Author: Adrienne Gonzalez

Adrienne is a 15-year veteran of the accounting industry, if by "veteran" you mean "vulture prowling the periphery of the profession waiting for something exciting to happen." She has been spewing vitriol on Going Concern since the site was founded in 2009. A former CPA review employee, she has sat through more FAR classes than any CPA exam candidate ever could -- even one who has failed FAR seven times -- and can still recall most of the mnemonics all these years later.

Three Examples of “Significant Unusual Transactions” that Should Get Auditors’ Attention

The PCAOB issued a friendly reminder yesterday to auditors that sometimes unusual transactions can be cause for alarm and should send the risk red flags flying. Unfortunately, the friendly reminder did not actually mention anything about what “unusual transactions” are but regardless, you better be on the lookout for them.

“The PCAOB’s message to auditors, in this challenging economic environment, has consistently emphasized attention to audit risk and adherence to existing audit requirements,” said Martin F. Baumann, Chief Auditor and Director of Professional Standards.

Since Practice Alert No. 5 (makes it sound kind of hot, don’t it?) warns of the risk of material misstatement inherent to unusual transactions without mentioning what those transactions could be, we came up with three unusual transactions to which the PCAOB could possibly be referring. It isn’t called guidance for nothing, you’re on your own when it comes to determining what qualifies as unusual, little auditors. Hopefully this helps.

• Large and frequent A/P entries to an entity known only as “Candy” (substitute “Bubbles”, “Kitty”, or “Roxy” as appropriate) This is why you have professional judgment so use it, we’re pretty sure even if you haven’t been to a strip club you know what strippers look like on the books and records.

• If you find yourself in a warehouse on December 31st counting an inventory full of dirty bombs, AK-47s, plutonium rods, chances are your entity is engaged in “unusual transactions.” Bonus points for extra unusual if you’re counting that crap and your entity is a church. Red flag, dear auditor, red flag!

• Recurring transactions for “crack” are definitely unusual. You don’t need us to tell you that’s a giant red flag, unless you are auditing under the influence yourself and concerned mostly with where the entity’s CFO hides his stash. Remember also that crack is pretty cheap on the street so repeated transactions will likely fall outside the scope of materiality though a raging crack habit will be material in the aggregate. Adjust scope accordingly.

PCAOB Issues Staff Audit Practice Alert on Auditor Considerations of Significant Unusual Transactions [PCAOB]

Here’s Your Study Plan for the Audit Section of the CPA Exam

Friendly reminder: >75 is here to answer your CPA Exam questions so send them over.

A reader sends us the following dilemma:

“I took the audit section only and failed, most of it was due to not committing enough time to it. If you have any tips to develop plans I would like any suggestions to creating a plan.”

First of all, no offense but I think you have already identified where you went wrong, are you sure you need our help? Oh well.


Let’s talk about Audit, shall we? The average CPA exam candidate will spend 60 – 90 hours studying for the Audit section – that assumes watching your CPA Review lectures 1 time and spending 2 – 3 hours on MCQ/sim practice problems for each hour of lecture. If you are taking the self-study route, you will obviously need to spend more time on MCQ/sims (about about 2 or 3 hours on top of the 2 – 3 you would be doing if you had videos to review) and create a structured study plan based on the most current CSOs (Content Specification Outlines), which you can always find on cpa-exam.org.

Those of you taking exams in early 2011 will want to be on top of exam changes planned to kick in in the first quarter, though the AICPA has been helpful and already released the CSOs for that period.

If you’ve taken the exam and failed, you already have an incredibly useful tool at your disposal – your score report. The report provided after you fail will compare you to other candidates: IGNORE THOSE NUMBERS. Who cares how you did relative to other candidates? All you need to glean from that information is an idea of where your stronger areas are in comparison to your weaker sections. The score report is broken down by different components of the CSOs for that section so obviously you will want to focus harder on areas that you performed poorly in.

About a week or two before your new exam date, give the entire section a once over just to be sure you are also sharp in areas you did well in the first time.

Schedule your new Audit exam AS SOON AS POSSIBLE as the information is still fresh in your mind. If you have a new exam scheduled in the meantime, reschedule it if you can. Unless you REALLY bombed Audit (68 or below), you will want to jump right back in while it is still floating around in your brain.

As for exam preparation and planning, we’ve covered that plenty of times on Going Concern so check out this, this, and this.

Michael Oxley Is Spreading the Good Sarbanes-Oxley Word to Nonprofits

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If you’re a non-profit leader and free on April 12th, why not head to Washington and listen to Mike Oxley (yes, that Oxley, without whom SOX would still be the property of a certain Chicago baseball team and not the bane of accounting’s existence) speak about transparency and accountability for non-profits?

The ironic part, of course, is that non-profits don’t really have to suffer with the legislation named after Oxley but he’d like to see a little more, well, Oxley in NFP, even if it isn’t necessarily required by law.

[Oxley] will speak about the importance for nonprofit organizations to be transparent and ensure greater accountability with their financial standards to build on and preserve donor trust, strengthen the reputations of nonprofit organizations and associations, and enhance the overall nonprofit sector.

Attendees will include thought leaders from foremost nonprofits, trade associations and key congressional staff members. Both the House and Senate Ethics committee’s staff have deemed this a “widely attended event.”

My feelings on Sarbanes-Oxley have been expressed more than once here on Going Concern but I can sum them up thusly: more useful things could be done to “protect” the investor interest besides arcane SOX compliance and the PCAOB including but not limited to random auditor cavity searches, TSA-style interrogation of management, and waterboarding the internal audit team. Is Oxley trying to imply that non-profits should follow suit but only voluntarily and out of obligation to donors instead of investors?

Surely his plan is not that sinister.

Only because non-profits already have their own version of SOX in the Form 990 (which I have complained about before as well) that has all of their bases covered. The only SOX carry-overs are strengthened whistleblower protection and retention of documents in lawsuits, perhaps because non-profits may have been where Mike Oxley got his ideas.

SOX compliance costs averaged $2.9 million during fiscal year 2006, actually down 23% from the fiscal year previous according to FEI. Do you know many nonprofits who have that sort of cash lying around?

I think it might be better to get some advice from the guy who wrote the bill and start tightening up the ship just in case.

Recommended reading by April 11th if you’re checking out Oxley’s “I just want to be helpful” presentation: The Sarbanes-Oxley Act and Implications for Nonprofit Organizations (last updated January 2006). Bring a notepad.

Former Congressman Mike Oxley to Speak at Nonprofit Summit [Council for Non-Profit Accountability]

Top Five Excuses for Not Studying for the CPA Exam

CPA exam candidates are good at a lot of things; unfortunately, their most common talent is an exceptional ability to procrastinate and make excuses. A career in public accounting, naturally, seems to exacerbate this problem, creating a laundry list of reasons why candidates can’t put in the time to pass the exam.

In the interest of knocking you all around a little bit (out of love, of course) on this, the second day of the 2nd testing window of 2010, I present the top 5 excuses for not studying I’ve heard from candidates over the years. Perhaps you have a favorite of your own?


I’m too busy – This is a CPA exam candidate’s favorite lifeline. Busy season, pursuing a Masters, brown-nosing management and balancing a drinking habit with a dysfunctional relationship is hard work. We all know how many hours you work a week but some of you forget everyone else can see what you’re doing on Facebook. That hour you spent finding stray ducks in Farmville could have easily been an hour worth of MCQ practice. Stop deluding yourself – if you are too busy to study, maybe you’re too busy to be a CPA. I hear Starbucks is hiring.

It’s too hard – Really? A professional license is hard? You don’t say! Listen, if this were easy, everyone would be a CPA. It’s hard for a reason but it’s also manageable if you attack it with knowledge and preparedness. Go in there like a boy scout amped up on espresso and you’ll get your BEC merit badge in no time.

I’m really bad at tests – Jealous of that asshat you went to school with who could drink all weekend, cram for seven hours and ace finals while you studied your ass off only to get a D? Guess what, you’re in luck. The CPA exam isn’t like college exams and you don’t have to be a rocket scientist to pass. Look around your office at some of the CPAs you work with and try to tell me otherwise. That’s what I thought.

I never took auditing (economics/tax/government accounting/et-effing-cetera) in college – So? I bet the guy who wrote the CPA exam questions you’re panicking over didn’t take auditing/econ/tax/etc either. The CPA exam requires you to know a lot about a little, no one is saying you need to be an expert in ANY subject. Again, look around your office and tell me some of those geniuses you work with are experts in anything, let alone subjects like advanced and governmental accounting.

I’m too old – This one is always funny to me, as if there’s an expiration date on your brain. Taking on the exam later in life actually puts one at an advantage: I don’t have official statistics on the matter but my professional experience has been that older candidates actually do better than younger ones. Think about it – if you’re over 30 now, look back to how you were at 22 fresh out of college. Do you really think 22 year old you was better equipped to be disciplined enough to commit 400 hours to studying? Exactly.

The reality is that excuses are more plentiful than CPAs – unfortunately there could be more but the potential future CPAs that could have been obviously got consumed with coming up with excuses instead of coming up with real study plans and goals to pass the exam.

If you’re a candidate struggling to create one yourself, get in touch and >75 would be happy to help. Seriously. Just don’t start making excuses or I’ll front you off on Facebook next time I catch you playing Farmville when you should be learning pensions.

Professor David Albrecht: IFRS Will Make Financial Statement Comparison an Impossibility

Ed. Note: This is the second installment of our dialogue with experts on International Financial Reporting Standards. See our first post with IFAC President Bob Bunting here and if you are an IFRS expert interested in joining the discussion, please contact us at tips@goingconcern.com

It’s appropriate to disclaim that The Summa’s Professor David Albrecht is a friend of Going Concern and for the most part he and I share similar views on the US conversion to IFRS. If you have not read any of our previous rants

A Wisconsin Non-Profit Learns an Important Lesson in Internal Controls

Presented by Serenic Software. Download our free whitepaper – “5 Key Reasons Why Great Financial Management is So Important for Your Nonprofit Now”

What is in the water up in America’s Dairyland? We’ve been going on and on about the internal control failures at Koss in Milwaukee but now there’s more of it at a non-profit organization just up the road. Let’s hope everyone at UW Madison is taking notes.

The latest tale of non-profit fraud stars 56 year-old Leonard V. Lauth of Beaver Dam.

Wings Over Wisconsin bills itself as a conservation organization dedicated to natural resource preservation and education through youth and community involvement. Spelling errors and obvious lack of updates since 2006 on its website aside, WOW manages nearly 1,300 acres of land and provides mostly young hunter education to the future gun-toting blue-stater babes in Wisconsin.


While it prides preservation of Wisconsin’s precious wetlands, internal controls do not appear to be high on WOW’s priority list. Hopefully this changes that.

It’s a textbook fraud case, starting with the mounting medical bills and the poor internal controls that allowed its Treasurer to lift $16,875 since 2005. Lauth’s advanced methods of fraud include writing checks to himself labeled “office supplies” in the books and taking home banquet funds after the event insisting he’d deposit them at the bank in the morning.

While typically WOW practice to require two signatures, Lauth had been with the organization for 24 years, leaving the “trust” issue totally taken care of. Opportunity, motive, what else do we need?

Rationalization, of course! Lauth told Beaver Dam Police Lt. Joel Kiesow he thought he’d taken $788 from the organization in the four year period in which he executed his fraud. When informed it was more like $17,000, Lauth was shocked. I guess he didn’t realize how expensive “office supplies” can be these days.

“Maybe I was robbing Peter to pay Paul on different things,” said Lauth in regards to using WOW funds to pay off family medical bills. Actually, he was robbing the little Dustins and Bobbys with their baby shotguns and wildlife of Wisconsin who counted on the funds to which he so sloppily helped himself. Shame shame.

Let this be a lesson to all you non-profits: cash management and financial literacy (including fraud prevention measures) are not only best practices for public companies and private industry. If anything, non-profits need sharper internal controls – without shareholders to answer to, money can easily slip into the fraud vacuum undetected for years, as in the case of Mr Lauth and WOW.

Calls to WOW left after business hours were not returned.

Man accused of taking funds from non profit [Beaver Dam Daily Citizen]

Let’s Take a Closer Look at This Shia LaBeouf and InterOil Situation

There’s some funny business going on in InterOil and a lot of it is pure juvenile humor. First of all, you have Louis from Even Stevens pumping their crap stock. Then you have him in Playboy saying he’s less than well-endowed.

It’s as if the jokes write themselves but then you realize that investors are actually counting on the soundness of markets and suddenly it’s not so funny. Never mind, it’s funny.


The first problem with InterOil isn’t really that the guy from Transformers is clumsily pushing it now that he’s worked beside the real Gordon Gekko – sure Wall Street is cool again but not cool enough to rub off on Shia LaBeouf who has apparently taken to pumping stocks lately.

Yeah, we know, we’re confused too.

Getting ready to play next to Michael Douglas for Oliver Stone’s “Wall Street” sequel “Money Never Sleeps”, LaBeouf studied under the financial ninjas at John Thomas Financial (yes, JDA already made that joke. A bunch of times) and apparently turned $20,000 into $489,000 says Business Insider.

And yes, he really did tell GQ readers to grow some balls and short gold at 120 (whatever that means). 120 what? Euros?

“He’s So Money” says GQ in the April 2010 issue. Give me a break. From the mouths of garbage-stock-pumping babes:

“I thought my life was pretty wild. I’m Richie Rich. I land in New York, secretly thinking I’m like the coolest guy in the world. I’ve been on the cover of GQ! But then I met these guys, and it’s humbling. It’s the most sex-drugs-and-rock-‘n’-roll atmosphere that exists on the planet. I was hanging out with some wild human beings.”

So we’ve established Shia is a douche but what about InterOil’s “fundamentals”? I’m so glad you asked!

How about this “bad faith” bankruptcy filing by InterOil’s esteemed CEO Phil Mulacek?

InterOil also recently announced a that part of the Antelope-2 well will need to be re-drilled, greasing it up further for 14-year-old humor for months to come. For 7 years InterOil has promised awesome discoveries and for 7 years it has failed to deliver. Since we no longer have logical fundamentals (InterOil outperformed well through 2009), the best we can do is juvenile humor, I guess.

Grow some balls and short InterOil or just sit there and wait for it to implode, up to you.* Shia needs to hurry up and jump on the tax problems bandwagon like many of his fellow “stars” so we don’t have to listen to this anymore. Wonder how much his toilet seat collection would snag at IRS auction?

Earlier: QOTD: Sam Antar is Ready to Rumble

*Disclaimer: nothing here should be taken as investment advice and I don’t take back what I said about Shia’s John Thomas nor his Financials.

Three Ways to Get Back into Study Mode for the CPA Exam

Masochism at its finest means just thinking about the CPA exam while fully head down, eyes closed and trudging towards the busy season finish line. It’s cool, CPAs are a masochistic bunch and if you’re going to subject yourself to the torture of studying for the CPA exam while tackling your least favorite part of the year, have at it but please be smart about it.

It’s almost April and you know what that means – a brand new testing window filled with fun and exciting >75 action. Hopefully 75s, if you little masochists plan right.


Here are a few tips, you can do whatever you want with them. Ideally, you can ignore them for the next few weeks until you shift from busy season mode back to exam mode.

• Don’t be unrealistic about your work load – Some of you complain about “busy season” and know damn well you haven’t pushed a difficult piece of paper in months while others haven’t seen the light of Facebook (nor the end of the tunnel) in weeks. Take a reasonable assessment of the free time you have to commit to the exam and plan accordingly. If you’re grinding all the way through April 15th, maybe a late April test date is a tad optimistic and not all that smart.

• If you aren’t ready, blow it off – This goes against everything I always recommend to CPA exam candidates but it’s a wise piece of advice this time of year. If you are not ready for an exam, try to reschedule. Maybe taking FAR on April 1st made a lot of sense when you scheduled it in October but now that April is almost here and you haven’t seen daylight in two months, it’s not looking like such a bright idea. Of course, if you’re in a situation where you are about to lose credit for exams previously passed but still not prepared, there’s no harm in going to the exam anyway as you’re basically forfeiting the exam fee and might as well find out what’s on the test for next time.

• Don’t permanent vacation yourself just because you’re tired – Shifting from busy season to exam mode, it is really easy to rationalize an extended vacation from studying just because you need a break. The rest is deserved but don’t let a few days of relaxation turn into several months of procrastination. It’s easier than you think and I’ve seen it enough times to know it happens all the time. Don’t be lazy, this is what you wanted.

AICPA Pushing Members, Small Business to Adopt More Cloud Solutions

The AICPA is in the cloud and wants you to join them, accounting industry. Being a preferred financial application for the AICPA can pay off so before you start ripping on accountants remember they (and especially their clients) have a metric shit ton of money.

The technology push came quite some time ago (XBRL anyone?) and CPAs are generally on top of it. You can’t get them to blog (Tracy Coenen can tell you more about that) but you can definitely get them worked into a lather over something that will make their lives easier.


Intacct is learning what being on the AICPA’s good side can do for one’s business.

CFO.com:

The American Institute of Certified Public Accountants is pushing to accelerate adoption of cloud solutions among its 350,000 members, focusing especially on small and midmarket companies as well as CPA firms. The AICPA’s first official endorsement of a cloud vendor, payroll solutions provider Paychex, came several years ago. But the institute has rolled out more such partnerships with increasing frequency, including with bill.com for invoice management and payment in 2008, financial management and accounting software maker Intacct a year ago, and tax-automation supplier Copanion at year-end 2009.

Intacct president and CEO Mike Braun was beside himself when the AICPA began pushing his product, acknowledging that an endorsement from them meant unprecedented reach in the industry. Awesome, the AICPA has finally joined with technology instead of fearing it. How dare I make broad generalizations about the AICPA’s conduct over the past few years?

A previous example of the AICPA’s tech phobia: It only took them 6 years to figure out what to do with BEC on the computerized CPA exam and they still aren’t sure how to treat it. No one is bitter but it’s a tad disturbing that CPAs were taking a professional licensure exam with paper and pencil up until 2003. They’ve had all this time to assemble BEC into something that isn’t the CPA exam’s junk drawer but still can’t manage to cobble together a storyline for the section.

One can only hope that the cloud can get the AICPA BoE to have an epiphany on that point. In the meantime, this is one hell of an endorsement so good for technology but even more credit is due to the AICPA for getting with 2008.

Then again, you have guys like GNU founder Richard Stallman and Oracle’s Larry Ellison who say cloud computing is “complete gibberish” and nothing but a slick marketing campaign for pricey third-party software. “Somebody is saying this is inevitable – and whenever you hear somebody saying that, it’s very likely to be a set of businesses campaigning to make it true,” Stallman told UK’s Guardian. Wait. Are you telling me the AICPA would engage in such shifty behavior just to make a few bucks?!

Nahhhhhh.

Ninety Percent of Nonprofit Execs Expect 2010 to be as Financially Difficult as 2009

Presented by Serenic Software. Download our free whitepaper – “5 Key Reasons Why Great Financial Management is So Important for Your Nonprofit Now”

Not to be the harbinger of doom but the Non-profit Finance Fund released a survey Monday that reflects the less-than-optimistic hopes of non-profit leaders for the year ahead. Though it’s far more depressing than Financial Armageddon, it shows that non-profits are far more prepared for the worst (and more deft at handling adversity) than their for-profit counterparts. For-profit CFOs still seem preoccupied with the credit crunch while non-profits are merely trying to meet increased demand with less to provide.

America’s nonprofits expect that 2010 will be financially more difficult or as difficult as 2009, according to a survey released today by Nonprofit Finance Fund (NFF). The survey of more than 1,300 nonprofit leaders in markets nationwide also found strong evidence of the dramatic and creative steps that organizations are taking in order to maintain and even expand service delivery to meet increased demand during this time of continued economic uncertainty.

• Nearly 90% expect 2010 to be as difficult or more difficult than 2009; only 12% expect 2010 to be financially easier for their organizations.

• 80% of nonprofits anticipate an increase in demand for services in 2010; 49% expect to be able to fully meet this demand level.

• Only 18% of organizations expect to end 2010 above break-even; 35% of organizations ended 2009 with an operating surplus.

• The majority — 61% — have less than three months of cash available; 12% have none.

“We expect 2010 to be another treacherous year for many nonprofits that routinely take heroic measures to meet demand for services,” said Clara Miller, President and CEO of NFF. “The economic ‘recovery’ has not yet reached people in need, or the organizations that serve them. We must do more to repair the tattered social safety net.”

Interestingly, only 46% of non-profits surveyed said they believed they would not be able to replace government stimulus money from other sources when the money is gone. Also curious, non-profits appear to be having an easier time of getting loans. Only 30% of survey respondents said they’d applied for a loan in the last 12 months but incredibly 74% of those secured the loan. Oh and 26% said they only applied for a loan because they were waiting for late government payments.

There were quite a few memorable responses from survey participants but I think this one sums up the theme of NFF’s results pretty well: “WE DIDN’T GIVE UP.”

2010 State of the Nonprofit Sector Survey [NFF]

CPAs Spanked by SEC for Porn Site Audit

Let it be known that if you are peddling porn and engaged in online pimping, you do not want the SEC on your back.

WebCPA reports that Stephen Corso of Las Vegas and Brian Rabinovitz of Oak Park, CA got the SEC smack down in a Nevada federal court for filing materially false and misleading financial statements from 1999 – 2002 (that’s quite a backlog) and that audit staff – under the boys’ supervision – omitted important info and violated the sanctity of auditor independence during audits of Exotics.com


While the enforcement doesn’t go into specifics, we’re happy to. Exotics.com bills itself as the world’s premiere source for – wait for it – beautiful female adult entertainers. Not to be outdone, Exotics also boasts a veritable cornucopia of escort options including “BDSM & fetish providers, exotic dancers, strippers, sensual and erotic massage specialists, TSTV and other adult entertainment.” It’s that “other that really scares me. Self-billed as the Quicker Pecker Upper (kid you not), the site headline right around the time the SEC brought the heat was “Better than Wives, Girlfriends, and Porn” – and apparently above performing audits according to GAAS?

So, who wants to wildly speculate as to how audit staff violated auditor independence?

Here’s the 2005 release from our friends at the SEC:

[T]he accountants fraudulently participated in audits of Exotics-Nevada’s year-end financial statements and in a review of its quarterly financial statements and failed to conduct those engagements in accordance with GAAS, as required. The Commission also alleges in its complaint that, among other things, the accountants prepared or created many of Exotics-Nevada’s books and records and then audited the financial statements they created. According to the complaint, they also caused their firms to issue false audit reports which, together with the underlying financial statements, were incorporated in Exotics-Nevada’s public filings with the Commission.

Now listen, little auditors, you don’t shit where you live and you don’t audit your own statements. Audit sampling? I could see how it would be hard to resist in this particular instance.

CPAs Disciplined for Porn Site Accounting Fraud [Web CPA]
SEC Complaint

Are Too Many People Passing the CPA Exam?

The AICPA recently announced that it would be re-evaluating the CPA exam scoring process and we’ve been wildly speculating awhile as to what that might actually mean. Staying true to the doom and gloom, yours truly immediately thought the AICPA Board of Examiners was convinced you kids would bomb FAR horribly in Q1 and 2 of 2011 with the addition of IFRS and they were just preparing for that.

Upon further reflection, maybe the exam is too easy. Maybe requirements to sit are not strict enough (even though we’re down to 4 states that allow you to sit with 120 units last I checked). Maybe the job market is worse than anyone wants to admit — now wait a minute, what does that have to do with it?


There isn’t raw data that tells us how many would-be CPAs we have on our hands who have passed all four parts of the CPA exam but still can’t get a job, at least none I’ve seen. I’ve spoken to these people and it doesn’t seem to be getting better in the aggregate.

I believe the BLS numbers somewhat concur with this conclusion, if you can believe them. (CPA Trendlines has them)

I hear you guys bitching about it all the time. If you’re still employed and trying to take the CPA exam, you get the extra special designation of ultra-masochist but it’s not you guys the AICPA BoE is worried about, it’s the bottleneck of people who’ve passed the CPA exam trying to squeeze in 2 years in public to get a license.

Case in point, a friend of mine here in the great (broke) state of California decided to take on the CPA exam a tad later in life than some of you. We won’t hate on her for that. She worked her ass off and eventually got through it. She’s a leader of a prestigious accounting society in her community and has the credentials a lot of the kids coming out of school don’t. She can’t find a job. She’s tried every firm in town large and small as well as the surrounding area. I’ve scouted the Bay Area and can’t find anything for her either.

She’d stay more than 2 years and be more than a body filling the chair but they don’t even have a chair for her.

She’s not the only one. So maybe the AICPA BoE caught on and is going to try to change that. They can’t create the jobs so what do you think they’ll do?

Oh, and if anyone has a lead on a public accounting gig in the top half of California for my qualified little friend here, do get in touch.