifying employees and other cost-savings initiatives, such as reducing SG&A expenses and closing facilities.

Why It’s Important: Caterpillar chairman and CEO, Doug Oberhelman, blamed the “challenging marketplace conditions in key regions and industry sectors – namely mining and energy.” In addition to ensuring that restructuring charges are properly accounted for (as previously discussed in the Groupon article above), auditors should assess what impacts the risks present in the mining and energy sectors have on their clients.

Losing Sleep (September 28, 2015) – Accounting Today (@AccountingToday)

This article discusses what leaders in accounting feel are the most important issues affecting the profession. Their responses varied, but three broad categories of issues came to the surface (the so called, “Three Nightmares of the Accounting Profession”):

1. The nightmare of irrelevance
2. The staffing nightmare
3. The nightmare of change

Why It’s Important: Keeping up with changing technologies, analyzing big data, and providing more “value added” services have been topics in the news recently and deal with the irrelevance issue noted in the article. Staffing has always been an issue for accounting firms, and this problem now has a new name – the millennial. Accounting firms need to find new ways to attract, develop, and retain top talent because without its people, they really don’t have a business. Regarding the issue of change, about the only thing we can say is “learn to deal with it!” All businesses need to learn to recognize and adapt to changes or risk the times passing you by. These “nightmares” have solutions, but it will require significant changes – changes in business model, changes in the structure of both careers and firms, and changes in technology adoption — and some of the leaders we heard from were not sure the profession was up to that. Well, the profession better be up to it, or risk insomnia!