The GSCPA House of Blogs
For the members. By the membersArchive for December, 2011
COSO IC Framework Revision Update
Written by: Bill Schneider
The COSO Advisory Committee met again earlier this month. At this meeting we covered the final pre-exposure draft of the Internal Control Integrated Framework and the first draft of the Guidance document over Internal Control over External Financial Reporting .
The Internal Control Integrated Framework exposure draft was released last week and is now open for comment. You can access the exposure draft at www.ic.coso.org. The document is lengthy, but it will be well worth your time. Proper controls are critical to a well functioning organization and the framework update should help you ensure your organization has a proper control structure in place.
You can submit comments in two ways. Traditional letters will be accepted and published on the COSO website. You will also be able to access an online tool to submit your comments. All of the online comments will be summarized and published as a single document so there will be some level of anonymity if that is what you are looking for in submitting comments. The comment period runs through March 31 so, while it is a busy time of year, you have plenty of time to get your comments in.
The second document the COSO Advisory Committee is working on is a guidance document on how to implement the Internal Control Integrated Framework over External Financial Reporting. This document is based on the 2006 guidance document on implementing the Internal Control Framework over financial reporting for small entities, but now it will cover all sizes of companies.
As the team reviewed the 2006 guidance we realized that even though the document was designed with small companies in mind, much of the guidance was applicable to entities of all sizes. The major reason for this is that the guidance focuses on the entire Internal control process as well as the point of internal control which is managing risk. The small versus large entity differences are most often highlighted in control activities which is often view by many CPAs as “internal control.” The reality is that is only a part of an internal control system is composed of control activities. Other critical components include Control Environment, Risk Assessment, Information and Communications and Monitoring Activities.
The guidance document will include a general guidance section as well as illustrative approaches and examples covering all five of the Internal Control Components. As such it should just as useful to someone updating an entire Internal Control Process as to someone who wants to focus on just one area to make improvements. The Guidance document will also be released for public exposure during the summer of 2012 with both documents being finalized by the end of the year.
I often hear comments from people about how the FASB, SEC and now COSO are doing things that to them that don’t make sense. This is your opportunity to make sure that doesn’t happen. Get involved in the comment process. Your comments will be reviewed and considered. It’s the only way to make sure the best possible document comes out in the end.
AICPA SEC-PCAOB Developments Conference
Written by: Bill Schneider
I had the opportunity to attend the AICPA National Conference on Current SEC and PCAOB Developments recently. If you work in the public company reporting or auditing world and didn’t attend this conference, you missed a great opportunity to get caught up on the latest developments and areas of focus from the IASB, FASB, FinREC, SEC Division of Corporate Finance, SEC, Office of Chief Accountant, SEC Enforcement Division, and the PCAOB. And the updates aren’t by some low level staff member. They are presented by Board Chairmen and Division Chiefs. The best part is the extensive question and answer sessions throughout the conference. Most speakers answer questions at the end of each of their sessions, but, in addition, at the end of each of the first two days of the conference, key speakers from the day spend over an hour just answering questions.
There is no way to give the conference justice in a short blog, but I did want to highlight a few things I found interesting. For the ninth time the SEC Division of Corporate Finance spent time talking about the requirements around segment disclosures. If you have not received a comment letter from the SEC on your segment reporting, just wait, you will. In addition, you better have your reasons for your segments well documented and they better align with the reports your Chief Operating Decision Maker is using.
One interesting point was made by a member of the SEC Office of Chief Accountant related to the PCAOB release on independence and mandatory auditor rotation. He raised the question “does the growth of consulting practices at audit forms represent a greater risk to audit quality (and independence) than tenure of the auditor?“ It’s an interesting point and one that my auditor colleagues should think about as they consider where the PCAOB may go in developing proposed rules based on the feedback received on the concept release.
Another area of emphasis that was brought up several times by the SEC representatives was the use of pricing services to develop level 2 fair value information. While there is nothing wrong with using the services, if management and the company auditors do not understand the assumptions and models used by the services, the SEC and PCAOB are of the opinion that a control deficiency and an audit deficiency is likely to exist. I guess the days of saying we are CPAs, not valuation specialists are over. Like it or not, accounting standard setters have embraced fair value and if you are not proficient in the language and techniques of valuation, then you no longer have adequate knowledge to be a preparer or auditor of financial statements in the modern world.
There is so much more I could talk about like the SEC views on IFRS and the fact that any word for the SEC on adoption of IFRS by the U.S. is not likely to come until well into 2012 or the stated desire to frame the “audit” requirement around conflict minerals certification so that it won’t be limited to CPAs, but I only have room for so much. If you regret not attending this year and don’t want to be left behind by the over 2,000 of your colleagues that attended this year, but sure leave a reminder to yourself to attend the 2012 conference next year. I’m sure it will be another great one.
I Write These Blogs
Written by: Bill Schneider
When I started writing this blog a little over two years ago I didn’t know what to expect. My initial thought was that I would write about AICPA Board and Council meetings. I had served on Council for three years and was about to embark on a three year stint on the Board of Directors. Having come through Chapter and State leadership I knew many CPAs that were active in the profession, but many of these even most active CPAs didn’t have a complete picture of what the AICPA did or why they did it. I thought a blog would be a good way to help people understand the AICPA.
So I started off writing my blogs about Council and Board meetings. I also wrote a series of eight blogs on the eight elements of the AICPA strategic plan. Then I started expanding my topics to cover other issues like accounting standards development and legislative and regulatory efforts such as tax patents and the tax preparer identification process from the IRS. After that the topics expanded to cover everything from why I became a CPA to my philosophy on work and what it means to be a member of this outstanding profession.
So here I am at Blog #100. Of course I’ve tracked how many Blogs I have written. I am a CPA after all. First off, to those who wonder, yes, I have written all 100 myself. I haven’t had some PR staff person write them and then put my name on them. Some blogs were reviewed by others for facts, but my main reviewer has been my wife. When I review something I’ve written, I have a tendency to fill in any missing words. I know what I meant to say so my brain just fills in the missing pieces, and anyone who writes on the computer much can tell you the fallacy of over relying on spell check and auto correction. I have to laugh at some of the things that came off my keyboard. Fortunately you never saw them or I might not be on Blog # 100.
The second question I get is how do you come up with topics for 100 blogs? First off, there is so much going on in the profession that I can honestly say there is never a shortage of things to write about, but if all I wrote about as the latest exposure draft issued by the FASB, this blog would get boring so I write about whatever is on my mind at the time. Sometimes it is something serious like FAF’s attempt to subvert the recommendations of the Blue Ribbon Panel on Private Company Financial Reporting, but other times it is little more fun like speculating on what was going on in the back office of the Minnesota Vikings when they had to trade out tickets for one stadium with those of a different stadium when the Metrodome roof tore open in a snowstorm.
The final question I get is why do I do it? I do it for two reasons. First, because you, my readers, seem to value it. I love my profession and the whole reason I got involved in it in the first place was to give something back to everyone in the profession. This Blog is just the latest iteration of that effort. The second reason is because it is an outlet for me. This is my blog. If I want to be a little politically incorrect, I can. If I want to rant a little I can. I’m sure most of you have wanted to do that from time to time. I guess what I am telling you is my Blog is my own little therapy session to keep me sane in this crazy world. So to end Blog # 100 I want to thank you, my readers. Thanks for not crucifying me over the occasional typo. Thanks for saving me a ton of money on therapy sessions and most of all, thanks for caring enough about the profession to read these Blogs.
Sustainability Reporting
Written by: Bill Schneider
Sustainability reporting is possibly the most misunderstood process by CPAs today. When you bring up the subject, far too many CPAs immediately react with indignation. They think its all about carbon footprints and dealing with irrational environmentalist demands. That has resulted in the finance department of many public companies having nothing to do with the official sustainability report issued by their company. Instead, PR departments, compliance organizations or other groups are taking the lead in producing this new external report.
This is unfortunate because sustainability reporting today has nothing to do with global warming and everything to do with the future of reporting by public entities. CPAs need to take a closer look at today’s sustainability report. Yes, there is information on a company’s carbon footprint and fresh water usage. There is also information on community support, employee training and benefits, and a myriad of other topics showing how the company does more than just make money. Simply put, sustainability reports do for other stakeholders what financial reports do for one group of those stakeholders – the shareholders.
It’s not like sustainability reports are all fluff either. They are full of quantitative information. Information that begs for the same rigor a finance department brings to the reporting of financial results. Quantitative information can include items such as the number of volunteer hours contributed to the community by a company’s employees or the number of people including dependents and retirees supported by a company’s benefit programs.
Now, users are starting to seek assurance on all of the numbers included in sustainability reports. This truly gets to the heart of a CPA’s competence. CPAs provide assurance on financial reports; who better to supply that same level of assurance on sustainability reports. Based on work back in the 1930’s CPAs became the exclusive providers of assurance on financial reports. That is not the case today on sustainability reports. Some audit firms are getting into the field, but a variety of other for profit and not-for-profit organizations are also positioning themselves to provide this assurance. The non-CPA organizations are getting increased traction in part because so many finance departments are not involved in sustainability reporting.
As a profession, we are at a critical juncture when it comes to sustainability reporting. Are we going to let this potential expansion of our role in providing information and assurance on company results pass us by or are we going to step up to the challenge of being the preeminent provider of information about all of the results of the company?
Christmas Gift Suggestions
Written by: Colin Blalock, Chair GSCPA (The Pessimistic Optimist)
‘Tis the season for being thankful and for many giving and receiving gifts… I recall when I was very young I had a huge list of “things” to be purchased; just in case someone needed a suggestion or two. I was under what I called the spell of the “sisters.” You know the two sisters: IWanta and INeeda? I want a fancy watch or was it I need a new IPhone. Several years ago I found a quote entitled “Christmas Gift Suggestions” by Oren Arnold (Novelist, journalist, and humorist). Every year I read it and come up with some additions of my own.
“Christmas Gift Suggestions:
To your enemy, forgiveness;
To an opponent, tolerance;
To a friend, your heart;
To a customer, service;
To all, charity;
To every child, a good example;
To yourself, respect.”
I have some 2011 additions to the list to consider:
- To your family and loved ones, especially young children, your time, attention and love;
- To people facing serious health issues especially young people and family, your prayers, concern, and understanding;
- To someone that hurt or disappointed you, forgiveness and compassion;
- To your business partners, your trust, respect and support;
- To people that work with and for you, respect, guidance and encouragement;
- To the less fortunate, your help and assistance;
- To your parents, compassion and gratitude;
- To friends, your time and understanding;
- To veterans, respect and gratitude for their service;
- To charitable organizations, your financial support and if possible your involvement;
- To teachers, appreciation for their dedication and passion for teaching;
- To yourself, exercise, personal time, and acceptance of who your are;
- To your profession, your time, effort, and support.
“There’s more, much more, to Christmas than candlelight and cheer;
It’s the spirit of sweet friendship that brightens all year;
Its thoughtfulness and kindness;
Its hope reborn again,
For peace, for understanding,
And for goodwill to men!” ~ John Greenleaf
We should all pause and think about how blessed we are, focusing on being thankful for our lives and understanding what wonderful gifts we have. It will make cold days warmer, dark days sunnier, and sad days merrier. ~Colin
This is my Christmas gift to you. Please share additions you make to your list.
Merry Christmas and Happy New Year! ~ Colin
