Audit News Briefing: 15 July 2016

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

July 14, 2016

Business Wire (press release)

IESBA Redefines Accountants’ Ethical Role When Laws and Regulations Broken

International Federation of Accountants (IFAC) 32-page July 14, 2016 Publication: Responding to Non-Compliance with Laws and Regulations – http://www.ifac.org/publications-resources/responding-non-compliance-laws-and-regulations

The global organization for accountancy profession released this new standard today through its independent standard-setting board, the International Ethics Standards Board for Accountants (IESBA).

IESBA Technical Director Ken Siong: “The board carefully calibrated the standard based on the rich and diverse input from a wide range of stakeholders to ensure that it is proportionate and, importantly, globally operable … The standard fills a gap in jurisdictions where legislation or regulation does not address professional accountants’ responsibilities in these situations, and by providing helpful guidance it may well complement legislation or regulation in jurisdictions that do address it. This has been a long journey, and now it’s time for national standard setters, professional accountancy organizations, and accounting firms to adopt and implement the standard.”

Please follow link for details: http://www.businesswire.com/news/home/20160714005837/en/IESBA-Redefines-Accountants%E2%80%99-Ethical-Role-Laws-Regulations

July 14, 2016

Accounting Today

5 Questions to Ask Before Moving into Advisory Services

Accounting technology veteran Amy Vetter recently featured a new revenue generating undertaking – that is, advisory service. It is based on the Global SMP Survey by the International Federation of Accountants (IFAC) which revealed a 32% increase in advisory and consultancy service by small and mid-size firms in North America.

She have found in her career that auditors tend to have the most natural skills to transition into advisory work – “They’re used to reviewing financial statements for anomalies and asking questions. Shifting to advisory is a natural evolution of the work: instead of delivering a report, you’re sitting down with clients to discuss the report in the context of improving their business operations.”

Please follow link for details:

http://www.accountingtoday.com/accounting-technology/news/5-questions-to-ask-before-moving-into-advisory-services-78674-1.html

July 14, 2016

Economia

FRC survey reveals fears that audit profession becoming less attractive

YouGov Survey by the Financial Reporting Council (FRC): “There is growing concern that the audit profession is becoming less attractive as a result of increased public and regulatory scrutiny”

·         It was stressed that the audit profession’s recruitment, level of quality and judgment skill development are disadvantaged after the implementation of EU Regulation and Audit Directive (ARD) last month.

·         Related FRC survey of audit market emphasized the concentration of the FTSE 350 audit market in the Big Four firms.

FRC executive director for audit Melanie McLaren: “Our vision for audit is that it is trusted to provide reliable assurance on the public reporting of financial information, and in doing so, promotes good governance and facilitates the effective allocation of capital … The FRC’s strategy is to promote continuous improvement in audit quality. One of the key factors in achieving this is to engage with other regulatory professional bodies, auditors, audit committees and investors to communicate good practice.”

Please follow link for details: http://economia.icaew.com/news/july-2016/frc-survey-reveals-fears-that-audit-profession-becoming-less-attractive

Audit News Briefing: 7 July 2016

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

July 7, 2016

CPAPracticeAdvisor.com

Financial Execs Struggle To Measure and Mitigate Risks

Accounting and Audit segment of CPA Practice Advisor highlighted this struggle through managing editor Isaac M. O’Bannon.

Basis: New Survey conducted by Grant Thornton LLP. Accounting and Business Consultancy, which states – Almost two-thirds of executives or 64% see strategic risk as a highly significant threat to their organizations compared to other types of risk – including compliance risk, operational risk and financial risk.

Among the important audit issues highlighted are as follows:

·         21% of organizations don’t rate third parties by the risks they pose, and nearly half or 41% don’t audit any of their third parties.

·         For departments involved in GRC activities, 43% of executives cite skill shortages in audit departments, while 38% cite skill shortages in operations leadership/management departments.

Please follow link for details: http://www.cpapracticeadvisor.com/news/12229007/financial-execs-struggle-to-measure-and-mitigate-risks

July 5, 2016

Australian Financial Review

The Big Four firms are now more technology than accounting

AFR data editor Edmund Tadros recently raised the concern that fast-growing areas of consulting, technology and digital services have already outpaced the companies’ original accounting roots. “Only one in five partners appointed to PricewaterhouseCoopers, Deloitte, EY and KPMG in the past year were in the traditional businesses of audit and assurance,” he said.

According to Lynn Kraus, the head of markets at EY Oceania: “Over the last two years, the acquisitions that the big four firms have been making are hugely different to four or five years ago … At EY, we've made six acquisitions over 24 months, all with a lens for this whole concept for digital and cyber skills.”

Please follow link for details: http://www.afr.com/business/accounting/the-big-four-firms-now-more-technology-than-accounting-20160701-gpwsd7

June 30, 2016

AccountancyAge

One in 20 audit firms quit as market evolves

June 2016 Key Facts and Trends in the Accounting Profession

By Financial Reporting Council (FRC.org.uk)

https://www.frc.org.uk/Our-Work/Publications/Professional-Oversight/Key-Facts-and-Trends-2016.pdf

This is the FRC (watchdog) publication report which head editor Kevin Reed have recently featured in Accountancy Age. It indicated considerable changes in the accounting profession, particularly in the field of audit — 304 practices have dropped their audit licence since December 2014. Taking into account that in 2004, there were 9,950 that are into UK’s accounting profession – it extensively decreased to 6,331 or a 4.6% fall.

Please follow link for details: https://www.accountancyage.com/2016/06/30/one-in-20-audit-firms-quit-as-market-evolves/

June 27, 2016

The Straits Times

Audit sector 'can benefit from opportunities tech brings'

Singapore-based English daily broadsheet newspaper featured the important role of technology in the accounting profession. Deputy Prime Minister Tharman Shanmugaratnam said, "The audit sector is one which can leverage new technologies to develop new capabilities in advanced audit analytics." This is during his opening address at Deloitte University Asia Pacific in Amara Sanctuary Resort in Sentosa, a centre set up by the Big Four accounting firm to groom employees into leaders.

Please follow link for details: http://www.straitstimes.com/business/companies-markets/audit-sector-can-benefit-from-opportunities-tech-brings

Audit News Briefing: 28 June 2016

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

June 27, 2016

AccountingWeb.com

Internal Controls Over Information Technology at Your Firm

American Institute of CPA awardee for Information Management & Technology Assurance, Sundeep Bablani wrote: “… enhancements in technology have significantly changed the outlook of evaluating controls from an auditor’s perspective.” This is about organizations’ reliance on manual controls in identifying unusual transactions. He explained the ‘integrated audit technique’ and emphasized on the necessity to conduct frequent IT audit evaluations in view of constant change in technology.

“Controls over technology have a direct impact on the overall reliability of financial statements regardless of the size of the organization. Financial auditors are therefore required to obtain a general understanding of information technology (IT) controls as part of their audits.”

Please follow link for details: http://www.accountingweb.com/technology/trends/internal-controls-over-information-technology-at-your-firm

June 24, 2016

AccountingToday.com

Will the Brexit Break E.U. Audit Firm Rotation?

Editor-in-chief Michael Cohn explained the impact of timing – when U.K. voted to “Brexit” from the E.U. only a week before the effectivity of the new rules for mandatory audit firm rotation.

His opinion states: “It’s probably too soon to say for sure. The mandatory audit firm provisions are only part of a wide-ranging set of audit market reforms now mandated in the E.U. They aim to force large public companies to tender requests for new audit firms at least every 10 years and to actually rotate audit firms at least every 20 years.”

He also disclosed a recent statistical finding by Ernst & Young that – One out of five large companies in the United Kingdom is “woefully unprepared” for the new EU rules on audit firm rotation.

Please follow link for details: http://www.accountingtoday.com/blogs/debits-credits/news/will-the-brexit-break-eu-audit-firm-rotation-78506-1.html

June 14, 2016

Economia.ICAEW.com

Big Four will take in each other's dirty washing under new audit law, says Lord Hodgson

Pointing out concerns regarding the effect of the new regulation – The Statutory Auditors and Third Country Auditors Regulations 2016 (effective 17 June 2016), Lord Hodgson of Astley Abbots lobby for joint auditing: “The challenge to the government and the profession is: how do you achieve break-in to the magic circle? One way would be to encourage joint auditing.”

He raised lack of competition in the audit market – an issue that the new regulation failed to resolve: “These regulations are the produce of tired thinking. It is a shame that the profession and its regulators have not been able to think more creatively about the real issues and, instead, have fallen back on the old policy of, ‘If in doubt, stick in another regulation’.”

Please follow link for details: http://economia.icaew.com/news/june-2016/big-four-will-take-in-each-others-dirty-washing-under-new-audit-law

June 8, 2016

The Wall Street Journal

WSJ: Top 10 Audit Firms Now Audit 61% of SEC Registrants

Based on the recent data released by the Audit Analytics research provider, CFO Journal’s Senior Editor Maxwell Murphy marked the observation that audit work is now concentrated among fewer accounting firms. The reason – top 10 U.S. accounting firms have stepped up the share of corporate books they oversee.

·         3.8% increase from 2015 – top firms audit 60.7% of nearly 7,000 firms and funds under SEC audit regulation.

·         Global Six audit 96.8% of large multinational accounts of companies categorized as “accelerated filers”. The Big Four handle almost 91% of these audit work.

·         Global six also captured 2/3 or more of smaller accelerated filers and non-accelerated filers.

Please follow link for details: http://blogs.wsj.com/cfo/2016/06/08/top-10-audit-firms-now-audit-61-of-sec-registrants-2/

Audit News Briefing: 24 December 2015

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December 16, 2015

Reuters - dailymail.co.uk

Accounting firms, SEC hobble U.S. audit watchdog

"U.S. rule-making is a complex process that involves people with many different perspectives who care deeply about the issues… I think this is the case with the PCAOB and SEC in the work we do together, including proposals to give more information to investors about who is leading the audits of the companies in which they invest." This is what PCAOB chief Doty said in a written statement during the annual accounting-industry gala. James Schnurr, who is just two months into his job as chief accountant at U.S. SEC also addressed auditing failures that had shaken public confidence in recent years. Investigative journalist Charles Levinson enumerated all exchanges of thoughts and surrounding events of this so-called hobble.

Please follow link for details: http://www.dailymail.co.uk/wires/reuters/article-3362563/Accounting-firms-SEC-hobble-U-S-audit-watchdog.html

December 15, 2015

The Wall Street Journal

Regulator Approves Naming of Audit-Firm Partners in Charge of Corporate Audits

Under the long policy aim to make auditors more accountable – Beginning with audits performed in 2017, audit firms will have to name their “engagement partner” in charge of each audit in a new form to be filed with the Public Company Accounting Oversight Board. The PCAOB voted unanimously last December 15 (Tuesday) to enact the proposal, which is still subject to Securities and Exchange Commission approval.

Please follow link for details: http://www.wsj.com/articles/regulator-approves-naming-of-audit-firm-partners-in-charge-of-corporate-audits-1450198985

December 10, 2015

Street Insider

SEC Suspends Five Public Accountants and Two Audit Firms for Bad Auditing

“Auditors must follow the professional standards and avoid conflicts of interest when they opine on the financial information reported by public companies… These accountants and their firms showed complete disregard for the basic rules of their profession. As a result, they are now barred from working on any SEC-related matters.”

This was the pronouncement of Director Paul G. Levenson of the SEC’s Boston Regional Office. The government regulator suspended five accountants and two audit firms from practicing or appearing before the SEC after they violated key rules that are designed to preserve the integrity of the financial reporting system.

According to the SEC’s orders finding violations by Peter Messineo and his firm Messineo & Co., Charles Klein and his firm DKM Certified Public Accountants, Robin Bigalke, Joseph Mohr, and Richard Confessore:

·         Messineo and his firm, which had more than 70 corporate clients, skipped mandatory quality reviews for their own audits and performed deficient quality reviews for audits by another audit firm.

·         To cover up these violations, Bigalke falsified and backdated audit documents in her role as Messineo & Co.’s senior accountant. She also arranged with Mohr, the firm’s quality reviewer, the backdating of quality review documents.

·         Mohr falsely identified himself as a certified public accountant during a time when was not licensed as a CPA.

·         Messineo served as the CFO of two public companies being audited by Klein and DKM. Messineo falsely certified the companies’ public filings despite knowing that auditor independence rules were being violated as Confessore was improperly serving conflicting roles as a member of the DKM audit team and an employee of Messineo & Co.

·         After Messineo resigned from his CFO positions at both public companies, he merged his audit firm into DKM and exacerbated DKM’s independence issues because he retained ownership interests in the two companies while DKM continued to audit them.

Please follow link for details: http://www.streetinsider.com/Litigation/SEC+Suspends+Five+Public+Accountants+and+Two+Audit+Firms+for+Bad+Auditing/11144504.html

Audit News Briefing: 15 December 2015

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

December 8, 2015

Accountancy Age

Audit firm governance code to champion quality and transparency

Based on the feedback from early-year consultation of the Audit Firm Governance Code provisions held by FRC – the role of independent non-executives was revealed to be significant but could be further strengthened. Moreover, investors require more direct appraisal from NED regarding firms’ audit performances.

FRC CEO, Stephen Haddrill said: "The audit firm governance code has led to an enhancement in governance of the major firms who have put significant effort into adopting its key provisions… Above all it creates, through the independent non-executives, an independent voice and challenge at the heart of the firms, which is of particular importance in view of their public interest responsibilities. The proposed new provisions will strengthen this voice further, provide clarity about the code's purpose particularly in relation to audit quality and encourage further transparency to investors."

Please follow link for details: http://www.accountancyage.com/aa/news/2438245/audit-firm-governance-code-to-champion-quality-and-transparency

December 7, 2015

PwC

PwC appointed as auditor to probe Vatican finances

PwC shall conduct a comprehensive external audit of the Vatican’s accounts. This is to support the Pope in his zeal to excommunicate corruption from the church. The Big Four shall work with Australian Cardinal George Pell who is head of secretariat that was formed to oversee papal finances following a series of scandals.

Please follow link for details: http://www.accountancyage.com/aa/news/2438045/pwc-appointed-as-auditor-to-probe-vatican-finances

December 4, 2015

Accounting Today

U.S.: Litigation Environment Favorable for Audit Firms (for Now)

Law firm Willkie Farr & Gallagher partner, Michael Young, specializes in defending audit firms. He said in an auditing conference in New York that –

“The litigation environment toward the accounting profession right now is about the best I have seen it in more than 30 years of doing this… Litigation against the profession is down, and just as important, the ability of the profession to effectively tell its story, to effectively present its defenses, is better than at any other time while I have been practicing law. But the times are changing, and in fact they have already started to change.”

Much of the litigation in recent years has come from the financial crisis but SEC is sending the message that it is back on the accounting beat, Young warned.

Please follow link for details: http://www.accountingtoday.com/blogs/debits-credits/news/litigation-environment-favorable-for-audit-firms-for-now-76616-1.html

Audit News Briefing: 3 December 2015

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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 News Briefing: 27 November 2015

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November 24, 2015

CFO Daily News

Auditors scrutinized by regulators when companies face fraud allegations

Three powerful regulatory entities were highlighted in the Internal Controls segment of CFO Daily last Tuesday (Nov 24) –

·         the Department of Justice (DOJ)

·         the Securities and Exchange Commission (SEC) and

·         the Public Company Accounting Oversight Board (PCAOB).

One of these three formidable entities could get attention whenever financial fraud allegations arise at any public company. DOJ leads the pack by receiving complaints and commencing criminal investigation. Collaboratively, the SEC carries out two federal initiatives aimed at detecting and prosecuting financial fraud:  the Financial Reporting and Audit Task Force and Operation Broken Gate. PCAOB investigations originate from several sources, including the PCAOB’s own investigations, information disclosed in SEC or other agency investigations, or other public sources.  The PCAOB has authority to investigate accounting firms and associated persons primarily to ensure compliance with professional responsibilities.

Strong compliance program determines what action or sanction may necessarily be imposed. Strong internal controls is said to be the key to enable auditors to do their jobs more effectively and efficiently.

Please follow link for details:

http://www.cfodailynews.com/auditors-scrutinized-by-regulators-when-companies-face-fraud-allegations/

November 20, 2015

Accounting Today

U.S.: CPA Pleads Guilty in Accounting Fraud Scheme

Last Wednesday (Nov 18), a New York CPA firm partner pleaded guilty to participating in a multimillion-dollar accounting fraud scheme. He performed year-end audits of the financial statements for an unidentified Florida-based cosmetics company.

“Marc Wieselthier has admitted to lying about the financial condition of a company to induce banks to lend the company millions of dollars,” said Manhattan U.S. Attorney Preet Bharara in a statement. “Relying on false information, the banks made loans that ended up defaulting with nearly $5 million still owed. Wieselthier now joins his co-conspirators in awaiting sentencing for his crime.”

Please follow link for details: http://www.accountingtoday.com/news/audit-accounting/cpa-pleads-guilty-in-accounting-fraud-scheme-76480-1.html

November 16, 2015

Accounting Today

PwC Transforms Audit Practice with Data Analytics

PricewaterhouseCoopers audit practice is becoming more sophisticated as the firm is leveraging data analytics technology. The transformation includes documentation or evidence management as well as audit process automation.

Bill Brennan, managing partner of assurance transformation at PwC – said:

·         “We’d like to think that we have been transforming the way we audit for decades, especially in light of everything that’s been going on in the marketplace, particularly with the regulatory changes that have impacted us,”

·         “Starting north of 10 years ago, we introduced to our auditors worldwide Aura. It’s basically the way we execute the documentation and where our evidence resides for our audit efforts. Aura is used by almost 100,000 people all around the world.”

·         “We automate certain processes that we’ve been doing manually for decades, maybe even a century,”

·         “The second piece is process. How can we improve the process by which we execute the audits, the approach, if you will. We have a tagline called ‘Engagement, Performance and Quality.’ It takes project management process improvement and injects it into the equation. You can have the greatest technology in the world, but if you don’t have good processes, it’s going to be useless. Then the last thing is people. How do we develop our people? How do we train them? How do we equip their skills such that they can adapt to the changes in not only the regulatory environment, but our own audit approach. How can we teach them to leverage data and analyze data in a wholesome way? You can have a great tool, but if the people are not equipped to do it, then it’s useless.”

Please follow link for details: http://www.accountingtoday.com/blogs/debits-credits/news/pwc-transforms-audit-practice-data-analytics-76435-1.html

Audit News Briefing: 19 November 2015

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

November 18, 2015

SBWire

Global IT Spending by Audit Firms Is Expected to Reach over USD 5 Billion Dollars in Revenues by 2019: ResearchMoz

Press Release: Technavios market research analysts predict the global IT spending by audit firms will witness a steady growth face, reaching over USD 5 billion dollars in revenues by 2019. The audit market is highly concentrated and dominated by the big four firms, including Deloitte, E&Y, KPMG, and PwC. But, mandatory auditor tendering and rotation reforms by various regulators across the globe had led to the entry of several audit firms in this market. Big Four firms are slowly losing their market share as these firms further intensify the competition. Also, audit services are highly regulated and commoditized, thereby reducing differentiation opportunities for audit firms. It is leading to the increased adoption of information technology by audit firms to provide differentiation in their offerings. Please follow link for details: http://www.sbwire.com/press-releases/industry-analysis/global-it-spending-by-audit-fi/release-642397.htm?utm_source=djournal&utm_medium=feed&utm_campaign=distribution

ResearchMoz latest research report is entitled "Global IT Spending by Audit Firms 2015-2019: Industry Research, Analysis, Shares, Size, Trends, Growth, Survey, Forecast".

November 17, 2015

CivilSociety.co.uk Finance

Audit firms 'missed fundamental risks' of Kids Company model, say MPs

Bernard Jenkin MP, chair of the Public Administration and Constitutional Affairs Committee said: The auditors missed the “fundamental risk” that Kids Company operated a “high risk model” of committing almost all its funding to helping its client. This should have been “taken more seriously”. This was the major issue pointed out when MPs have criticised auditors PwC, PKF Littlejohn and Kingston Smith for not scrutinising Kids Company properly and missing key indicators during their dealings with the charity before it folded. Please follow link for details: http://www.civilsociety.co.uk/finance/news/content/20782/audit_firms_missed_fundemental_risks_at_kids_company_say_mps

November 17, 2015

MarketWatch

Big Four audit quality can differ widely — even at the same firm

Board member, Lewis H. Ferguson of the Public Company Accounting Oversight Board (PCAOB) and chair of the global public policy committee working group of the International Forum of Independent Audit Regulators (IFIAR) – at MarketWatch – recently discussed about the significant roles of PCAOB as projected by the U.S. Congress and IFIAR in determining cross-border aspects of audits.

He emphasized that: “It would be a mistake to presume that an audit firm’s inspection results in the United States necessarily speak to the quality of its global network. There can be a real difference among audit deficiency findings for the firms in the United States and what we see at their affiliates around the globe.” In conclusion, “While these inspection results are not a scorecard or a stand-alone measure of audit quality, they do reflect differences in the inspection results among audit firms and in different countries. They may well represent differences in audit quality among firms. At the least, they reflect that each firm’s global network also faces different auditing challenges.”

Please follow link for details: http://www.marketwatch.com/story/big-four-audit-quality-can-differ-widely-even-at-the-same-firm-2015-11-17