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At this point in the year-end process most of us have numbers in place and are working on the final steps in reporting.  As you move toward final reviews, we share with you Audit Analytics’ list of high-risk financial reporting areas that can hopefully help you avoid reporting problems. For the last 17 years Audit Analyticshas done an exhaustive review of public company restatements.  Their report “2017 Financial Restatements – A Seventeen Year Comparison”…
On December 11, 2018, the SEC announced settled chargesagainst a natural and organic food company, Hain Celestial Group.  The company’s problems began when members of the company’s finance group discovered that its sales organization had been offering unauthorized incentives to two major customers.  These incentives induced the customers to accept shipments near quarter-end that helped the sales department meet internal sales goals. When the finance department discovered these unauthorized practices they began an investigation…
In November and December 2018, SEC Chair Clayton, Chief Accountant Bricker and several other staff members discussed the use of S-X Rule 3-13 waivers.  These waivers may be appropriate when a mechanical application of rules like the significant subsidiary test yield results that may require costly disclosures that might not be material to investors.  All of the SEC speakers emphasized that such waivers require thorough analysis and are not automatic.  The SEC staff has processes…
As companies worked through the implementation of the new revenue recognition standard they dealt with two issues surrounding ICFR: What changes were required to ICFR for this new standard, and Whether or not these changes to ICFR required reporting a material change in ICFR. Reporting material changes in ICFR is a requirement in both Form 10-K and Form 10-Q and involves substantial amounts of judgment.  This postreviews the details of this requirement. As we…
The staff in the SEC’s Office of the Chief Accountant recently provided their insights on a number of issues based on recent consultations with companies, their auditors and other groups within the SEC.  They shared these observations in speeches which you can find on this section of the SEC’s webpage. The issued discussed by the OCA staff included: Internal control over financial reporting (“ICFR”) – evaluation of control deficiencies. Internal control over financial reporting…
At the AICPA’s December conference, Chief Accountant Wesley Bricker’s remarks included a suggestion that this Statement would be valuable reading for professionals involved in the reporting process.  The Statement includes a summary of recent OCA activities, reviews priorities such as fostering ICFR and exercising effective oversight over accounting and auditing standard setting, and also discusses the OCA consultation process. In addition to providing the Statement, Mr. Bricker and Chair Clayton also displayed and emphasized the…
Materiality is always one of the most complex judgments we make.  You can check out some background in these earlier posts about materiality considerations, SAB 99 and related issues. As a year-end thought, here is a March 2018 comment about materiality judgments: Note 1 – Organization and Summary of Significant Accounting Policies, page 43 We note that in fiscal 2017 you revised your March 31, 2016 balance sheet for an error in the historical carrying…
One area where companies have not received many SEC comments – and, in all honesty, we don’t like to think about much – is market risk disclosures in Item 7A of Form 10-K and Part 1 – Item 3 in Form 10-Q.  In this time of more volatile markets this forward-looking disclosure about the extent of risk is becoming more important. We have recently seen three comment letters with questions about market risk disclosures.  In…
On December 26, 2018, the SEC levied a fine on a company that failed to follow the Regulation S-K Item 10 (e) guidance concerning the use of non-GAAP measures.  Specifically, the company did not present the most directly comparable GAAP measure with equal or greater prominence in the headline and highlights in two of its earnings releases. As you can read about here, the issue was aggravated because while the company touted increases in non-GAAP…