"New use for the acronym GIGO. GAAP In, Garbage Out" - Keith Kauffman, October 17, 2019
"FASB proposes delays for certain preparers, Effective dates of 4 major standards would be affected" (Journal of Accountancy, September 2019, title of article) - A delay in implementation when companies have had years to prepare tells you the standards are not worth the paper they are written on.
You thought ASC 606 was hard? Tackling ASC 842 is even more complex! (Lease Accounting, Twitter, @onthebalancesheet, Aug 30, 2019) - This tweet summed up everything wrong with US GAAP. Why does an accounting standard have to be even harder and more complex? How can one expect complete compliance when you punish the issuers? What a disaster.
Amazon.com Inc. chief executive Jeff Bezos, for example, has said that he doesn’t much care whether his company ever earns a profit as calculated by GAAP; his goal is to maximize another measure called free cash flow. (Accounting Today, Elizabeth Warren’s corporate tax plan sounds reasonable. It isn’t., April 17, 2019) - Amazon.com prepares financials under US GAAP only to tell investors those financials don't matter. 100% on point, they don't. Who is Bezos and Amazon.com again (sarcasm)?
Former SEC Chief Accountant Lynn Turner asks: Name one financial-statement corporate #fraud that was first found and reported by the firm's outside #auditors? Crickets. (from #FraudFest2019) - I can't name one. An interesting commentary. Is it they can't detect the fraud or are they not willing to report the fraud?
“We are not confident in relying solely on the integrity of auditors to do the right thing in the face of conflicting interest,” the report said. (100-page report from the Business, Energy and Industrial Strategy Committee, U.K. Parliament committee) - These are the same auditors who audit 90% of the U.K.'s largest companies. This disappoints me on so many levels.
"Audits have become a cruel deception on people. Auditors collect vast fees and deliver little. In all this, we should remember that auditing firms are a means to an end: to promote confidence in businesses and protect people from financial frauds and fiddles. As auditing firms deny even a modicum of social responsibility, we need to develop alternative arrangements." (Left Foot Forward, “We are not looking for fraud”: What a Parliamentary hearing revealed about Britain’s auditing sector) - Exactly. This is what this website is all about. A better alternative.
"The list of failures is practically endless. Now auditors’ handling of Carillion, BHS, Tesco, Manchester Building Society, Connaught, Quindell, banks and other firms has finally persuaded the House of Commons Business, Energy and Industrial Strategy (BEIS) Committee to examine the future of this murky world." (Left Foot Forward, “We are not looking for fraud”: What a Parliamentary hearing revealed about Britain’s auditing sector) - How is this not a wake up call even for the US.
"The new rules are supposed to improve comparability by eliminating industry-specific accounting for revenue under U.S. GAAP...and implementing a principles-based, single revenue-recognition model across industries and around the globe." (MarketWatch, Reporting on revenue recognition changes is still causing confusion—even for analysts, Francine McKenna, Feb 1, 2019) - I guess we are all selling the same widget like we learned in school. How pathetic.
"What is the point of the audit if the market moves on unaudited information every quarter and even at year end, and auditors feel pressure not to make adjustments once companies release unaudited results, typically crowded with non-GAAP metrics that are also unaudited?" (Re:The Auditors, Do Investors Care At All About Audits Anymore?, Jan 24, 2019) - Simple answer, there is no point. US GAAP is useless so the audit of US GAAP financial statements is even more useless.
"Under the definition, information is material if omitting, misstating, or obscuring it could reasonably be expected to influence the decisions that the primary users of general-purpose financial statements make on the basis of those financial statements, which provide financial information about a specific entity." (IASB new definition of Material) - This is crystal clear now. I was worried they would make it hard to understand (Sarcasm).
"To Few to Fail" - Common quote related to the Big 4 and the main reason the SEC and PCAOB have no teeth besides fining the firms. What are they going to do? No longer allow one let alone two of them to perform audits.
"Lee said “nonbelievers” and regulators who have overlooked blockchain technology have “got to start believing in this,” because it's not going away. That includes the Financial Accounting Standards Board and the International Accounting Standards Board, he said." (Quote by Hee Lee, EY Financial Accounting Advisory Practice leader, Panel examines blockchain and cryptocurrencies' effects on accounting and tax, Smart Brief, November 28, 2018) - It is not shocking FASB and IASB are not addressing. It is because they do not know what to do. The standards are useless is this new paradigm.
"Young professionals are leaving public accounting to go into private industry. Why? They are disengaged and not seeing a future.
Why does this happen? They see their firm deeply engrained in compliance and not moving toward the direction the CPA profession is headed. The future is not 1040s, tax returns and mandatory financial statement audits." (Accounting Today, Why is your staff disengaged?, November 7, 2017) - The heart of the problem is compliance (ex. US GAAP) and it appears firms are unable to make the change to a new paradigm. I say instead of blaming the firms, shift the compliance paradigm to be in line with young professionals expectations.
"The changes were published in Accounting Standards Update No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. The standard is designed to reduce the cost and complexity of financial reporting associated with variable-interest entities (VIEs), which are organizations in which consolidation is not based on a majority of voting rights."(Journal of Accountancy, 10/31/2018, FASB expands private company consolidation relief) - Seems to be a theme, reduce cost and complexity. This theme should be built into every standard.
“Cash is Cash. Everything else is accounting.” (Arizona Republic dated Thursday, May 10, 2007 made by Stuart Preston) - this one started it all for me
"Looks like the Theranos investors decided that audits are worthless, even if the cost is some “immaterial to them” fraud losses". - last line from the article, A Requiem for Independent Audits: The Last Days of Theranos, website www.retheauditors.com. Awesome commentary, read the article.
"Auditors soon will be able to communicate "critical audit matters" in addition to the pass/fail opinion financial statements" (Journal of Accountancy, October 2018, Tips for understanding critical audit matters) - If pass is a "clean" (unqualified opinion), what is a "fail" opinion?
"FASB continued its efforts to improve its new lease accounting standard, issuing minor amendments, 16 targeted changes, and a proposal to reduce costs and make implementation easier for lessors" (Journal of Accountancy, October 2018, Lease accounting rules get additional tweaks) - This pretty much speaks for itself and supports my theory on US GAAP
"80% of companies have an external audit as a fraud control, yet external audits only detect fraud 4% of the time. Fraud is detected 7% of the time by accident. Thus, a company has almost twice as a likely a chance to detect a fraud by accident than by an external audit" (2018 Report to the Nations, ACFE) - Not sure why there still exists a perception that external audits find fraud
"35% of investors have a great deal of or quite a bit of confidence in the audit financial information of publicly held companies" - Center for Audit Quality, 2018 Annual Main Street Survey - approx. 1 out of 3 investors, why isn't this much higher?
"20% - Auditors provide honest and independent third party scrutiny, 15% - Auditing is well regulated, 11% - auditors are highly skilled at what they do" - responses to the question For what reasons do you (i.e. investors) have confidence in the audited financial information of publically held companies - (Center for Audit Quality, 2018 Annual Main Street Survey) - This to me should be a wake up call
"The audit is a commodity" - the most famous of the quotes
55% of Investors have only some, very little or no confidence in the Audited Financial Statements of publicly traded companies - Center for Audit Quality, 2018 Main Street Investor Survey
"GAAP requires it or GAAP says so" - a personal favorite
"Nobody reads the financials" - Why?
"Financial statements prepared under US GAAP are little more than an expensive compliance document" - Keith Kauffman
Do you have a quote?
Send it to me!