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CAQ Snapshot: October 2017

Tuesday, October 31, 2017

CAQ Survey Reveals Soaring Investor Confidence in Markets and Independent Auditors

US investor confidence has reached record heights, according to the Center for Audit Quality’s (CAQ) 11th Annual Main Street Investor Survey. Eighty-five percent of investors expressed confidence in US capital markets for 2017, an all-time high for the survey, which also gauges confidence in markets outside of the US, public companies, and audited financial statements.

As in past years, the Main Street report sheds additional light on investor views regarding key risks, as well as factors affecting their investment decisions. Actions by the White House and Congress are most likely to affect investors’ decisions in the next year, the survey shows, followed closely by changes to US tax policy.

“Investors place strong trust in America’s market system,” said CAQ Executive Director Cindy Fornelli in a statement, adding that investors have high expectations and are “closely watching policy debates in Washington.”

Outside the survey’s four core confidence measures, investors register exceptional degrees of confidence in the ability of external auditors, audit committees, and stock exchanges to fulfill their investor protection roles.

Anti-Fraud Collaboration Releases Fourth Case Study

The Anti-Fraud Collaboration continues to promote diligence in financial fraud deterrence and detection with the publication of the LDC Cloud Systems Case Study. The new case study, the fourth in a series from the Collaboration, presents a fictional fact pattern about a rapidly growing global technology company whose board must contend with a bribery allegation and accounting abnormalities.

As with the Collaboration’s previous case studies, instructors can register for a guide that can assist them in leading an interactive classroom discussion. To provide an additional teaching aid, the Anti-Fraud Collaboration has created a set of “video vignettes” that dramatize key scenes from the case study.

Formed in 2010, the Anti-Fraud Collaboration consists of the CAQ, Financial Executives International, the National Association of Corporate Directors, and The Institute of Internal Auditors. The Collaboration promotes the deterrence and detection of financial reporting fraud through the development of educational opportunities, thought leadership, awareness programs, and related resources.

Video: Watch the Audit Committee in Action

When a company encounters allegations of fraud, what kinds of conversations does the audit committee have? Attendees at the Council of Institutional Investors (CII) 2017 Fall Conference got a flavor at a breakout session, “The Audit Committee in Action: Simulated Response to a Whistleblower.” The simulation is available for viewing at the CII’s YouTube channel.

Led by the CAQ’s Cindy Fornelli, the simulation centers on a fictional company that is preparing for its audit when a former employee makes a whistleblower claim that a unit of the company is channel stuffing to inflate revenue. The audit committee must consider its next steps given the late disclosure and weight of the allegation.

In addition to Fornelli, participants in the simulation were Bruce Blakely, independent director at Cubic Corp; Dan Carter, director and audit committee chair at WD-40; Sara Lewis, audit committee chair at Weyerhaeuser, PS Business Parks, Sun Life Financial; and Terrence Ward, partner at PwC.

CAQ Alerts Summarize Potential Risk Areas for 2017 Audit Cycle

The CAQ has published two new member alerts to help public company auditing firms address potential risks during the upcoming 2017 audit cycle.

The first of these alerts, Select Auditing Considerations for the 2017 Audit Cycle, identifies and discusses some of the more judgmental or complex audit areas for the upcoming audit cycle, including some of those identified by the Public Company Accounting Oversight Board (PCAOB) through its inspection process and published in the recent PCAOB Staff Inspection Brief.

A companion alert, Select Considerations for the 2017 Audit Cycle for Brokers and Dealers, provides auditing considerations that may be relevant for audit and attestation engagements for brokers and dealers registered with the US Securities and Exchange Commission.

Just Ahead! Cyber Webcast Will Feature AICPA’s Melancon and Robert Herjavec of “Shark Tank”

What are the latest trends in cybersecurity? What steps should CPA firms and other businesses take to protect data? On November 1 (12:00 p.m. ET), cyber-expert Robert Herjavec, CEO of the Herjavec Group and star of “Shark Tank,” will tackle these questions and more in a webcast with Barry Melancon, CPA, CGMA, the president and CEO of the Association of International Certified Professional Accountants (AICPA) and a member of the CAQ’s Governing Board.

This free, live event is designed for business executives, IT security officers, risk officers, cloud service providers, boards of directors, US CPA firms, and all others interested in having a robust cybersecurity program. More information and registration are available at the AICPA website.

Profession in Focus Welcomes BDO’s Chris Smith

Episode 52 of “Profession in Focus” features Chris Smith, BDO’s Global Head of Audit and Accounting. With over 30 years of auditing experience, Smith reflects on the evolution of public company auditing, the impact of the Sarbanes-Oxley Act of 2002, and the challenges and opportunities of connectivity in a global economy. “Thirty years ago, the notion of a virtual audit room would have just blown me away,” says Smith.

CAQ’s Fornelli Appointed to Weinberg Center Advisory Board

CAQ Executive Director Cindy Fornelli has been named to the Advisory Board of the John L. Weinberg Center for Corporate Governance at the University of Delaware. Established in 2000, the Weinberg Center is one of the longest-standing corporate governance centers in academia, and the first and only corporate governance center in Delaware, the legal home for a majority of the nation’s public corporations.

Join the CAQ at These Upcoming Events

India Governance & Ethics Forum
The CAQ is pleased to partner with Ethisphere on the 2017 India Governance & Ethics Forum, where key thought leaders, including the CAQ’s Cindy Fornelli, will discuss opportunities, challenges, and best practices regarding corporate governance, ethics, and the role of the independent director in India.
November 13, 2017; Mumbai, India (Website)

FEI Current Financial Reporting Issues (CFRI) Conference
We look forward to seeing our fellow financial executives at FEI’s 36th annual CFRI Conference, where CAQ Managing Director of Professional Practice and Member Services Catherine Ide will join Marc Panucci, the SEC’s Deputy Chief Accountant in the Office of the Chief Accountant;, Jeanette Franzel, PCAOB Board Member; Matthew Doyle, Chief Auditor at KPMG; and Ron Edmonds, Controller and VP of Controllers and Tax at Dow Chemical, for a November 13 panel discussion on “Matching Internal Controls to Real Life Change.”
November 13-14, 2017; New York, NY (Website)

ACGA Annual Conference
We look forward to seeing our international governance colleagues at the Asian Corporate Governance Association’s 17th Annual Conference.
November 14-15, 2017; Mumbai, India (Website)

NACD Directorship 100 Gala
As a proud sponsor of NACD’s 11th Directorship 100 Gala, the CAQ congratulates the nominees and honorees.
November 29, 2017; New York, NY (Website)

AICPA Conference on Current SEC and PCAOB Developments
Cindy Fornelli will help kick off the conference on December 4 with remarks on the state of the public company auditing profession and an update on CAQ activities.
December 4-6, 2017; Washington, DC (Website)

Anti-Fraud Collaboration Webcast
Sound corporate culture is a cornerstone of fraud deterrence and detection. This webcast, hosted by the Anti-Fraud Collaboration, will highlight leading practices on assessing and strengthening a company’s corporate culture. An expert panel will share actionable recommendations that organizations can implement to deter fraud and misconduct. Moderated by the CAQ’s Cindy Fornelli, the webcast will feature Paul L. Walker, Schiro/Zurick Chair in ERM at St. John’s University; Brenda Gaines, audit committee chair at Tenet Healthcare Corp.; and Gilly Lord, partner at PwC UK.
December 13, 2017 (Register)