Yesterday, the PCAOB issued this Practice Alert reminding independent auditors about their responsibilities to assess and respond to the risk of material misstatements of financials due to error or fraud posed by significant unusual transactions. Notably, the Practice Alert states:
Significant unusual transactions, especially those close to period end that pose difficult “substance over form” questions, can provide opportunities for companies to engage in fraudulent financial reporting. Further, the auditor’s evaluation of whether the company’s financial statements are presented fairly, in all material respects, in conformity with the applicable financial reporting framework, includes the consideration of the financial statement presentation and disclosure of significant unusual transactions.
This is a practice alert because as the alert notes, the standard on auditing for fraud already requires auditors to consider these unusual transactions. As I recall, the Auditing Standards Board has also issued Practice Alerts on this same issue in the past. It is quite likely this may become a topic of discussion between auditors and audit committees in the near future.
The Ratings Game: Association of Corporate Counsel Gets In
A few months ago, the Association of Corporate Counsel announced that it would start producing “value index” ratings of law firms, based on evaluations provided confidentially by its members (it’s called the “ACC Value Challenge“). It’s a good idea on its face – but as you could imagine, it is likely to create a heap of controversy. That’s already starting with this ABA Journal report that some of the ACC’s ratings have already been leaked prematurely (and here is an earlier blog – and another article).
Given that peer remarks can be one of the most influential factors in getting hired, this may prove to be a powerful tool. My problem with the ACC rating system is that – based on this demo evaluation form – it seems to allow only firms themselves to be evaluated – not individual attorneys like Avvo does. Since most folks hire lawyers for their own abilities and not so much for the law firm’s own brand (except for the most strongly-branded firms perhaps), the ACC framework might not be as useful as it could be…
The Socially Irresponsible Investor: A Video Parody
Here is a video parody about Wormwood Bayne, the stock fund for socially irresponsible investors. Hat tip to Jim McRitchie, who tipped his hat to Cliff Feigenbaum…
– Broc Romanek