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.

Gas, Currency Sap Costco’s Top Line, Taxes Help (September 30, 2015) – The Wall Street Journal (@wsj)

Sales at warehouse retailer Costco were impacted by cheaper gas and a strong dollar, but a tax windfall helped it report solid earnings growth. Sales at stores open for at least a year fell 1% from a year earlier. If not for plummeting gasoline prices and weaker currencies like the Canadian dollar and Mexican peso, it would have reported 6% comparable sales growth. However, Costco reported solid earnings growth in large part as a result of a tax benefit it received as a result of repatriating $560 million from Canada.

How It’s Relevant: Commodities and currencies markets are definitely taking a toll on the earnings of companies this year and Costco is just another example. Auditors should include consideration of these factors in their risk assessments. It is interesting that Costco reported a tax benefit for repatriating earnings. You normally would expect to see the opposite. The articles speculates it could be the result of Costco accruing deferred taxes that were smaller than those it would ultimately pay, or it could have recorded a deferred tax asset on the cash coming back if it was treated as a dividend from the Canadian operations to the U.S. parent. Companies in this situation should ensure they understand the requirements within ASC Topic 740 and see our blog post regarding the issues associated with foreign earnings and repatriation.

Glencore Oil Deals Could Bite Banks (October 4, 2015) – The Wall Street Journal (@wsj)

Glencore PLC paid $1.4 billion to the government of Chad as an up-front payment for four years of oil shipments. Now, uncertainties over the transaction, which was financed by bank lending, and troubles with similar deals are shedding light on how Glencore’s energy business has taken some banks into risk areas that are causing jitters as commodity prices fall.

How It’s Relevant: After reading this article, I immediately thought of Enron. At least seven banks signed on to the three-party arrangement with Chad, which as struck when a barrel of crude was trading near $100. Instead of having their primary claim on Glencore, the banks had a claim based on the African country’s oil output and expected profit from a steady stream of repayments. But then oil prices started to tank and the rest, they say, is history. This is a fascinating read about a fairly complex transaction. However, the big takeaway is for auditors to consider the impact of commodity prices in their risk assessments during the current year.

Deutsche Bank Seeks Big Loss on Write-Down in Corporate Banking (October 7, 2015) – The Wall Street Journal (@wsj)

Deutsche Bank AG warned investors that it will take a €6 billion charge on assets in its investment bank and retail – and private-banking operations for the third quarter and said it could cut its dividend this year. As a result, the bank expected to report a loss of €6.2 billion. Of the overall charges, the bank said €600 billion related to a valuation adjustment on its stake in a Chinese commercial lender. However, the bulk of its write-downs were sparked by tougher regulatory requirements, which are driving down the value of its investment-banking and other assets.

How It’s Relevant: It’s tough to be a banker these days. Between the continued low interest rate environment and regulatory burdens from Dodd-Frank and other legislation, it is hard to make money. Couple that with a stronger dollar and the depressed economies of emerging markets like China, along with the fact that they have no more reserves to release, and impairment charges and provisions abound. Banking auditors, you’ve been warned!

SEC Charges Grant Thornton Firms in India and Australia with Auditor Independence Violations (October 1, 2015) – Accounting Today (@AccountingToday)

The Securities and Exchange Commission (SEC) has charged Grant Thornton India LLP and Australia-based Grant Thornton Audit Ply Limited with auditor independence violations. The violations resulted from two Grant Thornton partners serving on the boards of subsidiaries of companies that were Grant Thornton audit clients and performed non-audit services prohibited under the SEC’s auditor independence rules.

How It’s Relevant: This is the first of two articles this week that deal with independence issues. The auditor independence rules are supposed to ensure that outside auditors remain independent from their clients in both fact and appearance. Accounting firms, especially member firms of global firms and smaller, regional firms, should always ensure independence, have systems and controls to track compliance, and adequately train their professionals with respect to independence requirements.

PCAOB Permanently Bars CPA (October 5, 2015) – Accounting Today (@AccountingToday)

The Public Company Accounting Oversight Board (PCAOB) issued a disciplinary order permanently barring CPA David A. Aronson from associating with a registered public accounting firm, and permanently revoking the registration of his firm. The sanctions are a result of “repeated violations of auditor independence and engagement quality review requirements,” the board noted in a statement.

How It’s Relevant: Issues involving independence are frequently noted by the PCAOB, especially at smaller, regional firms. Mr. Aronson’s firm issued audit reports to public companies for which Aronson’s son had acted in an accounting role during the period under audit. “Independence is essential in maintaining auditor objectivity and public confidence in the audit process,” said Claudius Modesti, director of the Division of Enforcement and investigations. Registration with the PCAOB is serious business, as Mr. Aronson can now attest. Accounting firms should make sure their professionals are properly trained on the requirements of the PCAOB to ensure they do not meet the same fate!