Auditors get clearer, but mistakes won't go unnoticed
Finance execs and investors may finally get a little bit of clarity from auditors — but that’s not necessarily good news.
Thanks to a new rule adopted by the Public Company Accounting Oversight Board (PCOAB), companies can expect financial statements to be a little easier to get through.
Auditing Standard No. 6 (if approved by the SEC), will require auditors to clearly state whether corrections made to a company’s financial reports were:
- Because of an error or misstatement on the company’s behalf, or
- A result of a change in accounting rules.
Under the old rules, auditors weren’t required to distinguish why they’d made certain changes, and their impossible-to-decipher notes would leave financial departments and investors scrambling to find out why alterations were needed.
This rule change will improve communication between a company’s accountants and its auditors — they’ll be able to comprehend the situation quicker and decide if any preventative actions need to be taken.
But clarity comes at a certain price: Auditors will plainly state if changes were made because of a company’s mistake, and that can make slip-ups a very noticeable event (especially in public companies). Without the security blanket of “It was an accounting change, not a mistake on our part!” availible as a fall-back, the heat’ll be on for Finance departments to step up compliance efforts.
Free Training & Resources
White Papers
Provided by UJET
White Papers
Provided by Anaplan
Further Reading
Accounting firms face tougher fiduciary duties as the result of three new federal rules. The Securities & Exchange Commission (SEC) ...
The IRS is extending an olive branch to businesses that received tax credits related to COVID-19 in error. The tax cops are launching a ...
Fewer college students are willing to put in the time and money to become accountants. Finance professionals are concerned about the dwindl...
Wealthy investors are about to lose a tax loophole that IRS allowed for years. The tax cops say its new policy and enforcement will net bil...
Excel financial formulas allow users to process accounting data quickly and easily. To use a financial formula in Excel, click on the â€...
Repetitive data entry tasks can drain productivity. Excel’s Autofill and Flash Fill features automate these tasks, saving time and reduci...