If Cleveland-based public accounting firm Cohen & Co. were an English Premier League goalkeeper, the firm would have gotten a clean sheet. Or if you’re not a fan of European soccer but like the NHL, Cohen & Co. would be like a goalie who finished the game with a shutout. In its 2019 PCAOB inspection […]
Congrats to EY for once again having more public company audit clients than any other Big 4 firm. Of the 6,167 public registrants in the United States, EY audits 921 of them, or 14.9%, according to Audit Analytics’ Who Audits Public Companies – 2018 Edition. PwC is next with 658 public company audits, or 10.7%; […]
Occasionally I will see something charged on my credit card that I don’t remember. I rack my brain. Sometimes I start to think maybe someone’s stolen my card number. But, more often than not is a charge from an obscure parking meter or something similarly mysterious that I didn’t commit to memory. The credit card […]
It’s not as cool as a multi-ship C-17 formation dropping paratroopers as a part of a training exercise (like the one that everyone thought was a UFO on Saturday night). But, our profession’s only semi-equivalent — 2,400 red-pen wielding auditors — will infiltrate the Department of Defense (DoD) this month to kick butt and take […]
The SEC announced a settlement with Grant Thornton and two partners today over some bad audits that went down in America's Dairyland. The firm will pay $3 million in fines, plus forfeit $1.5 million in audit fees with interest. The partners, Melissa Koeppel and Jeffrey Robinson agreed to a $10k fine and a 5-year ban and $2.5k and 2-year ban, respectively.
The PCAOB inspection report for Grant Thornton, while worse in susbtance, doesn't quite express the feelings of a regulator who expects a little more. A report from the UK accountancy watchdog said it was “disappointed” to find that five of the eight Grant Thornton audits it reviewed required either improvements or significant improvements, a blow […]
Back in October, we learned that BP was upset with McGladrey over the firm's audit of BP's 2010 Deepwater Horizon spill victim compensation program. The problem? Money, of course: With audit costs allegedly running nearly tenfold over budget and no audit in sight, BP last week asked a federal court to force the claims administrator […]
In press releases you didn't read this month news, the Department of Defense announced earlier this month that it had awarded contracts to audit the Army, Air Force, and Navy. Let's see who the lucky winners of that particular cluck mission are: The Department of Defense has awarded contracts to independent public accounting firms to […]
We were too busy yesterday making AS5 jokes about KPMG to talk about McGladrey's 2013 PCAOB inspection report, which was released at the same time. McGladrey is used to warming the bench over Big 4 firms so we figured they could wait for us to get around to it. The news is pretty good, at […]
Colin buried this in ANR this morning: Health-care real-estate investment trust Ventas Inc. ( VTR ) said a re-audit didn't result in any changes to its financial statements. KPMG LLP audited Ventas's 2012 and 2013 figures after Ventas said in July that it dismissed Ernst & Young "as a result of an inappropriate personal relationship" […]
The CAQ released a new Professional Judgment Resource today, "designed to provide auditors with an example of a decision-making process to facilitate important auditing and accounting judgments in a professionally skeptical manner." Get excited, people, this is awesome stuff: The Resource is aimed at assisting auditors who are responding to judgment challenges arising from the […]
As a creative, right-brained type myself, I realized very early on in my time in CPA review that the CPA exam was less a test of knowledge and more a test of a person's left brain to process and spit out information exactly as it was put in. In other words, the exam weeds out […]
The good news for Grant Thornton is that they managed to take remedial actions related to their 2010 inspection report and addressed criticisms to the satisfaction of the PCAOB. Cheers! The bad news is that the same cannot be said for their 2008 and 2009 reports. The quality control remediation process is basically a way […]
Today, we have an interesting ACFE report that not looking for fraud is more than twice as effective as external audits at detecting internal fraud. From CFO.com: In the recent past, the Association of Certified Fraud Examiners has described where companies should concentrate their monitoring for employee fraud. In finance departments, for example, a majority […]
Some dates are not set in stone, like the day of the week I decide to clean the cat fountain or change my sheets. Others, like the day I need to pay my rent and the fiscal year-end on or after December 15, 2014 are not so variable. When it comes to COSO's new 2013 […]
Yesterday, we shared McGladrey's not-all-that-bad inspection report results. Now, it's time to crown a world champion audit firm… CohnReznick! The words every audit firm wants to hear from the PCAOB: The inspection procedures included a review of aspects of the Firm's auditing of financial statements of 11 issuers. This review did not identify any audit […]
Keep holding out, China, the PCAOB don't need to check your stinkin' work anyway: Washington, DC, March 31, 2014 — The Public Company Accounting Oversight Board today announced that it has entered into a cooperative agreement with the Supervisory Board of Public Accountants (RN) of Sweden relating to the oversight of audit firms subject to […]
Aha! Pointy-headed professors aren't the only ones who think the PCAOB's use of the term "audit failure" is totally dramatic and possibly unnecessary. From the JofA: The PCAOB’s use of the term “audit failure” in its inspection reports of audit firms appears to have caused confusion and misunderstanding about the severity of inspection findings among […]
This groundbreaking idea brought to you by the AICPA Insights blog: According to a recent blog entry on the New York Times’ website, researchers have found that people who cheated, and got away with it, experienced a thrill, self-satisfaction and a sense of superiority. While that sensation was not as strong as the high that […]
Colin put this in ANR this morning but it's the kind of thing that deserves a post of its own just to make sure you don't miss it and mock appropriately: The Public Company Accounting Oversight Board gave a failing grade to Grant Thornton on 65 percent of audits inspected in 2012, the highest failure […]
This just in and developing, we will keep you posted: BREAKING: Former Madoff CFO says Madoff Securities forged documents during KPMG audit and cooled newly-printed documents in refrigerator. — CNBC (@CNBC) December 2, 2013
Today in bizarre sexual encounters with government employees news, a Fall Creek, Oregon man has filed a lawsuit against an IRS agent for "coerc[ing] him into having sex with her after suggesting that the liaison could keep him out of tax trouble." Dora Abrahamson claims to have known Vincent Burroughs when she called him to inform that […]
ParenteBeard, the 23rd largest CPA firm on the whole damn planet, issued the following press release earlier this month. This holiday season, ParenteBeard, a top 25 U.S. accounting firm, is helping to balance the books of what would be the largest nonprofit in the world: Santa, Inc. […] ParenteBeard began its audit of Santa, Inc. […]
Digging through the mailbag, I found this little gem: I'm not surprised broker dealer audits are bad. I used to be on a high profile one and let me tell you I spent so much time to trying to understand the business. At the end of the day, you get a general idea as to the operations BUT […]
In an interview with ABC News yesterday, Willard shared a few new tidbits about his life as a taxpayer: 1) He's not sure if he's ever payed less than a 13.9 effective tax rate 2) he's had the distinct pleasure of being audited by the IRS and 3) the crack squad in PwC's Boston* office […]
Maybe you're not aware of this, but the state of Indiana lost track of $320 million in corporate taxes. Yep! They know that "state workers did not properly enter changes in the state's tax collection system" but why it took them four years to discover the problem is anybody's guess. Oh, and they also owe […]
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!
Since the PCAOB was only up to Audit Standard 7 last time we checked and seems to take the conservative approach when it comes to issuing new ones, we have to say we were more than shocked to see them almost double their audit standards overnight. Gee, must be serious.
The Public Company Accounting Oversight Board today adopted a suite of eight auditing standards related to the auditor’s assessment of, and response to, risk in an audit.
The suite of risk assessment standards, Auditing Standards No. 8 through No. 15, sets forth requirements that enhance the effectiveness of the auditor’s assessment of, and response to ial misstatement in the financial statements.
The risk assessment standards address audit procedures performed throughout the audit, from the initial planning stages through the evaluation of the audit results.
“These new standards are a significant step in promoting sophisticated risk assessment in audits and minimizing the risk that the auditor will fail to detect material misstatements,” said PCAOB Acting Chairman Daniel L. Goelzer. “Identifying risks, and properly planning and performing the audit to address those risks, is essential to promoting investor confidence in audited financial statements.”
What does this mean for auditors? Let’s check them out.
AS No. 8 – Audit Risk. This standard discusses the auditor’s consideration of audit risk in an audit of financial statements as part of an integrated audit or an audit of financial statements only. It describes the components of audit risk and the auditor’s responsibilities for reducing audit risk to an appropriately low level in order to obtain reasonable assurance that the financial statements are free of material misstatement.
AS No. 9 – Audit Planning. This standard establishes requirements regarding planning an audit, including assessing matters that are important to the audit, and establishing an appropriate audit strategy and audit plan.
AS No. 10 – Supervision of the Audit Engagement. This standard sets forth requirements for supervision of the audit engagement, including, in particular, supervising the work of engagement team members. It applies to the engagement partner and to other engagement team members who assist the engagement partner with supervision.
AS No. 11 – Consideration of Materiality in Planning and Performing an Audit. This standard describes the auditor’s responsibilities for consideration of materiality in planning and performing an audit.
AS No. 12 – Identifying and Assessing Risks of Material Misstatement. This standard establishes requirements regarding the process of identifying and assessing risks of material misstatement of the financial statements. The risk assessment process discussed in the standard includes information-gathering procedures to identify risks and an analysis of the identified risks.
AS No. 13 – The Auditor’s Responses to the Risks of Material Misstatement. This standard establishes requirements for responding to the risks of material misstatement in financial statements through the general conduct of the audit and performing audit procedures regarding significant accounts and disclosures.
AS No. 14 – Evaluating Audit Results. This standard establishes requirements regarding the auditor’s evaluation of audit results and determination of whether the auditor has obtained sufficient appropriate audit evidence. The evaluation process set forth in this standard includes, among other things, evaluation of misstatements identified during the audit; the overall presentation of the financial statements, including disclosures; and the potential for management bias in the financial statements.
AS No. 15 – Audit Evidence. This standard explains what constitutes audit evidence and establishes requirements for designing and performing audit procedures to obtain sufficient appropriate audit evidence to support the opinion expressed in the auditor’s report.
Now don’t get me wrong, I love rules and regs as much as the next girl – if not more – but I am of the thought that users of financial statements would be better served not by more rules and regs but by a more comprehensive auditor training program that starts in college. Am I asking too much?
Did we really need clarity on audit evidence? The PCAOB seems to think so and that’s fine, they are well-intentioned in their motive and you can’t fault them for that.