Internal Control Zealots May Be Helpful in Preventing Accounting-related Reckonings

Posted on by Caleb Newquist

Lawyers. Gotta love 'em. They have many functions but when it comes to accounting and financial reporting, it's usually to sue the pants off those who make gross errors in these two areas. Maybe the company was stupid; maybe the company did something illegal. It doesn't matter. If some numbers are wrong and someone lost money, you can bet the farm they will be suing to get it back.

How can one deter the sharks? Well, a recent study of federal securities class-action filings suggests that staffing your accounting department with COSO fanatics might be a good start: 

Accounting-related cases during the first three quarters of 2012 represented 31 percent of filings, which is a nine percentage point decrease from the percentage of filings during the comparable period in 2011 (40 percent). Through the third quarter of 2012, the most common accounting-related allegations were inadequate internal controls and improper revenue recognition, which were cited in 63 percent and 26 percent of accounting-related cases, respectively.

So get wise to the teachings of internal controls. It's far more practical than resorting to Shakespearean tactics.

PwC Reports a Decrease in Securities Litigation [AT]

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California Controller All But Guarantees That the State Will Issue IOUs Again

As the State Controller of California, John Chiang arguably has one of the worst jobs on Earth. Public service is a fine calling and working for the Terminator probably has its moments of awesomeness but he still presides over one of largest fiscal nightmares you could possibly imagine.

For starters, it doesn’t help when you overshoot tax revenues for the month of April by $3 billion. Plus, you’re dealing with a state legislature that is probably incapable of agreeing on what ocean serves as the border of their state.

So take that and a bunch of other stuff that’s not really worth rehashing, you get this, “[W]ithout a new spending plan that closes a $19 billion shortfall, the state would run out of money by late October. ‘We will run out of money if everything remains the same,’ [Chiang] said in an interview.”


Of course the state Assembly’s Republican leader, Martin Garrick, finds this to be a load of crap since what it comes down really is your political party “[He] didn’t represent the fact that it is his party’s own lack of leadership that have led to these delays.”

Look, we’ve all accepted the fact that California is the brokest-ass state of the union and is completely inept when it comes to doing anything about it. Sure New York is a pathetic loser that manages to embarrass itself on a regular basis and most of the rest of the states out there leave a helluva a lot to be desired but Cali really outdoes everyone on a regular basis. This will make two years straight of issuing IOUs at the expense of citizens and yet the diaper-wearing California reps do nothing.

If Whitman gets in there, her first act as Guv could be to auction them off one by one (or just list them all as “Buy It Now” for $1). Of course the take wouldn’t be nearly enough to fix the budget but at this point a symbolic gesture will do.

California Faces Prospect of Issuing IOUs Again [WSJ]