NEW YEAR’S RESOLUTIONS FOR AUDITORS

New Year’s resolutions can be a great way to start off the New Year, but if you are like so many people you may have already broken one or more of your 2011 resolution by now. Even so, with busy season rapidly approaching, I thought that it would be good to give you some things you might want to use to update or revise your list of New Year’s resolutions if you are an auditor. The items listed are frequently found in AICPA peer reviews and PCAOB inspections. I hope they serve as a gentle reminder of things to do, or not do, in your audit, compilation, and review engagements in 2011.

GAAP Departures
• Improperly classifying certain liabilities as long-term rather than current.
• Failing to properly identify a loan as a loan to a related party.
• Improperly classifying a legal settlement as an extraordinary item.
• Failing to properly eliminate intra-entity revenues and the related costs of sales in consolidations.
• Improperly presenting investments in marketable securities at cost rather than fair value.
• Improperly accounting for asset retirement obligations.

Audit Deficiencies
• Failing to adequately test the existence, completeness, and valuation of revenue, including cutoff of revenue transactions.
• Improperly relying only on management representations when testing corroborating information was possible.
• When using substantive analytical procedures, failing to develop appropriate expectations and investigate significant unexpected differences.
• Failing to adequately test the valuation of goodwill and other long-lived assets.
• Failing to identify and evaluate conditions indicating that an entity may not be able to continue as a going concern.
• For entities that use a service organization, failing to consider the effects of the service organization on the entity’s internal control.

Reporting Deficiencies
• No dating of reports or dating them incorrectly.
• Inappropriately referring to GAAP in the accountant’s report when the financial statements were prepared on an OCBOA.
• Failing to disclose a lack of independence in a compilation report.
• Issuing an audit or review report when the accountant was not independent.

Financial Statement Presentation Items
• Failing to disclose all applicable accounting policies, such as significant advertising costs and revenue recognition.
• Misclassifying items on the cash flows statement.
• Failing to clearly segregate supplementary information or to mark it as supplementary.

HAPPY NEW YEAR and here’s to a successful and prosperous busy season.