40 Eventful and Gratifying Years

by Ken Urish 1. February 2016 16:29
On February 1, Urish Popeck commemorated 40 years of service to its clients and the public accounting profession. When we started out, Steve Jobs was founding Apple, Jimmy Carter was elected President, and Rocky was in theaters nationwide. Then as today, change in the public accounting profession was being driven by a variety of forces including government regulation, social demands, economic conditions, and global events. Still to come was Worldcom, Y2K, 9/11, Enron, Sarbanes-Oxley, the Big 8 becoming the Big 4, Bernie Madoff, the PCAOB, and the profound impact of technology on how we conduct business. It has been an eventful and gratifying 40 years. We are proud that we have successfully adapted to provide the resources our clients need to grow and prosper, while maintaining the highest professional standards.   Throughout 2016 we hope you can participate with us as we celebrate our history. We look forward to serving our clients for years to come.

10 Years of Sarbanes-Oxley

by Dennis Stuchell 23. October 2012 09:45
It may be hard to believe, but the Sarbanes-Oxley Act and the Public Company Accounting Oversight Board (PCAOB) have been with us now for ten years. And the PCAOB inspections of audit issuers continue to find serious deficiencies. During a recent keynote address at the American Law Institute (ALI) CLE conference in Chicago, Board Member Jeanette M. Franzel spoke to some of the common areas of audit deficiencies, which include revenue recognition, fair value of financial instruments, management estimates, testing and evaluating internal controls, related party transactions, and the auditor’s assessment and response to fraud risk. The full text of the speech  is available on the PCAOB website. Urish Popeck has signficant experience with revenue recognition, valuation, and other critical assurance and accounting advisory issues. We would be pleased to assist you in these areas and other public company accounting needs. And let us know if you have any questions regarding SOX or PCAOB oversight.
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Categories: Advisory

SEC Approval Pending for AS 16

by Ken Urish 10. October 2012 13:42
Auditing Standard (AS) 16, Communications with Audit Committees, was approved recently by the PCAOB. AS 16 largely retains current guidance contained in AU 380, Communications with Audit Committees, and does not impose any new performance requirements on the auditor. Rather, for the purpose of promoting improved financial reporting, it expands and/or enhances requirements that emphasize the relevance, timeliness and quality of the communications between the auditor and the audit committee.  The goal is to better align auditing standards with the requirements of the Sarbanes-Oxley Act of 2002, so as to facilitate audit committees’ financial reporting oversight. All new auditing standards and amendments to PCAOB standards adopted by the Board are submitted to the Securities and Exchange Commission for approval. AS 16 will become effective with SEC approval, which was pending as of this writing. The new standard and related amendments, if approved by the SEC, will be effective for public company audits of fiscal periods beginning after Dec. 15, 2012. 
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Is the PCAOB’s Consideration of Mandatory Auditor Rotation Dead?

by Harry Emerick 19. July 2012 11:00
The Public Company Accounting Oversight Board (PCAOB or Board) issued a Concept Release on Auditor Independence and Audit Firm Rotation.  The Board recently extended the comment period on the release through July 28, 2012.  Apparently the rumors of demise are greatly exaggerated.  Then again, the idea may in fact be a useful, controversial tool for the PCAOB to engage debates on other ways to improve audit quality.  The origin of the Concept Release appears to be with the investor community and other “users” of audits who, however, are not directly involved in the audit process.  Perhaps this explains why the idea of mandatory auditor rotation is such an orphan idea with no credible studies or research supporting that it would improve audit quality and a host of opponents in both government and the private sector. According to an article in Compliance Week, the U.S. House of Representatives’ (House) Financial Services Committee has threatened the Board with legislation to bar auditor rotation.  The House Banking Committee ordered the PCAOB Chairman to give up the idea.  The U.S. GAO has studied the idea of mandatory auditor rotation and concluded that the idea was not advisable and that it would significantly increase the cost of public company audits.  The AICPA issued a well thought-out comment letter on the Concept Release in which they pointed to a number of arguments against mandatory auditor rotation:  No credible research exists demonstrating that firm rotation would significantly improve audit quality; Numerous studies indicate that audit quality increases with audit firm tenure; Studies indicate fraudulent financial reporting is more likely to occur in the first three years of the auditor tenure; The disadvantages would be compounded in multi-national companies in which multiple international auditor rotation requirements (currently being considered) could result in multiple audit firms using varying auditing methodologies on a single, given audit---essentially a forced audit quality nightmare; Mandatory rotation undermines the role of the audit committee as the gatekeeper to select the audit firm that can perform the highest quality audit in the most efficient and effective manner; All right – enough piling on. In the interests of engaging debates, what are some fertile ideas to improve audit quality aside from mandatory auditor rotation?  We auditors at Urish Popeck suggest: More focused auditor education and CPE requirements relating to known drivers of audit quality such as independence, objectivity, professional skepticism, industry knowledge, audit methodologies, complex accounting and auditing issues and areas, workpaper and financial statement review and other quality control measures; Specific CPE requirements and standards for certain industry specializations (health care, banking and other regulated industries) similar to the current yellow book standards for auditors; Measures and standards to improve audit committee accounting, auditing and financial reporting competence, “360” communication and independence of Company management; More emphasis and structure to the audit committee’s role in monitoring audit quality for both internal and external audits and perhaps ensuring coordination of the two without overlap; Better definition to the role of the internal audit function reporting to and being the daily eyes and ears of the audit committee; A requirement that absent an internal audit function, the Audit Committee have at least a minimal (at least one) full time seasoned auditing staff to serve as their daily eyes and ears; Establish separate, additional, auditing and audit committee standards (clearly acknowledging a dual standard based upon the risks) for public companies that are “too big to fail”; Finally, with a nod to auditor rotation, better definition to the Audit Committee’s role as the gatekeeper in hiring and firing auditors and a presumption that they evaluate changing auditors on a periodic basis (ideally long term---say every 10 years) with it being acceptable to retain the current auditors if the committee concludes the auditors continue to do quality work.  We auditors at Urish Popeck are opposed to mandatory auditor rotation and take very seriously the challenge of delivering quality audit work tailored to our clients’ risks and needs, in an efficient and cost effective manner. With the PCAOB’s decision upcoming, please stay tuned to Urish Popeck’s blog for updates on mandatory auditor rotation or follow Urish Popeck on Twitter for breaking news. 
Categories: Advisory

Thoughts on PCAOB Oversight

by Hiller Hardie 1. February 2012 11:21
  My recent blog discussed the trend of the last several years of declining revisions of financial statements due to accounting errors or manipulations. As a member of the Accounting profession, I follow the activities of the PCAOB with interest (and often skepticism). Of particular relevance is their current slate of projects including mandatory auditor rotation, expanded audit reports and expanded roles for auditors beyond the traditional financial statements. As I focus on this, in view of the aforementioned decline in restatements, I tend to believe that we are going too far.   However, the unfolding story of Olympus and the depth and duration of the fraud perpetrated by their management paints a different picture.  The announcement that the PCAOB’s recent inspections of Big 4 firms have revealed numerous flaws in their audits is also pertinent   I am often tempted to think that the PCAOB should eventually go in to “maintenance” mode. In other words, they should allow the system to run as designed. Their actions should commence when audit failures transpire. Changes and remedies they put in place should be based on the findings from the investigations of such failures. That may ultimately prove to be naïve but at any rate now is not the time.
Categories: Advisory

New and Improved! PCAOB AU 380

by Ken Urish 23. January 2012 14:39
As a prison boss famously said to Paul Newman's character in Cool Hand Luke, "What we got here is... failure to communicate." Well, the PCAOB did not consider AU 380, it's standard on auditors' communications with audit committees, to be a failure of Cool Hand Luke proportions - but they have decided some improvements were in order. In late December 2011 the PCAOB reproposed AU 380 based on response to comments received through a comment letter process and a public roundtable. The reproposed standard is intended to improve current requirements regarding auditor communications by linking these to the related performance requirements in other auditing standards; it does not otherwise impose new performance requirements other than communications. The new proposed standard and related amendments are anticipated to be effective, subject to SEC approval, for audits of fiscal years beginning on or after December 15, 2012. Comments on this reproposal are due by February 29. Click here for access to the reproposed standard and supplemental materials.
Categories: Assurance