Category: Accounting and Auditing

Do hiring practices lead to earnings management?

by Cydney Posner Yes, according to a study from academics at the University of South Carolina, reported by Reuters.   The study showed that U.S. public companies tend to favor hiring accountants “who show a willingness to flatter corporate profits by massaging the numbers.” In the study, which surveyed 41 executive […]

Does auditor rotation impair professional skepticism?

by Cydney Posner CFO.com is reporting on a study published in a leading accounting journal The Accounting Review (payment required) that reaches the counter-intuitive conclusion that auditor rotation  actually impairs professional skepticism.  Skepticism is “a perspective universally viewed as essential to effective auditing. The primary reason traditionally advanced to require […]

SEC issues concept release regarding potential additional audit committee disclosures

by Cydney Posner The SEC hasn’t issued a concept release since 2011, but that’s changed now with the posting of this concept release regarding possible revisions to audit committee disclosures (foreshadowed in this post). The concept release seeks public comment on possible new reporting requirements focused on the audit committee’s  responsibilities […]

SEC proposes clawback rules

by Cydney Posner At an open meeting this morning, the SEC voted, three to two, to propose rules implementing Section 954 of Dodd-Frank, the clawback provision. Both Commissioners Gallagher and Piwowar voted against the proposal. As you may recall, Section 954 required the SEC to direct the national securities exchanges […]

Tools for Audit Committee Members

by Cydney Posner The Audit Committee Collaboration (ACC) has announced the release of new tools, the External Auditor Assessment Tool: A Reference for Audit Committees Worldwide and an updated U.S. version of the External Auditor Assessment Tool, both designed to assist audit committees in evaluating the external auditor, to assess the quality […]

SEC to consider requiring disclosure of audit firm tenure and name of engagement partner

by Cydney Posner The SEC is expected to issue its concept release on improving audit committee reports “soon” (whatever that means) according to Compliance Week, and among the topics the SEC will examine is whether those “reports should include the audit firm’s tenure and the name of engagement partners.”  If this […]

Are non-GAAP financial measures coming under renewed scrutiny?

by Cydney Posner Potential misuse of non-GAAP financial measures may be causing some consternation once again…in the press at least. In the wake of the Enron scandal and the dot-com bust in 2003, the SEC adopted Reg G and related amendments to Reg S-K to prevent public disclosure of misleading […]