Traditionally, audit procedures for private companies tend to focus on the balance sheet. That is, auditors evaluate whether the book values of the company’s assets are overstated and its liabilities are understated. However, the income statement needs attention, too, especially in light of the updated guidance on recognizing revenue from contracts and the potential for misstatement.
The coronavirus (COVID-19) outbreak — officially a pandemic as of March 11 — has prompted global health concerns. But you also may be worried about how it will affect your business and its financial statements for 2019 and beyond.
The American Institute of Certified Public Accountants (AICPA) recently issued the 2019/2020 edition of the Audit Risk Alert (ARA), General Accounting and Auditing Developments. This publication provides auditors with an overview of recent economic, industry and regulatory developments that might affect how they conduct audits. Here are some highlights to help private companies understand the auditor’s mindset in the current audit season — and beyond.
The new current expected credit loss (CECL) standard goes into effect this year for large public companies. However, a recent study by Moody’s Investors Service reports that bank-to-bank comparisons will be muddled, because the new rules don’t prescribe a specific model for measuring losses. But the study also found that new rules are unlikely to have a significant effect on banks’ loss reserves or credit ratings.
Auditors use various procedures to verify the amounts reported on your financial statements. In addition to reviewing original source documents and comparing trends from prior years, they may reach out to third parties — such as customers and lenders — to confirm that outstanding balances and estimates agree with their records. Here are answers to questions you may have about audit confirmations.
Contingent liabilities reflect amounts that your business might owe if a specific “triggering” event happens in the future. Sometimes companies are unclear when they’re required to report a contingent liability on their financial statements under U.S. Generally Accepted Accounting Principles (GAAP). Here are the basics.
In fiscal year 2019, auditors of large public companies began to include so-called “critical audit matters” (CAMs) in their audit reports. Here are initial observations from the Public Company Accounting Oversight Board (PCAOB) about the effort that large audit firms have put into implementing the guidance for the first time.
Construction contractors, professional service firms, specialty manufacturers and other companies that work on large projects often struggle with job costing. Full cost allocations are essential to gauging whether you’re making money on each job. But some companies simply lump indirect job costs into overhead or fail to use meaningful cost drivers, thereby skewing their profit reports. Here’s what you should know to avoid this pitfall and get a clearer picture of your company’s profitability.
Before you jump headfirst into the year-end financial reporting process, review the role independent audit committees play in providing investors and markets with high-quality, reliable financial information.
A comprehensive benchmarking study requires calculating ratios that gauge the following five elements: