Guidance from AICPA can help with financial reporting and auditing. Also, there is a need for COBOL programmers.
If you had not noticed, the California Society of CPAs is offering a lot of CPE webcasts on tax and auditing issues during the pandemic. Many of them are free. Yeah, no charge CPE. How ‘bout that?
A few more articles as you work through your audits, reviews, and compilations during the pandemic, plus a video on how to make your own cloth masks out of a t-shirt.
Key issues in this post:
Postponement of new CECL accounting
Deep dive into going concern assessment
3/26/20 – Nicola White at Bloomberg Tax – Congress Poised to Derail Biggest Bank Accounting Change in Decades – Congress put a provision in the giantic CARES Act to postpone CECL until 12/31/20 or when the governemnt declares the pandemic over. CECL otherwise went into effect on 1/1/20. This is the first time Congress has dictated accounting rules. Article mentions this is a reminder of the debate over mark-to-market during the Great Recession.
A range of financial reporting issues need careful attention during the COVID-19 pandemic. These issues are old news in the professional literature but need to be considered more intentionally.
Here, in bullet point italics, are the items mentioned for your focus, with a few of my comments for highlight:
Subsequent Events
Type II subsequent events are those which take place after the financial statement date which are so significant that they warrant mention in the financial statements to keep those statements from being misleading.
Subsequent Events – Market-Value Declines
A technical Q&A (TQA 9070.06) indicates there are some occasions that can arise which warrant adjusting financial statements based on subsequent declines in market value.
That view is enough to make you cringe. Sort of like some of the situations recently addressed by the Board of Accountancy. Image courtesy of Adobe Stock.
Update newsletter issue 89 for Fall 2019 has 33 disciplinary actions listed. Timeframe of the effective dates is the first half of 2019. My recap of actions by the California Board of Accountancy is listed below. I counted as one action those situations involving a firm and the owner of the firm.
Revocations
audit fail
other
issue
1
3
felony
1
1
didn’t complete contracted service
1
audit fail
1
audit fail and no peer review
1
no peer review & expired license
2
probation violations
1
some deeper issues, not quite apparent from summary
4
8
total revocations
Of the CPAs with felony issues, two were for embezzlement, one also had an audit failure, and another ended up with conviction on 12 counts.
Two of the revocations were for rather extensive violations of a previous disciplinary action.
Securities and Exchange Commission Building, Washington, DC.
Going Concern is doing a great job keeping us all updated on the status of the current felons / former KPMG and PCAOB staff tangled up in the inspection list theft fiasco.
A complete overhaul of the auditor’s report for audits of 12/31/20 financial statements is going to be a very big deal. Please tune in to the new standards!
In November 2019, the AICPA published the first of a new semi-annual newsletter, PR Prompts!, designed to help CPAs keep current on peer review news.
The AICPA gave me permission to reprint portions of the newsletter on my blog.
This is the fifth of six posts to help you stay up to date.
I have looked at this page on the AICPA website. It is quite helpful. If you provide audits to your clients, it would be worth your time to find, browse, and bookmark this page.
The following comment is quoted verbatim. For ease of reading it will not be set inside quotation marks:
Auditor Reporting
The form and content of the auditor’s reports will change substantively which will be effective for audits of financial statements for periods ending on or after December 15, 2020. Statement on Auditing Standards (SAS) No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, was issued in May 2019. SAS No. 134 includes a new AU-C section 701, Communicating Key Audit Matters in the Independent Auditor’s Report, and replaces the following AU-C sections in AICPA Professional Standards:
The Auditing Standards Board has issued SAS 138 and SSAE 20 which change the definition of materiality. Under current audit standards, the materiality definition matches what is currently in use by IASB and IAASB. The revision will get the definition to match what is currently used by the American legal system, PCAOB, SEC, and FASB.
Of the six players in the fiasco of KPMG getting leaked inspection lists from PCAOB, one is in prison, two have been sentenced and await their reporting date, while three are scheduled for sentencing.
Jeffrey Wada, the former PCAOB staff person who leaked inspection lists to KPMG, was sentenced to nine months in jail plus three years supervised release. He was convicted of wire fraud in March 2019.
The last person to face justice in KPMG’s fiasco of gaining illegal access to PCAOB inspection lists entered a guilty plea a few weeks before his scheduled trial.
David Britt entered a guilty plea on 10/3/19 to one count conspiracy to commit wire fraud. His trial would have otherwise started on 10/21/19.
The most senior level former partner charged in the KPMG “steal the exam” fiasco was sentenced to one year and one day in prison for his role in the leak of PCAOB inspection targets. David Middendorf received a fraction of the 37-46 months requested by US Attorney office and 46-57 months recommended by the United States Probation Office.
Crain’s New York Business – Aaron Elstein – 9/11/19 – Former top KPMG partner gets a year and a day in prison – Article points out the sentence of a year plus one day means Mr. Middendorf is eligible for good behavior credit.
The second sentencing in the fiasco of leaking PCAOB’s inspection list to KPMG is set for 10:30 today, 9/11/19.
Background on Mr. Middendorf sentencing
David Middendorf will face federal judge J. Paul Oetken to learn how long he will be in federal housing. Judge Oetken is handling all of the trials in this case.
On 7/26/19 Mr. Middendorf submitted his arguments on sentencing (docket #379). If you have lots of time on your hand, you can also read the 25 attachments.
The US Attorney filing had this comment (#394), which I’ll quote:
A former Inspections Leader at PCAOB who went to work for KPMG as an Executive Director and was involved in leaking lists of audits scheduled for inspection was sentenced today.
Here are some fun or interesting or useful tidbits from the October 2018 A&A and the June 2019 Not-for-profit conferences presented by California Society of CPAs that apply to not-for-profit organizations.
Non-attest services and Yellow Book independence. Everyone probably knows that charities with more than $2 million of revenue who are registered with the California Attorney General must have an audit. Excluded from the requirement would be religious organizations, who are exempt from registering with the AG.
That requirement was created by the Nonprofit Integrity Act of 2004, so it’s old news.
The best payoff from attending CPE conferences is to compare every piece of information you hear to what you think you know. So, here is one of the big rewards for me attending this class…
