{"id":249,"date":"2014-10-03T18:57:31","date_gmt":"2014-10-03T18:57:31","guid":{"rendered":"https:\/\/seci.wpenginepowered.com\/?p=249"},"modified":"2014-10-03T18:57:31","modified_gmt":"2014-10-03T18:57:31","slug":"the-season-of-icfr","status":"publish","type":"post","link":"https:\/\/seciblog.pli.edu\/index.php\/the-season-of-icfr\/","title":{"rendered":"The Season of ICFR"},"content":{"rendered":"

(Our apologies, the post is longer than usual, but it\u2019s an important one)<\/strong><\/p>\n

Pumpkins, glorious foliage, and frost signal the arrival of Fall in NH, as well as hunting season.\u00a0 Alas for many accountants, Fall signals the beginning of the assessment of internal control over financial reporting as calendar-year companies and their auditors start their interim testing and hunt for material weaknesses.\u00a0 This year will likely be especially challenging due to recent PCAOB inspection report ICFR findings and guidance such as Staff Audit Practice Alert No. 11: Considerations for Audits of Internal Control over Financial Reporting, issued in October 2013.\u00a0 The SEC has weighed in over the last year as well. \u00a0So, we thought it might be helpful as we start the ICFR season to increase your awareness of the PCAOB and SEC concerns over ICFR assessments and audits and point you to some resources worth reading.<\/p>\n

Let\u2019s start with the PCAOB.\u00a0 It is no secret that the PCAOB inspection staff has focused on ICFR audits and has not been happy with a lot of them.\u00a0 If this is news to you, just take a look at the inspection reports issued to the Big 4 over the last few years. The inspections staff expects the firms to show progress in addressing inspection findings in the next audit cycle, so the pressure is on.\u00a0 As a result, it is very likely that your auditors will be changing their audit methodology in some way this year, which will ultimately trickle down to what you do.\u00a0 So our recommendation to registrants is to be pro-active: read the last 2 inspection reports your auditor received (you can find them at http:\/\/pcaobus.org\/Inspections\/Pages\/PublicReports.aspx<\/a>), read Staff Alert No. 11 (find it at http:\/\/pcaobus.org\/Standards\/QandA\/10-24-2013_SAPA_11.pdf<\/a>), and talk to your auditors about anticipated changes in your audit and their expectations.\u00a0 And if you have an appetite for more, see an interesting speech by Board Member Jeanette Franzel at http:\/\/pcaobus.org\/News\/Speech\/Pages\/03262014_IIA.aspx<\/a>.<\/p>\n

The SEC has also expressed concern that some of the PCAOB\u2019s inspection findings \u201care likely indicators of similar problems with management\u2019s evaluation\u201d (see Deputy Chief Accountant Brian Croteau\u2019s speech last December at www.sec.gov\/News\/Speech\/Detail\/Speech\/1370540472057#.VC6uXEuppZg<\/a>)<\/p>\n

For years, the SEC has voiced its concern that material weakness findings are lagging indicators, discovered as a result of a restatement, and not a leading indicator discovered in the ICFR assessment in time to prevent a restatement. \u00a0Case in point is the recent SEC Enforcement case against JDA Software Group.\u00a0 The SEC investigation found that the company had inadequate internal controls over financial reporting, specifically in the area of revenue recognition, resulting in a multi year restatement. \u00a0And from Mr, Croteau\u2019s remarks cited above there are more ICFR enforcement cases in the pipeline\u2026<\/p>\n

We hope this helps \u2013 happy hunting!<\/p>\n

As always, we would love to hear your comments!<\/p>\n","protected":false},"excerpt":{"rendered":"

(Our apologies, the post is longer than usual, but it\u2019s an important one) Pumpkins, glorious foliage, and frost signal the arrival of Fall in NH, as well as hunting season.\u00a0 Alas for many accountants, Fall signals the beginning of the assessment of internal control over financial reporting as calendar-year companies and their auditors start their … Continue reading The Season of ICFR<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false},"categories":[1],"tags":[],"coauthors":[163],"class_list":["post-249","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts\/249","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/comments?post=249"}],"version-history":[{"count":0,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts\/249\/revisions"}],"wp:attachment":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/media?parent=249"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/categories?post=249"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/tags?post=249"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/coauthors?post=249"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}