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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Categories: Advisory

The U.S. Still Far From Using IFRS

by Kevin McGarry 13. September 2012 10:12
In July 2012, the SEC issued a report describing the issues that the U.S. would face if they got rid of U.S. GAAP. Regulators said they needed to do additional research before revisiting the controversial subject. One of the main drawbacks and hold ups from the U.S. moving towards IFRS is the sheer burden of converting. It would take a huge effort on individuals and high costs to change the vast number of references to U.S. GAAP in U.S. regulations and laws. To combat this fear, there was a hope that IFRS would be approved and tailored for U.S. companies on an as-needed basis. However, many countries that use IFRS modify the standards for their markets, which causes a lack of consistency across the world. To better understand the issues and concerns that face the U.S. with a possible switch to IFRS, please see the full report issued by the SEC. If you have any questions or concerns, please do not hesitate to contact me at
Categories: Tax

Dealing with the Foreign Corrupt Practice Act and the "Tone at the Top"

by Hiller Hardie 29. August 2012 10:45
The SEC and DOJ have been very active in investigating and prosecuting Foreign Corrupt Practices Act (“FCPA”) related matters of late. Pfizer, Teva Pharmaceuticals, Las Vegas Sands   and Avon are some of the more well known companies that have recently received negative press related to this. While the FCPA has been on the books since the late 1970’s, the fact that this bolus of activity is transpiring serves to remind us that (1) the temptation to use questionable practices to secure business overseas is omnipresent and (2) we as CPA’s, in both public practice and private industry, must play pivotal roles in combating questionable practices. The first line of defense against FCPA issues (or any questionable or fraudulent activity, for that matter) is to establish and maintain a strong system of internal accounting controls. CPA’s in management or internal audit roles can and should provide valuable advice and assistance in that regard. CPA’s in public practice need to diligently fulfill their duty to evaluate internal controls during their audits and communicated potential improvements. Indeed a critical, periodic review of existing controls, by both Management and the auditor can result in meaningful improvements and bolstering defenses. However, FCPA compliance issues often arise where collusion and/or management override are in play. In these situations, the critical importance of Entity Level Controls and the “tone at the top” becomes very apparent. While these may be viewed as “soft” and hard to grasp, especially by less experienced CPA’s, those who have been involved with sensitive issues (such as FCPA non-compliance) know their importance. The CPA must use his or her softer skills in assessing the “tone at the top”.  Often it is a pure “gut” feel that generates questions and ultimately may result in discovery of issues. The recent frequency with which FCPA issues have been noted requires us all to maintain (or elevate) our sense of professional skepticism.
Categories: Assurance

Dodd-Frank: Impacting Executive Compensation

by Ken Urish 12. March 2012 08:05
Among several other purposes, when the Dodd-Frank Act became law in 2010 it required public companies to comply with a number of disclosure and shareholder-voting provisions regarding their compensation practices, and gave the SEC the authority to make additional rules in furtherance of these requirements. The SEC adopted a number of new provisions effective in 2012 requiring consideration of risk that could be associated with any of an organization's compensation plans, as well as the solicitation of shareholder input on executive compensation practices. Those are: Say on Pay – a non-binding shareholder vote is required at least once every three years to approve the compensation of the executive offers Say on Pay Frequency – the SEC permits companies to solicit a non-binding vote on the frequency of shareholder Say on Pay votes (every one, two, or three years) Shareholder Disclosure and Approval of Golden Parachutes – the rules require an advisory shareholder vote related to all compensation arrangements with executive officers in connection with any merger, acquisition, consolidation, proposed sale, or other disposition of all or substantially all assets of the company What's ahead? Compensation committees should be aware that many additional regulations are expected to be developed during 2012 that will be implemented for 2013. Further analyses and disclosures (e.g., CEO pay compared with shareholder performance, CEO pay as a percentage of the "median" company employee (compensation, etc.) are in process and will require new and more in-depth examination and communication of executive pay practices.
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

Significant Support for Incorporating IFRS into GAAP

by Ken Urish 17. November 2011 13:33
In a letter to the SEC dated November 15, 2011, the Financial Accounting Foundation (FAF) announced that it supports the incorporation of IFRS into U.S. GAAP “as the appropriate path forward for the continued development of high-quality, investor-focused, international financial reporting standards.” FAF is the independent, private-sector organization with responsibility for the oversight, administration, and finances of the Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB and their Advisory Councils. FAF expressed its support for an incorporation approach that “advances improvements to U.S. GAAP and furthers the comparability and consistency of high-quality, investor-focused financial reporting standards throughout the globe.” Toward that end, it has recommended a number of modifications to the SEC’s proposed approach to IFRS incorporation. The proposed FAF approach is based on the premise that, over time, international standards will become the foundation of U.S. GAAP. Significantly, FAF believes that its proposed approach complements the SEC’s primary responsibility of facilitating investor protection in the U.S. capital markets, and that it reinforces the SEC’s goal of setting standards that provide necessary financial information to investors in our capital markets.
Categories: Assurance

XBRL – So Far, So Good

by Ken Urish 7. July 2011 09:32
eXtensible Business Reporting Language (XBRL) has been adopted as the new technology standard to web-enable the financial reporting process. XBRL is intended to provide benefits to both the auditing profession and to shareholders and other users of corporate financial data. Instead of treating financial information as a block of text, XBRL employs a computer-readable tag to identify specific items of data. This process enables access to and exchange of corporate financial and business data in an “intelligent” manner, with the goal of enhancing corporate governance by making the information more meaningful and transparent. SEC-reporting companies are in a phase-in period of the interactive data requirements, with the ongoing introduction of detailed tagging of notes to the financial statements and the phase-out of the limited liability provisions.  The Division of Risk, Strategy, and Financial Innovation recently completed a review of XBRL documents submitted during the first two months of 2011 and has published its observations on those filings.  The SEC is encouraging companies to take these observations into account as they prepare future filings. Overall, the SEC believes that filers “continue to devote significant effort to consider their responsibilities under this program, comply with the new rules and provide high-quality submissions.”
Categories: Assurance

SEC Takes Next Steps to Implement XBRL

by Jessica Moore 24. June 2011 11:18
Effective June 15th, the SEC will initiate the third phase of the Commission’s XBRL implementation program. The implementation should be viewed as a means of creating better transparency for investors, allowing them to access financial information in an analyzable format. [More]
Categories: Assurance