December 2011 – Attestation Update

What’s going on in the big firms? Part IV, or, what’s the turning radius of a ship or large CPA firm?

Series of posts on GIK valuation

Leave a Comment / Accounting / Jim Ulvog

I have started a series of posts at my other blog, Nonprofit Update, discussing gift in kind valuation issues.

Those posts are written for an audience of non-accountants. The CPAs reading this blog who work with nonprofit organizations might get something out of those posts. There is a bit of commotion in the NPO community on valuation. Description of my posts with embedded links:

Series of posts on GIK valuation Read More »

How I make corrections and updates to posts

Leave a Comment / Accounting, Other stuff / Jim Ulvog

This would be a good time to explain how I make changes on posts. The etiquette in the blogging world seems to be that changes and corrections should be clearly identified. That’s a great idea.

Here’s my protocol:

The original comments will be left in the post.

~~Corrections and deletions will be marked through with strikeout.~~

Update comments will be identified Update: with the word update and italicized comment.

Small updates will be italicized right after a strikeout. For ~~illustration~~ example.

Minor typos will be corrected without a special notation, unless it has significance to the article.

With two different series of posts I’m working on now, I’m making a number of corrections, so thought it worthwhile to mention this.

How I make corrections and updates to posts Read More »

Ideas to ponder as you plan your year-end audits

Olympus releases restated earnings- an auditor’s observation

Leave a Comment / Accounting, Audits, Fraud / Jim Ulvog

Olympus had a hard deadline of Wednesday to file its second quarter earnings report or face automatic delisting from the stock exchange. It met the deadline.

Along with the quarterly report, Olympus announced restated financial statements for the last five years.

Here are a few tidbits from today’s news reports of interest to us auditors.

Size of the fraud hasn’t change – currently at $1.58B.

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Olympus releases restated earnings- an auditor’s observationRead More »

Olympus releases restated earnings- an auditor’s observation Read More »

What’s going on in the big firms? Part III. – Complexity affects small firms too.

1 Comment / Audits / Jim Ulvog

In my previous post, I suggested that maybe the problems affecting the big firms also affect us small firms.

I suggest that time pressures and complexity are major drivers for the issues we see in the PCAOB inspection report that found deficiencies in 12 of 52 engagements at KPMG and in 28 of 71 engagements at PwC.

Previously touched on time pressures.

On to complexity.

Here is a hint of what complexity looks like, from Francine McKenna’s post that I discussed earlier, At Deloitte, More Pain Before Any Quality Gain:

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What’s going on in the big firms? Part III. – Complexity affects small firms too.Read More »

What’s going on in the big firms? Part III. – Complexity affects small firms too. Read More »

Fingerprinting all California CPAs – proposal from CBA

Leave a Comment / Other stuff / Jim Ulvog

Something else for you to keep an eye on – The California Board of Accountancy just announced a proposal to require all CPAs to submit fingerprints to the Department of Justice as a condition for renewing licenses. Would apply for the next renewal after 6-30-14.

Hearing on the proposed rule will be on 1-27-12. Written comments must be submitted by 1-23-12. Send a letter if you have a comment.

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Fingerprinting all California CPAs – proposal from CBARead More »

Fingerprinting all California CPAs – proposal from CBA Read More »

What’s going on in the big firms? Part II. – Time pressures affect small firms too.

1 Comment / Audits / Jim Ulvog

Background – Previous post mentioned the PCAOB found deficiencies in 12 of 52 engagements at KPMG and in 28 of 71 engagements at PwC. Deloitte is publicly arguing with PCAOB.

Two questions:

What is the underlying pressure causing the high number of deficiencies and some substandard engagements?
Why does that matter to those of us in small firms?

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What’s going on in the big firms? Part II. – Time pressures affect small firms too.Read More »

What’s going on in the big firms? Part II. – Time pressures affect small firms too. Read More »

Summary of Olympus financial fraud – part 3

5 Comments / Accounting, Audits, Fraud / Jim Ulvog

Previous posts discussed the outside report on the Olympus fraud. My wrapup comments:

Causes of the fraud

The report was harsh in identifying the causes. See the report, starting at page 23. Some that were mentioned: …

Summary of Olympus financial fraud – part 3Read More »

Summary of Olympus financial fraud – part 3 Read More »

Summary of Olympus financial fraud – part 2a

4 Comments / Accounting, Audits, Fraud / Jim Ulvog

Article in the Wall Street Journal on 12-7-11 gives more background on the methodology of the Olympus fraud: Panel Calls Olympus ‘Rotten’ at Core. (article behind paywall)

I made a few updates on my part 2 post. Have a few more comments in this post – things that are interesting to me.

Hiding losses was legal and normal

Apparently, moving underwater investments off the books was so common in Japan that it had a nickname, tobashi. …

Summary of Olympus financial fraud – part 2aRead More »

Summary of Olympus financial fraud – part 2a Read More »

Summary of Olympus financial fraud – part 2

5 Comments / Accounting, Audits, Fraud / Jim Ulvog

Previous post described the investigative report of the Olympus financial fraud.

Now a discussion of the debits and credits. Final post will discuss the underlying causes identify by the investigative committee and some of their recommendations.

Update 2 – When accounting rules changed in 2000, the report says Olympus management decided to move the investments off the books instead of taking the write down. Thus phase 1 was launched.

How do you hide a $1.7B loss?

This is what I was most curious about and what prompted me to read the report.

Here is a one paragraph summary from the report: …

Summary of Olympus financial fraud – part 2Read More »

Summary of Olympus financial fraud – part 2 Read More »

What’s the impact when there is zero cost to distribute one more item?

Summary of Olympus financial fraud – based on independent report – part 1

3 Comments / Accounting, Audits, Fraud / Jim Ulvog

The investigative report on the Olympus fraud has been released. The fact pattern, causes, and recommendations are scathing.

This and my followup post are a thumbnail description. These are the result of just an hour or two of research. If you wish to expand the summary, point out errors, or clarify, feel free to do so. My guess is that readers of this blog won’t want as many details as I am providing, but do want to know more than just what shows up in the general news reports.

You can see one news article here: Olympus faces Tokyo delisting after management hid $1.7 billion of losses.

The Wall Street Journal has a good report, but it is behind a pay wall. WSJ also has a copy of the report, but I caution you on getting their copy. I was able to access the report once, but when I went back to it, accessing the report crashed my computer. Twice.

Update: Olympus has made the report available here.

The report’s conclusion compares management to a cancer:

Olympus had originally been a sound company, with diligent employees and high technical strength. Not all part (sic) of the company was involved in this misconduct. Olympus should remove its malignant tumor and literally renew itself. (Page 30)

What is the amount of the fraud and time frame?

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Summary of Olympus financial fraud – based on independent report – part 1Read More »

Summary of Olympus financial fraud – based on independent report – part 1 Read More »

Some clues to interpret behind-the-scenes fight over Little GAAP

Leave a Comment / Accounting / Jim Ulvog

Don’t know about you, but I’m not perceptive enough at reading the back room maneuvering to figure out what is going in the battle for turf between the AICPA and FASB over Little GAAP and Big GAAP.

I’m smart enough to know there is a fight. See my post here for discussion of AICPA announcing they will set up a new standard-setting body if FAF goes forward with its plan to keep PCSIC (Pic-sic?) under the control of FASB.

In his post Little GAAP – Big GAAP Territorial Fight, John Hufnagle suggests that a few of the FASB’s recent projects are designed to make GAAP more user-friendly for private companies. Here are three illustrations: …

Some clues to interpret behind-the-scenes fight over Little GAAPRead More »

Some clues to interpret behind-the-scenes fight over Little GAAP Read More »

Not so fond memories of Enron

3 Comments / Accounting, Audits / Jim Ulvog

December 2 was the 10^th anniversary of the Enron bankruptcy.

Just a few of the big consequences of that massive fraud were Sarbanes-Oxley legislation and the bankruptcy of Arthur Andersen.

Two of the subtle consequences are that it’s now a federal felony to destroy any documents after a federal investigation has begun (when the IRS or ICE has merely started asking questions about one of your clients, it becomes a felony to do a routine shredding in your office or cleanup of your e-mail) and PCAOB is setting standards for public company audits.

If you need to refresh your memory of what happened, here are just a few of the recent blog posts discussing that not-so-wonderful time:

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Not so fond memories of EnronRead More »

Not so fond memories of Enron Read More »