More than ever, public companies and their auditors are under tremendous scrutiny. History shows us that changes in the public realm may trickle down to the private sector as well. An assessment of the current public landscape highlights the following audit and accounting items:
- The SEC requires audit firms to file with the PCAOB the name of the engagement partner for all public company audits issued on or after January 31, 2017. Will the personal identification of the audit partner(s) in a public document impact the extent of audit procedures?
- The PCAOB is working on the following projects to enhance audit procedures:
- Work of specialists
- Supervision of other auditors
- Accounting estimates
- Going concern
- New accounting standards facing public companies include:
- Going concern assessment relevant in 2016 for calendar year end companies.
- Lease accounting to implement by 2019 with early adoption allowed. Traditional operating versus financing leases is relevant, but now all long-term leases are placed on the balance sheet.
- Revenue recognition can be early adopted in 2017 for calendar year end companies. Even if companies do not early adopt, systems should be set up now for purposes of transitioning in 2019 for comparative purposes.
- The SEC and FASB continue to work on a joint disclosure simplification project. Other interesting FASB proposals include:
- Removing step 2 of the goodwill impairment assessment. Impairment would equal the difference between carrying value and enterprise value.
- Inclusion of restricted cash in the beginning and ending cash total on the statement of cash flows. This will remove the need to decide between operating and investing classification for restricted cash.
At Dean Dorton, we work with public companies in a consulting capacity including SOX compliance. Contact Bill Kohm or Jim Tencza to learn how we can partner to help you tackle these audit/accounting items and free you up to stay focused on your strategic objectives.