Accounting & Auditing Update

Be careful what you call a “foreign business.” The Securities and Exchange Commission says it is seeing too many instances of companies trying to call their joint ventures “foreign businesses” for financial reporting purposes. Perhaps that’s because the reporting requirements might be easier to meet. See inside.

Ford Motor Co. is taking a one-time $800 million charge to earnings in its 2014 fourth quarter because of continued currency problems with Venezuelan operations. In a filing with the SEC, the company said the currency woes have constrained parts availability, which makes normal production difficult to maintain. Details inside.

The Audit Committee Collaboration, backed by seven groups with various missions around corporate governance and investor advocacy, has updated its External Auditor Assessment Tool, tips to help audit committees conduct their evaluation of external auditors. Cindy Fornelli, executive director of the Center for Audit Quality, says the tool “can help audit committees address evolving challenges with a focused yet scalable approach.” Details inside.

The Center for Audit Quality has issued an alert to auditors advising where they should focus their audit attention this year. First up is professional skepticism and internal control over financial reporting, followed closely by risk assessments, cyber-security, revenue recognition, and related parties. “These alerts reflect the public company auditing profession’s strong commitment to continuously strengthening audit quality,” CAQ Executive Director Cindy Fornelli says. Details inside.

As the SEC considers the potential for new disclosure requirements for audit committees, audit committees themselves are volunteering more, according to recent analysis by the Center for Audit Quality and Audit Analytics. The analysis revealed one-fourth of companies in the S&P 500 enhanced their discussion around the audit committee’s appointment of the audit firm in 2015, roughly double the number the year before. Details inside.

The Center for Audit Quality, which represents auditors, has issued a new report on its effort to pilot test its approach to defining audit quality indicators and its suggested path forward on how to identify the most effective way to define and then measure audit quality. The CAQ says it has learned through its roundtable discussions and pilot testing that the determination is “more art than science,” and audit committees are looking for guidance on how to grasp the more qualitative aspects of external audit.

Companies beginning to prepare for year-end audits can get a sense of what might be on their auditors’ minds through a new alert from the Center for Audit Quality. More from Tammy Whitehouse.

A new survey from Protiviti of 1,300 internal audit professionals shows that companies have made big progress in the past year integrating cyber-security risk into internal audit plans. Nearly three out of every four organizations include cyber-security risk in their internal audit plans, according to the poll, up from only half of organizations in 2015. Nearly 60 percent of auditors said their companies have received inquiries from customers, clients, or insurance providers about the entity’s readiness to withstand a cyber-attack. 

The Center for Audit Quality has created a tool to help audit committees navigate the thicket of questions they should be asking in light of increased scrutiny of corporate use of non-GAAP accounting measures. Tammy Whitehouse reports.

Public company auditors are suggesting that companies voluntarily submit to an independent cyber-security examination separate from the existing financial statement audit. Tammy Whitehouse explores a new process for examining and reporting on a company’s cyber-security risk management.

Citing an “urgent” need for audit committees to get up to speed on implementation of the new revenue recognition standard, the Center for Audit Quality offers some pointers. Tammy Whitehouse has more.

Audit committees have an updated tool available for use to help them assess their external auditors, courtesy of a collaborative group of advocates for audit quality.

Auditors now have a new guide available to them to help examine and report on companies’ efforts to manage their cyber-risk, and the profession is touting their ability to contribute to the effort.

Audit committees now have some talking points on how to engage auditors and management on the audit profession's new Form AP filing requirement.

Auditors have been notified to be alert to whether corporate SAB 74 disclosures about pending new accounting standards are adequate.

Audit leaders have handed out yet another alert to auditors to dig into high-risk areas as they prepare for the upcoming year-end audit cycle.

Audit committees took it up another notch in the past year in their voluntarily disclosures to investors, according to the latest analysis.

The Center for Audit Quality is offering some tips to audit committees on how to query senior management regarding readiness for new lease accounting standards.

To stoke more board inquiry on cyber-security, the CAQ has published a primer on questions that  management and external auditors should be ready to answer.

As a new crop of college graduates joins the audit profession, U.S. audit leaders issued a joint statement to sell them on the viability of their career path.

Investor confidence in auditors and in capital markets in general fell in 2018, according to the annual poll by the Center for Audit Quality.

SEC staff have signaled companies might want to take a second look at their revenue recognition compliance as they approach their first year-end filing under ASC 606.