Companies often need financial audits when they seek additional funds or have to satisfy the requirements of owners, creditors, investors and other outside parties who want a higher level of comfort on the accuracy of financial statements.
My experience auditing privately held companies has taught me that a few proactive measures can go a long way in avoiding audit delays, keeping you and your auditor on track, and ensuring a smoother audit process for all. So, let’s jump right into those tips, shall we? (more…)
Not too long ago, the Association of Certified Fraud Examiners (ACFE) released their Report to the Nations, a publication on worldwide occupational fraud based on real life fraud cases and it was certainly a telling study in fraud. As an auditor for private companies, it hit very close to home to learn that the median loss experienced by companies with fewer than 100 employees was $200,000! And nearly half of these fraud cases were the result of a lack of internal controls. (more…)
In the last couple of years, I have witnessed several of my private company clients reorganize their operations, through either a merger, an acquisition or a significant management member buyout. While such situations provide a great stage for all to display their accounting chops, they also present us an opportunity to consult with our clients and help them avoid an accounting faux pas or burdensome and unnecessary disclosures caused by an inadvertent accounting election. So, in no specific order, I thought I would summarize some of the unique accounting issues I’ve encountered in such situations and how to navigate them: (more…)
If you have been following Steps 1 (Identify the Contract with the Customer) through 3 (Determining a Transaction Price), of the revenue recognition update as eagerly as I have, then I am sure that you keenly await the discussion on Step 4 about the allocation of the transaction price to the performance obligations in a contract. The wait is over as we explore Step 4 in this blog post. A couple key concepts that we need to understand in this process: the allocation objective and standalone selling price. (more…)
As we enter into another audit busy season, I have started my standard exercise of compiling a list of frequently encountered audit and accounting issues that require research, additional analysis and often times detailed disclosures and even material adjustments to my client’s financials. An oft-recurring theme is the existence of related party transactions and how such transactions are recorded and disclosed.
Below are a few frequently asked questions on this subject that merit our attention: (more…)
It is that time of the year again when I am working on audits of U.S. companies with significant international operations, either in the form of wholly owned subsidiaries or branch offices. And my observations while performing these audits have resulted in this compilation of common errors while accounting for foreign currency, recording translation adjustments and finally the culmination into consolidated financials.
Recently, I’ve come across various instances of related party transactions with several of my clients, such as stockholder notes to or from the company, a stockholder leasing office space to a company at favorable rates, forgiveness of compensation or reduced compensation for the initial startup period, and favorable credit terms to another entity with common ownership to name a few examples. And it worries me sometimes when companies enter into these transactions without thinking through the accounting ramifications, which can be problematic. What could the risks of related party transactions be?…
Over the past several years, it has become common for companies to control businesses without a majority voting interest while avoiding consolidations, and I have several clients involved with related entities requiring the regular assessment of Variable Interest Entities (VIEs) and its varied implications. This year I had the pleasure of working with San Jose State University students on a project to analyze the provisions of U.S. GAAP as it relates to determination VIEs and primary beneficiaries and the consolidation considerations for such entities. It is certainly not a straightforward topic, and their step-by-step explanation, with the aid of a flowchart, broke down the requirements into layman’s terms that quite succinctly highlighted the salient characteristics of a VIE and when to consolidate. You may find our analysis from the project helpful as…