According to CAQ's YouTube page, this was posted back on July 30 (SOX's birthday, no less) but was tweeted earlier this afternoon so we figured it was worth sharing:
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It’s Not Impossible To Make Money on Small Audits
- GoingConcern
- October 12, 2010
The following post is republished from AccountingWEB, a source of accounting news, information, tips, tools, resources and insight–everything you need to help you prosper and enjoy the accounting profession.
Most small firm practitioners can offer lots of answers as to why it is difficult to profit from small audits. Ever-changing professional standards, increasing quality control requirements, using standard “one-size-fits-all” audit documentation and increasing legal liability are a few of the common answers. The problem is that knowing the answer doesn’t solve the problem!
Maybe we need to change the question to solve the problem. A better question may be, “What changes do we need to make in our audit practices to profit from small audits?” Answer this question correctly and we solve a major problem!
Here are changes in audit practices some smaller CPA firms are considering:
• Developing the technical and leadership abilities of engagement leaders is at the top of the list. Recognizing this takes time and money, small firms are making increasing investments in training and consultations to expand the knowledge resource base of their leaders and the firm. Making sure leaders are technically current in all professional standards affecting auditing engagements is a first step. Teaching leaders to pass their knowledge on to all assistants is the second.
• Designing firm policies and procedures within existing professional standards that provide reasonable assurance audited financial statements are not misstated. While we’d like to achieve absolute assurance the financial statements are not misstated, we have to assume some risk they may contain misstatements. In short, we have to give up some of our traditional approaches to audits in exchange for uniquely tailored audit strategies designed to gather the minimum amount of evidence necessary to verify relevant financial statement assertions. Gathering the minimum required evidence in the most efficient ways results in maximum profits!
• Creating proprietary audit documentation packages by eliminating or modifying documentation purchased from major publishers. Extensive audit documentation is not a substitute for the knowledge of staff personnel! We cannot afford to complete practice aids and other documentation containing everything we need to know on every engagement, particularly on small audits. Many small firms are realizing they can modify their quality control documents to permit engagement leaders to tailor documentation on every audit. Using major publisher’s practice aids for reference is the most any firm should do on small audits. When we know the requirements of professional standards, it isn’t difficult to tailor or create basic practice aids to guide small audit performance.
These are just a few of the small audit changes CPA firms must consider to increase profits. I’ve designed my Small Audit Series of live and on-demand webcasts to provide holistic solutions that will enable practitioners to make more money on small audits. You can obtain over 300 pages of instructional text materials and illustrative practice aids designed for CPE credit on the left sidebar of our website, www.cpafirmsupport.com. Don’t be left behind! Small audits can generate BIG profits!
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The Way Things Are Going, Eventually No One Will Have to Comply with Sarbanes-Oxley Section 404
- Caleb Newquist
- July 12, 2010
As we trudge toward a Senate vote on he financial reform bill, one issue that is of utmost interest to those in the accounting/audit biz is that of small businesses complying with Section 404(b) of Sarbanes-Oxley.
As it stands, only a small number of non-accelerated filers are voluntarily in compliance with 404. Those not jumping at the voluntarily complying with 404 have enjoyed the repeated delays by the SEC since the legislation was passed in 2002.
But if reform bill passes in its current form, all companies with market caps of less than $75 million will be exempt from complying with the requirement to have an audit of their internal control system. And even those companies that went to the trouble of voluntary compliance, might not continue doing so:
Dan Crow is one of the few small-company CFOs with an auditor’s stamp on his internal controls. Getting it wasn’t as time-consuming or as costly as it would have been several years ago, when large public companies first began complying with one of the most onerous requirements of the 2002 Sarbanes-Oxley Act, known as Section 404.
Still, Crow, who oversees finance for retailer Hastings Entertainment, doesn’t rule out dropping the extra review next year if Congress decides to permanently exempt small public companies from needing an auditor’s sign-off on their internal controls — as it seems poised to do. The Senate is expected to vote this week on the final version of the financial regulatory reform bill, which would exempt companies with market caps less than $75 million from complying with Section 404(b), the rule in question. (The House has already passed the bill.)
But that’s not all! Because 404(b) is clearly “red tape” (a popular rallying cry in an election year) that provides no benefits whatsoever and just crushes the spirit of small business (the backbone of America, we might add!) Congress has called for a study of “how the ‘burden’ of 404(b) compliance for companies with market capitalization between $75 million and $250 million could be reduced, and whether an exemption for them could increase the number of initial public offerings in the United States,” in the bill.
Christ, where does it end? Let’s just study the whole damn thing over while we’re at it. Apparently the entire Congressional body has completely ignored the benefits of Sarbanes-Oxley; never mind that costs of gone down significantly in the past eight years, making compliance less financially painful.
And not to mention that smaller companies are at greater risk for fraud and accounting manipulation. Look at the roster of companies on Sam Antar’s website and you’ll note that many of them have market caps of $1 billion or less. If these companies can’t resist the temptation to get shifty with financial reporting in order to meet (or not) the short-term focus of Wall Street, it’s difficult to reason that even smaller public companies won’t succumb to it.
To 404(b), or Not to 404(b)? [CFO]
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The PCAOB Has a Few Specific Criticisms for Auditors But Faith in Them Regardless
- Adrienne Gonzalez
- September 3, 2014
The Journal of Accountancy interviewed PCAOB board members Jay Hanson and Lewis Ferguson for a […]