February 2012

If auditors won’t audit, mandatory rotation won’t help. Part 1

6 Comments / Audits /

I read an unsettling post by Tom Selling, “Thinking, Fast and Slow” about Auditing, which made an interesting argument in favor of auditor rotation.  Essence of the concept deals with the halo effect.  His post got me to thinking.  Mentioned my discomfort here.

In a sentence, the halo effect in the audit context is unconsciously concluding that management is right this time because they were right so many times before and therefore the halo effect biases auditor’s judgment so severely that mandatory audit rotation in needed to get good audits.

I’ve read a large portion of the book and have resolved my discomfort.

If auditors won’t audit, in other words if they don’t take their work seriously and try to do a good job, mandatory rotation won’t change anything. Neither will disclosing the name of the partner, nor disclosing the names of the audit team, nor increasing penalties from the SEC, nor increasing auditor liability.

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If auditors won’t audit, mandatory rotation won’t help. Part 1Read More »

If auditors won’t audit, mandatory rotation won’t help. Part 1 Read More »

Hire grown-ups and you don’t need a Facebook policy

Leave a Comment / Social media /

Jay Shepherd has a great fantasy dialogue about corporate policies.  On one hand we have a company boss that announces the company doesn’t have and never will have a Facebook policy.  On the other hand, we have a worker bee who’s a little slow on the uptake:  A Facebook policy for grown-ups.

Why no policy? The company hired grown-ups and expects them to act like grown-ups.

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Hire grown-ups and you don’t need a Facebook policyRead More »

Hire grown-ups and you don’t need a Facebook policy Read More »

Arrests in Olympus accounting scandal point to a serious and expanding investigation

Leave a Comment / Fraud /

I previous mentioned the arrest of 7 former officials and advisors in the Olympus fiasco.  Also mentioned that I did not know what the arrests mean in the context of the Japanese legal environment.

The Wall Street Journal article Arrests Go Beyond Olympus provides me some context.  (Article behind paywall, so grab your copy of Friday’s WSJ before you toss it.  Better yet, get an online subscription.)

It would seem that the prosecutors are seriously pursuing the case.

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Arrests in Olympus accounting scandal point to a serious and expanding investigationRead More »

Arrests in Olympus accounting scandal point to a serious and expanding investigation Read More »

The power of data-mining – calculating which customers are newly pregnant

Leave a Comment / Other stuff /

Have a post at my other blog, Outrun Change, describing the power of data-mining.  Target is looking at their customer sales database to determine who is in the early stages of pregnancy so those mommies-to-be can start getting coupons for baby stuff.

See Predicting who is expecting by their shopping patterns in the second trimester – the power of data.

Might be a bit weird if you haven’t quite yet announced the good news to everyone.

The power of data-mining – calculating which customers are newly pregnant Read More »

A twitter policy short enough to tweet

1 Comment / Social media /

Jay Shepherd, an employment law attorney who blogs at Jayshep, has a great policy for twitter that is 140 characters long:

Our Twitter policy: Be professional, kind, discreet, authentic. Represent us well. Remember that you cannot control it once you hit “Tweet.”

140 characters.  Does a better job than a 280 word policy.

In his post, A twitterable Twitter policy (updated), he gives permission to use the policy as your own:

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A twitter policy short enough to tweetRead More »

A twitter policy short enough to tweet Read More »

What does that risk assessment in a SSARS 19 review look like?

Leave a Comment / Compilations & reviews /

In a review, the analytical procedures and inquiries should be based on the accountant’s professional judgment.  That judgment is based on the accountant’s understanding of the industry and the client.

According to the SSARS literature, it is also based on the accountant’s awareness of the risk of unknowing failure to modify the review report on financial statements that are materially misstated

That means the accountant should focus analytical procedures and inquiries on those areas where there are increased risks of misstatements.

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What does that risk assessment in a SSARS 19 review look like?Read More »

What does that risk assessment in a SSARS 19 review look like? Read More »

Primer for CPAs on testing the functional allocation

Leave a Comment / Accounting, Audits, Books you might enjoy /

I discuss the e-book Lies, White Lies, and Accounting Practices; Why nonprofit overhead doesn’t mean what you think it means by Saundra Schimmelpfennig at my other blog, Nonprofit Update.

If you are a CPA working with NPOs, check out my description of the book in my post, Q: Are overhead ratios the perfect measure of NPO efficiency and effectiveness?   You ought to get the book.

I suggest you buy a copy of the book for all of your staff who work with NPOs. Would be a cheap and fast way to provide some education on testing the functional allocation.

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Primer for CPAs on testing the functional allocationRead More »

Primer for CPAs on testing the functional allocation Read More »

Remember to book construction retainages

Leave a Comment / Accounting /

On construction projects, there’s typically a retention held back from the contractor until the project is complete.  Scott Moglia at Nonprofit GPS has a reminder in Don’ Forget about your Retainages:

Remember to pick up the liability for retainage on construction projects.

When I read his post, I pondered a moment and realized that if all of my clients were  a baseball team, the lifetime team batting average for booking that liability when it exists is about 0.000.

Remember to look for, and record, retainages.

Read the full, short article.

Remember to book construction retainages Read More »

The ROI on social media is zero. Also zero on your e-mail, rebranding and relocation. So get started.

4 Comments / Social media /

Who would think to demand a quantification of the ROI on developing a new logo then printing new letterhead & business cards that go with it?

Do you really want to identify exactly every contributing factor behind a new client so your new logo, new office, e-mail system, marketing speech last spring, and latest 4 newsletters can get proportionate credit for that new audit?  Then you could calculate the ROI of your newsletter.

Then why would you even think about using that criteria for social media?

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The ROI on social media is zero. Also zero on your e-mail, rebranding and relocation. So get started.Read More »

The ROI on social media is zero. Also zero on your e-mail, rebranding and relocation. So get started. Read More »

Tell my again why there’s nothing to write about in accounting?

2 Comments / Pondering /

I was out-of-town four days towards the end of January.  Provided a peer review to a CPA firm.  Took a break from the ‘net as much as I could.

I drove across the Central Valley of California for the first time and after the project, enjoyed taking one of those away days seeing Yosemite.  Haven’t been there before.  It’s breathtakingly awe-inspiring. (Yes, I know. I don’t get out enough.)

While driving I came up with two or three ideas for blog posts. Couldn’t help but think about some things and translate them to blog ideas as I was driving and observing and pondering.

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Tell my again why there’s nothing to write about in accounting?Read More »

Tell my again why there’s nothing to write about in accounting? Read More »

Q: How do you make sure you can take a stand for your real client, and stand up against the person that signed the engagement letter?

1 Comment / Pondering /

A: Be ready to fire the apparent client.

If your real client is the stockholders or an NPO itself and not the CFO or CEO, then you may have to take a stand against the CFO or CEO.  How can you make it possible to do that since they can fire you?

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Q: How do you make sure you can take a stand for your real client, and stand up against the person that signed the engagement letter?Read More »

Q: How do you make sure you can take a stand for your real client, and stand up against the person that signed the engagement letter? Read More »