“These new standards are a significant step in promoting sophisticated risk assessment in audits and minimizing the risk that the auditor will fail to detect material misstatements,” said acting PCAOB Chairman Daniel L. Goelzer. “Identifying risks, and properly planning and performing the audit to address those risks, is essential to promoting investor confidence in audited financial statements.”
Assuming the SEC gives them the green light, the standards will become effective for audits of fiscal periods beginning on or after Dec. 15, 2010.
Ernst & Young knows it. The firm has released a new report that claims “regulation and compliance” is the top risk to businesses today.
“Many of these threats are related to the aftermath of the global financial crisis,” the E&Y report reads. “Asset management, banking and, to a lesser extent, insurance are facing a political backlash and regulatory overhaul following the global financial crisis. Oil and gas, real estate and mining and metals are contending with efforts by cash-strapped governments to gain revenues. And public sector organizations must cope with knee-jerk decisions made by political leaders under pressure. We hope the list will trigger a debate, which we would like to explore further.”
Rounding out E&Y’s risk top 10 are access to credit; a slow recovery or double-dip recession; managing talent; emerging markets; cost-cutting; non-traditional entrants; radical greening; social acceptance risk and corporate social responsibility; and executing alliances and transactions.
The SEC knows it. CFO.com’s Sarah Johnson reports that the Commission is pressuring companies to provide more information about the risks they face.
“In annual and quarterly financial statements, as well as proxies, the regulator wants companies to give more details about potential problems, including risks tied to credit and liquidity, goodwill impairments, and compensation,” Johnson writes. “These topics became hot-button issues during the financial crisis, so it makes sense that the SEC has focused on them in the comment letters that are just now trickling into the commission’s electronic filing system.”
Of course, you take a risk just rolling out of bed each morning.
If only we had a regulator who was focused on that.
Want to learn more? Check out these related resources:
- Sept. 2 program: Applying the Risk Assessment Standards Using a Case Study Approach
- Sept. 3 program: Detecting Misstatements: Integrating SAS 99 and the Risk Assessment Standards
- Sept. 20 program: Accounting & Auditing Current Developments
- Oct. 18 program: Accounting & Auditing Current Developments
- Oct. 19 program: Auditor’s Risk Assessment Process: Tackling the Risk Assessment SASs
- Nov. 11 program: Risk Assessment and Audit Sampling: Applying the New Audit Sampling Guide Requirements
- Nov. 15 program: Accounting & Auditing Current Developments
- Dec. 6 program: Accounting & Auditing Current Developments