Auditors Can Bring Trust, Confidence, Reliability to Currently Unaudited Corporate Reporting

Auditors are uniquely qualified to enhance confidence in a wide range of company-prepared information outside financial statements, according the Center for Audit Quality (CAQ).

In a white paper titled The Role of Auditors in Company-Prepared Information: Present and Future, the CAQ describes the role of auditors in various types of publicly disclosed information, as well as how that role is evolving.

“Investors and other market stakeholders increasingly rely on information beyond financial statements to make decisions and assess company value, yet much of this information doesn’t undergo independent review,” says CAQ Executive Director Julie Bell Lindsay. “Employing their critical thinking, skepticism, business knowledge and technical expertise, auditors stand ready to enhance the reliability of corporate information for the benefit of the capital markets, investors and the public.”

Today, the role of auditors is largely limited to the audit of financial statements and audits of internal control over financial reporting (ICFR). However, due to changing business models and investor demand, companies are increasingly providing information that falls outside the purview of traditional audits. This information typically does not undergo the rigor of assurance provided by an auditor, CAQ asserts, so the need for verification, trust and assurance of the information rises.

CAQ says auditors can meet stakeholders’ needs, boosting confidence in the following types of company-prepared information:

  • Non-GAAP financial measures, such as adjusted earnings per share
  • Key performance indicators, such as sales per square foot
  • Environmental, social and governance information, such as sustainability reporting
  • Cybersecurity reporting outside of the financial statements, such as how companies manage cyber-risks
  • Other communications about value-creation outside of financial statements, such as intellectual property

More news from CAQ

Study: More Skills Needed to Properly Manage Financial Downturn

When the next recession hits, as much as half of today’s workforce won’t be prepared.

This is according to research from VitalSmarts, a leadership training company, which asserts that 89 executives in a recent survey say 47% of their employees are not sufficiently “agile, persistent or self-starting to handle a recession.”

The company asked 1,080 employees and executives to rate their company on five skills thought to be most important to weathering a financial downturn: open dialogue, change mastery, productivity, universal accountability and leadership.

The survey shows 52% believe their employees lacked the skills to engage in open, productive dialogue. On the upside, executives had relatively less concern about their employees’ productivity in a financial downturn.

“As the threat of a recession looms, executives question whether their people have the skills to adapt, candidly speak up and hold others accountable,” says David Maxfield, vice president of research at VitalSmarts. “Unfortunately, our research shows leaders who find their teams and organizations to be on the short side of these skills during a recession may not only struggle to weather the recession well, they may struggle to weather it at all.”

Employees, for their part, say their boss and other leaders also struggled to practice the five skills cited. Specifically, 52% said their bosses did not have the skills needed to successfully navigate a recession, according to the survey, which included 964 employees. Only an average of 7.3% of employees were confident their senior leaders could plan, communicate or lead the sustainable changes needed for success.

Joseph Grenny, co-author with Maxfield of Crucial Conversations, says, “Recession-proof companies have people – from front-line employees to executives – who can hold crucial conversations on how to stay relevant, profitable and accountable. Interestingly, a lot of executives may not be any more prepared than their employees. Employees across the board need to be trained in these skills.”

BKR Survey: Full Adoption of Remote Work Slow, but Possible

Aiysha (A.J.) Johnson

Aiysha (A.J.) Johnson

By: Aiysha (A.J.) Johnson, BKR International

Professional job posts have a newer feature. It’s called “remote,” and it proactively tells applicants that the physical location of their work is negotiable. Depending on the job search site, applicants can find 30,000 to 60,000 listings for remote work at any given time. It is defined as employees working in a physical location almost exclusively outside of the company’s offices – even another state or country. And it’s not limited to sales positions.

Although remote work has always been an option in some industries, the accounting profession is moving slowly toward this option as a way to retain and attract the best talent. For the industry’s more consultative future, will remote work become the norm rather than the exception?

To get a pulse, BKR International asked member firms about their expectations for remote work arrangements in the near future. Their responses indicate that full adoption may be slow, but possible and attractive. Here are four real scenarios to consider for your firm.

Scenario 1: It is a unique situation.

Some firms adopted a remote work arrangement years ago in order to employ a professional with a special skill set. At Hauppauge, N.Y.-based Albrecht Viggiano Zureck & Company, one employee has worked remotely for two decades.

“She lives in Maryland and works on government entities on the audit side of the practice,” says Kenneth Laks, a partner at AVZ and a BKR Americas board member. “Around six times a year, she will come up to New York, but most all of the work is done remotely from her home,” Laks adds. “It has worked out very, very well…but again she is known and trusted from building a confidence with us over time.”

Many firms note that a remote work arrangement is still considered on a case-by-case basis rather than as a general opportunity available to anyone. While firms have written policies regarding flexible scheduling arrangements, including occasional work-at-home options, a true remote work arrangement is still tailored to the needs of the firm and clients as much as for the employee.

Scenario 2: It’s a method to keep key talent.

For Gumbiner Savett of Santa Monica., Calif., (FY18 net revenue of $21.1 million), a formal work-from-home policy for qualified individuals as well as one full-time remote employee communicate options to candidates — as well as to current staff.

“We are open to remote work options with existing staff we want to retain,” says Irene Valverde, director of human resources and practice development. “We are a digital office, so everything is accessible to employees via our network. Our phone system also allows for forwarding of outside calls so that communication is seamless.”

Although Valverde doesn’t see remote work as a possibility for all positions, the firm evaluates the option based on individual talent and responsibilities. “We have no formal plans right now to hire remotely, but we are open to it,” she says.

Scenario 3: It’s a method to hire needed talent.

Now that more firms have adopted cloud-based technology and mobile devices, openness to remote workers has improved from just a few years ago. Still, few if any firms actively advertise for remote positions.

“When we hire, we are hiring for specific talent. So, for the right talent, we are willing to consider remote work arrangements,” says Mark Thomson, managing director of Ostrow Reisin Berk & Abrams of Chicago (FY18 net revenue of $29.5 million). “We currently have four remote employees,” he says.

Technology has made remote work easier and more secure, but firm leaders don’t focus on the tools alone. “We believe that the key to hiring great remote talent is to set expectations at the outset – outline key performance indicators, goals and communication standards to set remote workers up for success,” Thomson adds. “You still must meet with remote employees, and outline their specific arrangement, so that everyone is on the same page and the employee understands expectations.”

Scenario 4: It’s a business strategy.

Performance is paramount whether an employee works in the office or remotely. However, the firm leaders interviewed on this topic agree that the hunt for talent necessitates alternative ways of thinking about service delivery and growth.

“We also recognize that, as the market for hiring public accounting talent continues to be tight, firms will need to search outside of their geographic location, whether it be outside the state or even the country,” says Thomson.

Remote hiring becomes more of a business strategy when it’s about how the team can best serve clients, too. For example, a coastal, mid-sized accounting firm focused on alternative energy may establish a “wind power” team in the Midwest. Maybe the talent is more available there. It’s cheaper for younger professionals to live there, plus it’s also near clients. To adopt this mindset as a growth strategy will take time, policy and technology. But firm leaders are certainly discussing and preparing for their options.

A.J. Johnson is executive director of the Americas Region for BKR International, the global accounting association with 160 independent accounting and business advisory firms in over 500 offices and 80 countries.

Trade Publication Names Top 50 Construction Accounting Firms

Construction Executive, a trade publication covering the business of construction, has ranked its top 50 construction accounting firms.

Construction accounting, the magazine says, is one of the most complicated forms of business accounting. “All top CPAs are well versed in accounting, bookkeeping and tax advice. The best bring balance and stability to thousands of construction companies as highly trusted business advisors.”

In the magazine’s first ranking of construction accounting firms, which was included in the July/August issue, the top five firms are listed as CLA (FY18 net revenue of $954.6 million), Chicago-based RSM (FY19 net revenue of $2.43 billion), Chicago-based Crowe (FY19 net revenue of $951.9 million) Seattle-based Moss Adams (FY18 net revenue of $691 million), and Milwaukee-based Wipfli (FY19 net revenue of $362.5million). Find the full listing here.

To determine the ranking, according to Skoda Minotti (FY18 net revenue of $59.4 million), which ranked 33rd, Construction Executive asked hundreds of U.S. accounting firms with a construction practice to complete a survey. Data collected included:

  • Revenues from the construction practice in 2018
  • The number of CPAs in the construction practice
  • The percentage of the firm’s total revenues from the construction practice
  • The number of construction clients in 2018
  • The number of office locations with a construction accounting practice
  • The number of employees with CCIFP certification
  • The year the construction accounting practice was established

The final ranking was determined by an algorithm that weighted these factors in descending order of importance.

The magazine also surveyed accounting professionals on top issues within the industry and quotes professionals from 11 CPA firms on the biggest concerns expressed by their clients.

They report that the No. 1 issue is the labor deficit, and other big worries are business succession, cybersecurity, the impacts of climate change on the bottom line and the possibility of an impending recession.

The results are similar to that of a separate, three-month-long survey of New York contractors and construction industry leaders, conducted by an independent research firm for New York-based Grassi & Co. (FY18 net revenue of $63.6 million). The top concern was the shortage of skilled labor. Other concerns are regulatory compliance, such as minority/women-owned business rules and New York labor laws. Cybersecurity was also raised as a worry, with 76% of respondents saying that the number of people with access to worksite data was a significant security concern. (To receive a copy of the Grassi survey, contact Jennifer Maizel or call (516) 918-5927.)

Overall, however, the outlook among construction industry leaders is positive, according to Joseph Natarelli, national construction services industry leader at New York-based Marcum LLP (FY18 net revenue of $549.7 million). He told Construction Executive: “We have seen a major increase in the number of commercial construction backlogs and improvement in the general business environment. Infrastructure, hospitality and office construction, in particular, have been standouts.”

The magazine advises, “To ensure a healthy business lifespan, treat your relationship with your experienced construction CPA as you would a trusted doctor. Check in regularly, show them everything, heed their advice and get a second opinion if needed.”

Areas ‘Primed for Growth’ Being Ignored: Fortune Tech Conference Speaker Says

Hans Tung

GGV Capital MP Hans Tung says the tech industry is failing to invest adequately into India, Latin America and Southeast Asia, where the next billion people will come online, according to Fortune.

“A lot of growth is coming from smartphones, and if you look at where smartphone users are coming from, three places stand out,” Tung said July 16 at the annual Fortune Brainstorm Tech conference in Aspen, Colo.

He said India, Latin American (largely Brazil), and Southeast Asia (especially Indonesia) are expected to be hotspots of online growth, Fortune reported. The capital cities of Bogota in Colombia and Jakarta in Indonesia, as well as Sao Paolo, Mexico City and New Delhi are primed for growth.

Yet, those areas are largely being ignored by the tech industry, he contends. “You look at some of these other emerging markets where the next billion users are coming from, they’re still underinvested.”

He also noted that the users will be young people. “They grew up on iPads. They grew up listening to Spotify. They grew up looking at YouTube. They spend more time on YouTube than all the TV time I ever spent in my life.”

Study: Top Concern At Tax Time Is Too Much Work

As CPA firms ended their 2019 tax season, 40% reported that the top concern was the consequences of workload compression on morale and quality. The biggest concern of 30% of respondents was keeping staff and clients informed on new tax law changes.

That’s according to the 2019 Post-Tax Season Survey by Right Networks, which hosts cloud-based tax and accounting applications. The survey was sent to more than 3,500 members and prospective members of the CPA Firm Management Association (CPAFMA) April 18-April 30, drawing responses from 162 firms.

“Entering tax season, firms were balancing workload compression with the education of staff and clients on the implications of the Tax Cuts and Jobs Act,” says Roman Kepczyk, director of firm strategy at Right Networks. “Add in late legislative updates on tax software and you can easily understand why most firms were in scramble mode from the very start of busy season.”

Fifty-five percent of respondents said this busy season was either substantially more difficult or slightly more difficult than in the past.

To prepare for tax season, many firms upgraded software or hired staff to handle the work. Seventy-five percent of firms increased staffing, including accountants, administrative staff and interns. Training new staff on firm systems proved a challenge for half the respondents, so firms may look to train earlier in the year in the future, the report said.

When asked about cloud services, “72% reaffirmed the convenience of anytime/anywhere access and 67% touted the secure environment provided,” the survey says. Also, 34% cited improved collaboration with personnel and 20% cited improved collaboration with clients.

“Tax season is always the most stressful time of year for CPAs, and 2018 filings were expected to be the most complicated in recent memory. Yet it appears that a combination of increased staffing and use of cloud-hosted applications helped firms successfully meet the challenge,” according to Kepczyk.

More news from CPAFMA

Study: ‘Opinion-Shopping’ Harms Auditor Independence

A recent study has revealed that most distressed companies have sought out auditors likely to provide a favorable opinion.

The benefit of a favorable opinion, however, comes at the expense of auditor independence and investor interests, according to, which reported on the study published in the May issue of the American Accounting Association magazine, Auditing: A Journal of Practice and Theory.

Most of the 3,560 distressed public companies studied over nine years engaged in auditor “opinion-shopping,” the report says.

The result is a lower possibility of going-concern opinions but a higher incidence of financial misstatements. The research also says that the Sarbanes-Oxley corporate reform legislation did not affect the dynamic much. While opinion-shopping sharply declined between 2004 and 2006, it later returned to roughly the same amount before establishment of the PCAOB.

“This study highlights the need to develop mechanisms that curb clients’ opportunistic auditor switches, such as regulatory intervention in the choice of a successor auditor or other mechanisms that discipline excessive client pressure,” the authors wrote.

An estimated 57% of the studied companies “shopped” for opinions. Only 16% received going-concern opinions of the shoppers, compared with 28% among non-shoppers.

The report also says, “Audit firms and offices that more frequently accept opinion-shopping clients tend to exhibit poorer audit quality not only for switching opinion-shoppers but for other clients.”

Women C-Suite Ranks Increase, but Not Much

More women are holding the nation’s most important corporate roles, just not that many more, according to a survey by Korn Ferry, a global consulting firm and executive recruiter.

Women now hold 25% of the five critical C-suite positions. That’s an increase from 23% in 2018, according to the analysis of the nation’s 1,000 largest corporations across eight industries – consumer, energy, financials, health care, industrial, retail, services and technology. Still, women hold a majority of only one of those spots, chief human resources officer, and only 6% of CEO spots are held by women, unchanged from 2018.

“In every industry we analyzed, there’s a tremendous need for improvement to bring more women to the C-suite,” says Jane Stevenson, global leader of Korn Ferry’s CEO Succession Services. The onus is on both women to seek out experiences that can help them lead and organizations to create an environment where women can succeed, she says.

The Korn Ferry analysis reviewed the positions of chief executive officer, chief financial officer, chief information/technology officer, chief marketing officer (CMO), and chief human resources officer (CHRO). Among the eight industries, retail has the highest percentage of female CEOs (12%). In contrast, healthcare has the fewest, at 1%.

Women hold 55% of the CHRO spots across industries. The CMO role saw the biggest percentage increase of all C-suite roles, rising to 36% from 32% in 2018. The financial industry has the highest percentage of female CMOs at 53%, up from 45% last year.

About 45% of employees at the nation’s largest firms are women, according to various studies. But female representation diminishes considerably up the leadership ladder. It’s hard to pinpoint exactly how gender influences hiring and promotion, but companies must commit to developing a pipeline of women leaders, experts say. “It’s critical that both talented women and those around them focus on creating a clear path for advancement,” Stevenson says.

Deloitte Study: Only 19% of Business Leaders Say They Are Ready to Lead Social Enterprise

Amid rapid technological, economic and social change, it is important for social enterprises to move beyond mission statements and social impact programs to put humans at the center of their business strategies, a new Deloitte study says.

In “Leading the Social Enterprise: Reinvent With a Human Focus,”  the Big 4 firm examines various ways organizations can change the experiences of the workforce to “build identity and meaning for workers.”

A social enterprise is a cause-driven business that exists to achieve a social mission. In the report, survey respondents – nearly 10,000  in 119 countries – say the role of the social enterprise is more important than ever and noted a positive link between leading the social enterprise and an organization’s financial performance.

In fact, 73% of industry-leading social enterprises expect stronger business growth in 2019 than in 2018, compared to only 55% of those where the social enterprise is “not” a priority. However, only 19% of respondents reported being “industry leaders” in their organization’s maturity as a social enterprise.

“What’s missing for many organizations is the focus on the individual and the day-to-day challenges that workers are facing,” says Erica Volini, principal, Deloitte Consulting LLP, U.S. human capital leader. “The reality is that while technology is helping organizations gain competitive advantage, if not managed appropriately, it can simultaneously mean that workers lose their identity in the workplace. We see a call to action for organizations to reinvent their approach to human capital with the worker in mind to create opportunities for continuous learning, accelerated development, and professional and personal growth.”

The report says, “As organizations look to effectively lead the social enterprise, they must adapt to the forces restructuring work and the implications to the workforce – both in composition and capability – while embedding a meaningful experience for workers.”

This focus on the workforce comes as more than 86% of respondents cited reinventing the way people learn as important or very important – the No. 1 trend for 2019. Lifelong learning has evolved from a matter of career advancement to workplace survival. However, even with this emphasis on learning, only 10% of respondents said their organizations are “very ready” to address this topic.

Organizations are also being challenged to “up their game” when it comes to the employee experience. This emphasis comes as only 49% of respondents believed that their organizations’ workers were satisfied or very satisfied with their job design and only 42% thought that workers were satisfied or very satisfied with day-to-day work practices.

“Over the last five years, issues related to productivity, well-being, overwork and burnout have grown,” said Jeff Schwartz, principal, Deloitte Consulting LLP, U.S. future of work leader. “As a result, organizations need to shift from the traditional employee experience to a new category we call ‘human experience,’ where relationships are enduring, learning is continuous, and work has meaning centered around human identity.”

Organizations are finding themselves in a job-seekers’ market as the war for talent rages on. “As organizations’ workforce needs drastically change, leaders should shift from focusing on acquiring talent to accessing capabilities. While the change may seem nuanced, taking a more expanded view of where skills can be found – whether it’s in automation, the gig economy or current employees – can pay dividends in today’s fast-paced and high-demand business environment,” says Volini.

The survey also reveals that the way many organizations compensate and reward workers is out of date. Today, only 11% of respondents felt that their rewards systems are highly aligned with their organizational goals and 23% do not feel they know what rewards their employees value.

“The combination of shifts in the work, the workforce, and the organization have created a new mandate for HR to shape the future,” says Heather Stockton, principal, Deloitte Global, global human capital leader. “But HR cannot do this alone. The entire organization, led by the symphonic C-suite, needs to come together to help organizations truly take the lead in the future of work.”

Deloitte to Deploy Smart Monitoring Sensors by PointGrab in London

Accounting firm Deloitte Touche Tohmatsu Ltd. has selected Israel-based home and building automation company PointGrab Inc. to install smart sensor systems in its London headquarters.

PointGrab’s system will allow Deloitte to receive real-time data on desk occupancy, foot traffic, elevator usage and occupancy of public areas in the 270,000 square-foot building.

According to IoT Evolution, the program is the culmination of a four-year project to define the “workplace of the future,” to accommodate a range of different work activities and styles, with spaces that “fuel creativity and ultimately generate more collaboration across the business.”

PointGrab’s system is designed to enable Deloitte to optimize use of the building. It involves thousands of ceiling-mounted sensors, which provide accurate information about the location and number of people in each space throughout the building.

PointGrab uses foot traffic data to assist in more efficient building maintenance management. For example, the system can alert cleaning crews to focus on spaces with high foot traffic.

“The system serves us both for real-time applications like hot-desking and for space utilization reports of any given area within the premises,” says Dominic McGrory, director of workspace performance, according to IoT Evolution. “PointGrab sensors have a unique mix of high accuracy rates and advanced features, which enable us to truly understand what is going on at any given moment.”

Founded in 2008, PointGrab is based in Kfar Saba, a town northeast of Tel Aviv.