Audit News Briefing: 3 December 2015

Audit-is-cool is pleased to accumulate and provide its readers with the news on audit and related topics:

December 2, 2015

Accounting Today

SEC Penalizes Grant Thornton for Ignoring Red Flags in Audits

In a statement – SEC’s Division of Enforcement Director Andrew J. Ceresney said that “Audit firms must be held responsible when systemic failures such as inadequate engagement procedures, staffing, or supervision cause the firms’ work to fall significantly short of expected standards, particularly when multiple audits and engagements are involved.”

During audits of two public traded companies under SEC enforcement actions, Grant Thornton and two of its partners disregarded red flags and fraud risks. For improper accounting and other violations, the firm has agreed to pay $4.5 million to settle charges. They admitted wrongdoing and agreed to forfeit approximately $1.5 million in audit fees and interest plus pay a $3 million penalty.

Please follow link for details: http://www.accountingtoday.com/news/audit-accounting/sec-penalizes-grant-thornton-for-ignoring-red-flags-in-audits-76580-1.html

December 1, 2015

PwC

Our focus on audit quality

PwC Assurance Quality Managing Partner Michael Gallagher:

“We understand the importance of maintaining our focus on delivering quality, being transparent about our process, continuously investing in innovation, and further developing the competencies that will allow us to solve important problems.”

PwC leaders are proud of the quality of their audits and, in particular, the progress they have continued to make, such as: 94% compliance rate of audit engagements selected for internal inspection; 99% audit professionals reported receiving consistent messages about the importance of audit quality; and 97% audit professionals reporting that they understand the practice’s objectives regarding audit quality.

The support on transparency, people strategies and new leadership framework to assess PwC professionalism were also discussed.

Please follow link for details:  http://www.pwc.com/auditquality

November 26, 2015

Accountancy Age

Has the value of audit to investors improved post-HBOS?

After the collapse of HBOS, the Bank of England’s 500-page report did not satisfactorily show how or why the failure happened. But it accordingly provided some significant points regarding the value of audit.

Excerpts from Deputy Editor Richard Crump’s Opinion:

“The ultimate arbiter of value around audit will be on how these challenges are articulated to the investment community. As is so often the case - concerns get raised about management assumptions but they never found their way through to the investment community - until a long way down the line… Improvements have been made to how audit is undertaken, so will the enhanced auditor reports complete the task? There is still some way to go for audit to deliver real value to investors.”

Please follow link for details: http://www.accountancyage.com/aa/opinion/2436695/has-the-value-of-audit-to-investors-improved-post-hbos

Audit Method: Going Concern Assessment

ISA 570 requires an auditor to obtain and evaluate management’s assessment of the entity’s ability to continue as a going concern. Issues to consider by the auditor while evaluating the going concern assumption by management are as follows.

Are any events or conditions which may cast significant doubt on the entity’s ability to continue as a going concern has been identified? Examples of conditions and events can be traced from paragraphs A2 of ISA 570.

Based on our inquiries of management and our review of their assessment, were any events or conditions noted that may occur shortly beyond the management assessment that were so significant that they may cast doubt on the entity’s ability to continue as a going concern?

If audit team answer to the above two questions is “NO” then the evaluation is complete but if the answer is “YES” then the following additional audit procedures need to be undertaken.

Evaluate management’s plans for future actions in relation to its going concern assessment, whether the outcome of these plans is likely to improve the situation and whether management’s plans are feasible in the circumstances.

Stated plans: Obtain and discuss with management its plans to deal with the identified risks. Indicate the individuals interviewed.

Supporting evidence overcoming substantial doubt: Indicate below the elements of management's plans that are particularly significant to overcoming the substantial doubt about the entity’s ability to continue as a going concern. Examine and describe evidence that supports those elements. Elements include Third-party guarantee, Debt restructuring or new borrowings, Liquidation of assets, Reduction or delay of expenditures, Increase in revenues, Increase in equity etc.

Third party guarantees and other financial restructuring agreements: If there are significant guarantees of financial support from a third party (such as the entity’s parent company, another shareholder, an affiliate or a general partner of a limited partnership):

Prospective financial information: Although this information is not as persuasive as evidence provided by third parties, we usually consider it as necessary to support management's plans.

Management's representation: Obtain written representation from management and where appropriate from those charged with governance regarding management's plans and conclusion about the appropriateness of the going concern assumption and the reasonableness of related disclosures in the financial statements.

Practice

Based on the audit evidence obtained, conclude whether a material uncertainty exists relating to events or conditions, that individually or collectively, and may cast significant doubt on the entity's ability to continue as a going concern. A material uncertainty exists when the magnitude of its potential impact and likelihood of occurrence is such that, in our judgment, appropriate disclosure of the nature and implications of the uncertainty is necessary for the fair presentation of the financial statements.

Other articles on related topic:

New Regulations for Auditors: European Revolt

Audit Firm: ACCA exams

Audit firms are interested to hire and retain qualified accountants. For example, Big4 firms provide support to their employees during their study in college to obtain qualification.  ACCA (The Association of Chartered Certified Accountants) is one of the professional accounting bodies certifying accountants through exams and experience. ACCA exams test the students very rigorously and they are not easy to pass if you are not well prepared ahead of time for it. Here are few tips about approaching the ACCA exams that will prove to be helpful in your preparations and to get you pass these exams.

Familiarity with Syllabus

Get yourself familiar with the syllabus of ACCA certification. ACCA has two levels; one is the Fundamental level that includes 9 papers from F1 to F9. And the other Level is called Professional level that include a total of 7 papers from P1 to P7 but you will be given a choice to attempt any two papers among P4 to P7. Choose among the papers from P4 to P7 wisely as you may get stuck in one or two papers in the end and it can waste your exam attempts, time and money.

Learning material

Choosing your books from which to study for the exams is a very major step as it can determine your success or failure from the start. ACCA's new Approved Content Providers are:

• Becker Professional Education
• BPP Learning Media
• Kaplan Publishing

Exam Paper Analysis

After when you have finished your course well at least once you are ready to take a look at the exam papers. Analyzing exam papers for trends is very important as it can give you clues about which topics to give more weightage and which topics demand less preparation. Try to attempt the full paper in actual time bounded exam pressure simulated scenario. This will give you a very good idea of where you are lacking. Do you need to concentrate more on few topics or you need to grasp the important topics well so as to finish the paper in time.

On Exam day

Sleep well before exam day is a cliché we hear from our seniors and teachers. This is actually very important for your performance on exam day. If you will feel relax you will perform and deliver in a much better way. ACCA exams have 15 minutes reading time for reading the question paper. Use this time efficiently. Plan the first question you have to answer when the reading time is over. Also you can arrange the questions in the in the order of difficulty during that time. Attempt the easy questions first and then go for the difficult ones. When answering questions, understand the requirements of the question and write only to the point answers. Remember DO NOT leave any question unanswered of you have time remaining. There is no negative marking in these exams and writing one or two important concepts well, even if you don’t know the complete answer will secure you the minimum marks that will help you to cross the minimum passing threshold for the whole paper.

After the exam

Try avoid discussing the paper if you are going to attempt another paper in a day or two as all you have in your hands now is to get ready for the next paper and try not to repeat the mistakes which you have committed in today’s paper.

In the end I would share this beautiful quote with you.

The reason why most people face the future with apprehension instead of anticipation is because they don't have it well designed." -- Jim Rohn.

Sources:

• http://www.accaglobal.com/gb/en/discover/about.html
• http://www.accaglobal.com/ca/en/student/your-study-options/alp-content.html
• http://www.accaglobal.com/us/en/student/exam-support-resources.html

Disclaimer:
"This group is not associated with or approved by ACCA and the views expressed on this page do not necessarily reflect the views of ACCA".

i-Monday: You Are Absolute Center of Universe

“Here is just one example of the total wrongness of something I tend to be automatically sure of: everything in my own immediate experience supports my deep belief that I am the absolute center of the universe; the realist, most vivid and important person in existence. We rarely think about this sort of natural, basic self-centeredness because it's so socially repulsive. But it's pretty much the same for all of us. It is our default setting, hard-wired into our boards at birth. Think about it: there is no experience you have had that you are not the absolute center of. The world as you experience it is there in front of YOU or behind YOU, to the left or right of YOU, on YOUR TV or YOUR monitor. And so on. Other people's thoughts and feelings have to be communicated to you somehow, but your own are so immediate, urgent, real.”

David Foster Wallace was an English and creative writing professor, as well as an influential author. His most famous works were Infinite Jest and The Pale King, a novel of his which was found unfinished, three years after Wallace committed suicide.

Despite the internal struggles Wallace faced, this quote of his reminds us that it’s okay to be egocentric, because that’s how we were created and that’s all we’ve ever know. By realizing this, we are encouraged to own that self-centeredness, utilizing ourselves to be the best we can be, and feeling okay about putting our own needs first.

From: Commencement address delivered by the late David Foster Wallace, professor at Pomona College, CA and author, for the 2005 graduating class of Kenyon College.

Picture reference:

https://en.wikipedia.org/wiki/David_Foster_Wallace_bibliography