International Accounting Day

On November 10,1494, the first book about double entry systems was published by the Italian mathematician, Lua Pacioli, also known as the father of accounting. In his honor the day is celebrated as the International Accountants Day! To all fellow accountants, keep up the great work.

Big 4 collusion conspiracy

Italy’s Antitrust authority fined the big 4 (Ernst & Young, Deloitte, KPMG and PWC) a total of 23 million euros for allegedly conspiring and colluding to divvy up large public consultancy contracts. Looks like the Big 4 need to revise their Ethics class!

Embezzlement report by Hiscox

According to a recent study by global specialty insurer Hiscox, in 2016, workplace embezzlement cases cost companies an average of $1.13million. Some very interesting facts from the report

55% of cases occurred at companies with fewer than 100 employees
37% of cases committed by someone in finance and accounting
30% of cases occurred in financial services or government sectors
37% of cases involved losses of > $500,000 and 23% of cases involved losses of > $1million
28.7% schemes lasted greater than 5 years
51% of perpetrators were women
Median age of perpetrators is 48

Definitely an interesting read.

 

Making the audit report more useful

The Public Company Accounting and Oversight Board (PCOAB) adopted a new auditing standard with a goal to enhance the usefulness of the auditor’s report to investors by providing additional and important information.

The US Securities and Exchange Commission (SEC) approved the regulation as well. The new standard would require auditors to include in the auditor’s report a discussion of the the critical audit matters (CAMs). CAMs are matters that have been communicated to the audit committee, are related to accounts or disclosures that are material to the financial statements, and involved challenging, subjective or complex auditor judgment.

CAMs will have to be added to the audit reports of large companies beginning in mid- 2019 and for other companies starting in early 2021. Along with that auditor’s will also have to disclose their tenure with the company starting early next year.

It definitely seems to be in the right direction to give investors more information on not simply the quality of the financials but also the quality of the audit.

Another fine for a big 4 for audit misconduct

The Financial Reporting Council fined Ernst & Young £1.8 million for their shoddy audit work of distributor Tech Data.

This is what happened. In 2013, Tech Data revealed that there were material errors in their financials for 2011, 2012 and part of 2013. The errors were related to improper accounting of vendor sales, improper use of manual journal entries and incorrect recognition of forex currency conversion. The company’s bottom line was reduced by $27 million due to these errors.

After Tech Data’s revelation, FRC got into action and in 2014 started to look into Tech Data’s auditor E&Y’s role in the matter. Both E&Y and the audit engagement partner Julian Gray admitted that they messed up and were fined £1.8m and £90K respectively.