Defective Audits Are Not Being Adequately Dealt With The SEC removed William Duhnke as chairman of the Public Company Accounting Oversight Board (PCAOB), the U.S. audit watchdog, on June 4, 2021. This raises serious questions about the relevance of the PCAOB today and whether it has been operating as intended.... Read more →

Protecting the Public Interest It’s the time of year when companies provide earnings guidance to investors and financial analysts about their future prospects for 2021. Uncertainties abound because we are in unchartered territory with respect to the impact of Covid-19 on the financial position, operating results, and future cash flows... Read more →

Will Whistleblowers Still Come Forward? A new SEC rule interpretation threatens to weaken the incentive for external whistleblowers to come forward with details about potential corporate fraud. The clarification states that a whistleblower’s tip has to offer insight “beyond what would be reasonably apparent” to the agency from publicly available... Read more →

Accounting Ethics at KPMG is an Oxymoron It was just announced that that the California Board of Accountancy has fined KPMG $1.3 million for violations of the Accountancy Act. The Board’s action arose from KPMG admitting to being disciplined by the Securities and Exchange Commission over its actions to obtain... Read more →

ACFE 2020 Report to the Nations on Occupational Fraud and Abuse The 2020 Report to the Nations on Occupational Fraud and Abuse developed by the Association of Certified Fraud Examiners examined 2,504 cases of fraud in 125 countries causing $3.6 billion losses. The results are an eye-opener with respect to... Read more →

Keys to Operating a Successful Cannabis Business State legislation that permits the sale and distribution of marijuana is on the rise. Thirty-three states allow it for recreational and/or medical purposes including the District of Columbia. Cannabis sales were estimated to be $15 billion in 2018 and projected to be about... Read more →

Trust and Verify Artificial Intelligence systems can obscure the data in a way that creates biased information depending on the human values of those who enter the data from its source. For example, an algorithm developed from mortgage loan data might include a variable for the expectation of homeowners’ repayment... Read more →

Actions Constitute an Act Discreditable to the Profession On May 18, 2020, the Securities and Exchange Commission (SEC) announced settled charges against three former KPMG LLP audit partners for improperly sharing answers to internal training exams. The exams were administered to determine whether its audit professionals understood certain accounting and... Read more →

Global Reporting Guidelines I’ve been communicating with Michael Kraten, a friend of mind and fellow blogger, about accounting issues surrounding the coronavirus. We agree that companies hard hit by the shutdown should disclose a contingent liability that estimates possible losses as a result of the shutdown. This may be easier... Read more →

The Lost Art of an Independent Audit The time has come to revisit the issue whether all nonaudit services should be prohibited for audit clients. The accounting profession continues to struggle with independence issues when both services are provided. The threats and safeguards approach in the AICPA Code does not... Read more →