July 31, 2018

CAQ Snapshot: July 2018

New CAQ Resource Educates on Key Change to Auditor’s Report: Critical Audit Matters

The Center for Audit Quality (CAQ) has released a publication designed to help audit committees, investors, and others understand changes under the new auditor’s reporting model. The resource, Critical Audit Matters: Key Concepts and FAQs for Audit Committees, Investors, and Other Users of Financial Statements, focuses on the auditor’s responsibility to determine and communicate critical audit matters (CAMs).

According to the relevant Public Company Accounting Oversight Board (PCAOB) standard, a CAM is “any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee” and that (1) “relates to accounts or disclosures that are material to the financial statements” and (2) “involved especially challenging, subjective, or complex auditor judgment.” The requirement to determine and communicate CAMs will begin to take effect in mid-2019.

For more CAQ tools and resources on auditor reporting, visit the CAQ’s related resource page.

“The Promise of Our Profession” Highlights Fundamentals of Public Company Auditing

Integrity, strong oversight, ongoing investment in quality, cutting-edge technology, and an enduring commitment to continuous improvement: these and other elements fundamental to the public company auditing profession were highlighted by members of the CAQ Governing Board in a joint statement, “The Promise of Our Profession,” issued on July 25. 

Welcoming the “thousands of newly minted US accounting graduates” who will become auditors this year, the statement also notes that “a career in the auditing profession promises to be one of opportunity—the opportunity to learn and grow in a place where diversity, inclusiveness, respect, and doing right by others is not only embraced, but central to our long-term success.”

CAQ Sets Out Mindsets, Knowledge, and Skills Necessary for Aspiring Auditors

The CAQ, in collaboration with leading public company accounting firms and the American Institute of CPAs (AICPA), has published a Discover Audit “roadmap” to help students understand what they will need to become successful auditors. Designed for both students and educators, this hands-on guide outlines the mindsets, behaviors, knowledge, and skill sets that public accounting firms seek in their future auditors. The roadmap also provides a list of key knowledge areas and coursework on which aspiring auditors should focus while in school.

New Offering from the CAQ: Cyber News Weekly

Given its highly complex and evolving nature, the issue of cybersecurity generates an enormous quantity of reporting, research, and commentary. As part of its efforts to engage and educate on cybersecurity—including the role of the CPA profession in this area—the CAQ is pleased to introduce Cyber News Weekly. This free email newsletter filters media coverage to focus on key cybersecurity news, events, and developments of interest to companies, boards of directors, the public company auditing profession, and other capital markets stakeholders. Sign up for Cyber News Weekly at the CAQ’s subscription center.

CAQ Provides Profession Input to the SEC

In July, the CAQ filed a pair of comment letters with the US Securities and Exchange Commission (SEC). Early in the month, the CAQ provided input on an SEC proposal to improve the “Loan Provision” of Regulation S-X. The Loan Provision is designed to curb conflicts of interest that could arise from debtor–creditor relationships and that could affect auditor objectivity. The CAQ’s letters point out that, in certain situations, the Loan Provision can result in noncompliance “even though there is plainly no impact on the auditor’s objectivity and impartiality.” The CAQ expresses support for the specific elements of the SEC’s proposal and offers additional considerations.

Subsequently, the CAQ provided input on the SEC’s Draft 2018–2022 Strategic Plan. Offering support for the goals outlined in the plan, the CAQ focused its comments on protecting the interests of Main Street investors, facilitating capital formation, and collaborating with internal and external stakeholders.

Webcast Explores Non-GAAP Measures and Fraud Risk

More than 2,300 viewers tuned in to a July 2018 webcast from the Anti-Fraud Collaboration. Featuring a panel of top experts, the webcast explored the potential implications for fraud risk when it comes to the use of financial measures, presented outside the audited financial statements, that do not conform to US Generally Accepted Accounting Principles (GAAP).

Separately, the Anti-Fraud Collaboration added to its set of online self-study courses, which are housed on the AICPA’s learning platform. Derived from the Anti-Fraud Collaboration’s December 2017 webcast “Oversight of Corporate Culture: A Core Asset in Driving Performance,” the new courseprovides actionable recommendations for deterring and detecting fraud and misconduct, as well as the opportunity to earn two continuing professional education credits. 

Since 2010, the Anti-Fraud Collaboration has promoted the deterrence and detection of financial reporting fraud through the development of thought leadership, awareness programs, educational opportunities, and related resources. The Collaboration’s members are the CAQ, Financial Executives International, the National Association of Corporate Directors, and The Institute of Internal Auditors.

Fornelli: “Get Inspired by a Veteran’s Courage”

In a July LinkedIn post, CAQ Executive Director Cindy Fornelli reflected on the inspiration she has drawn from providing career guidance to a military service member who is transitioning to the civilian workforce. “I urge my readers, if they’re not doing this already, to consider getting involved somehow with assisting veterans,” writes Fornelli, who also notes that firms in the CPA profession have proved themselves as leaders and innovators when it comes to hiring those with military service on their résumés.

Fornelli’s post was part of the CAQ’s monthlong focus on “courage,” an important ingredient of the independence, objectivity, and skepticism that are so integral to the public company auditing profession’s efforts to build a bedrock of investor confidence. The CAQ’s theme for August will be “dialogue.” Follow along and join the conversation on social media using #BuildingaBedrock.

Join the CAQ at These Upcoming Events

AAA Annual Meeting
August 4–8, 2018; Washington, DC

Join the CAQ at the American Accounting Association’s (AAA’s) Annual Meeting, where Cindy Fornelli will moderate the panel discussion “The Auditor’s Reporting Model: What Will the Future Bring?” on August 7 at 2:00 p.m. Panelists include Steve Glover, Associate Dean, K. Fred Skousen Professor, Brigham Young University; Josh Jones, Partner at EY; James Kaiser, Board Member at the PCAOB; and Mike Santay, Partner, Audit Services, National Professional Standards Group at Grant Thornton LLP.

Beta Alpha Psi Annual Meeting
August 9–11; Washington, DC

This year, the CAQ will be exhibiting at the Beta Alpha Psi Annual Meeting, where the theme is “Embracing the Opportunity.” Margot Cella, CAQ’s Senior Director of Research, will participate in the session “Launching Your Career in Public Accounting” on August 10, with Laurie Brady, Director, Talent Team at EY.  

Cybersecurity Webinar: “Resources Boards Want to Know About”
August 22; Online

The CAQ’s Managing Director of Professional Practice and Member Services, Catherine Ide, will join a panel discussion hosted by BDO and focused on cybersecurity risk. During the session, board members and audit and advisory professionals will examine various responsibilities and resources to aid companies in their management of cybersecurity risk.

AICPA & CIMA SEC Conference 2018
September 13–14; Hong Kong

We are delighted to join US and Asian accounting leaders, regulators, standard setters, and issuers for discussions related to the foremost issues in accounting and SEC compliance and reporting. On September 13, Cindy Fornelli will moderate a panel on SEC activities with Wes Bricker, SEC Chief Accountant; Craig Olinger, Deputy Chief Accountant, Division of Corporate Finance, SEC; and Melissa Hodgman, Associate Director, Enforcement Division, SEC. Friends of the CAQ can receive 30 percent off the registration fee by registering via this link.

Corporate Board Member’s Building Better Boards Committee Series
September 20–21; Chicago, Illinois

On September 20, Erin Dwyer, CAQ’s Managing Director of Stakeholder Engagement, will moderate the session “Board Accountability 2.0: Investors’ Role in Driving the Evolution of Today’s Boardroom.” Panelists include John Hoeppner, Head of US Stewardship & Sustainable Investments, Legal & General Investment Management; Christine O’Brien, Head of Investment Stewardship at Elliott Management Corp, and Maureen O’Brien, Vice President & Director of Corporate Governing at Segal Marco Advisors.