Category: Financial Reporting

$1.5 Billion Clerical Error: Appellate Ruling Finds That Authorization Trumps Intent, Reverses Bankruptcy Court’s Opinion

In the recent matter of re: Motors Liquidation Co., et al. the Court of Appeals for the Second Circuit (the “Appellate Court”) ruled that a clerical error which unintentionally rendered $1.5 billion of debt unsecured due to the inclusion of an improper financial statement, was in fact authorized and thus enforceable. The Appellate Court determined …

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New Option Available for Accounting for Intangible Assets

The Financial Accounting Standards Board has issued new rules pertaining to accounting by private companies for identifiable intangible assets in a business combination, based on a consensus of the Private Company Council. Accounting Standards Update No. 2014-18, Business Combinations (Topic 805), was issued in December 2014. Under the new rules, an eligible entity is no …

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Permanent link to this article: http://betweenthenumbers.net/2015/01/new-option-available-for-accounting-for-intangible-assets/

Whistleblower Program to Pay Big on Late Report from Overseas

The Securities and Exchange Commission (“SEC”) has announced that it will award over $30 million in its latest high profile payout to a whistleblower who provided key original information that led to a successful SEC enforcement action. The award is getting a lot of attention for a number of reasons. This $30 million amount is …

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Permanent link to this article: http://betweenthenumbers.net/2014/10/whistleblower-program-to-pays-big-on-late-report-from-overseas/

Fraudulent Revenue Recognition Causes Rift at the SEC

A settlement agreement has been reached In the Matter of Lynn R. Blodgett, Adm. Proc. File No. 3-16045 (August 28, 2014), but without consensus on the part of the Securities Exchange Committee (“SEC”) as to the appropriate penalty. The underlying circumstances involve a financial fraud action against two executives at Affiliated Computer Services, Inc. (“ACS”), Lynn Blodget, …

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Audit Re-do Required Because of Inappropriate Relationship

Ernst & Young (E&Y) audits of Ventas, a real estate investment trust (REIT) in the healthcare sector, will have to be redone for the years ended December 31, 2012 and 2013, along with a review for the quarter ended March 31, 2014.  This unfortunate and costly required effort results from E&Y’s determination that the work …

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Permanent link to this article: http://betweenthenumbers.net/2014/07/audit-re-do-required-because-of-inappropriate-relationship/

Internal Control Failings At The IRS

The U.S. Government Accountability Office (“GAO”) recently issued “Management Report: Improvements Are Needed to Enhance the Internal Revenue Service’s Internal Controls”, describing how the Internal Revenue Service (“IRS”) continues to have internal control deficiencies, both new and old. The purpose of the report is to present internal control deficiencies identified during the GAO’s audit of …

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Permanent link to this article: http://betweenthenumbers.net/2014/07/internal-control-failings-at-the-irs/

New Rules Aimed At Increasing Auditor Scrutiny Of Critical Fraud Areas

With its new audit standards and amendments aimed at specific transaction types, the Public Company Accounting Oversight Board (“PCAOB”) has targeted three critical areas in its ongoing efforts to combat financial reporting fraud.  A more comprehensive article found here describes the new rules to heighten auditor scrutiny regarding (i) related-party deals, (ii) significant unusual transactions, …

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Better Accounting Controls Would Likely Have Prevented Inventory Fraud at Jewelry Company

The Securities and Exchange Commission (“SEC”) filed a claim stating that DGSE Companies Inc. (“DGSE”) and its former chief financial officer (“CFO”) engaged in accounting fraud by manipulating inventory accounts.  DGSE transacts in jewelry, diamonds, fine watches, rare coins, precious metals and other collectibles and valuables.  DGSE’s CFO allegedly made numerous false accounting entries that …

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First Circuit Disallows Event Study Which Fails to Connect to Key Events

An event study provides the basis for identifying movements that can attributed to specific events and illustrate how the public markets react (or fails to react) to a specific event.  Identifying and measuring such activity can substantiate (or counter) a claim for economic damages. In Bricklayers & Trowel Trades Int’l Pension Fund v. Credit Suisse …

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New standard for revenue recognition

The newly converged standard for revenue recognition has arrived. Both ASU 2014-09 (issued by FASB) and IFRS 15 (issued by IASB) are entitled “Revenue from Contracts with Customers”.  They represents a principles-based framework that is effective for revenue-generating public entities with reporting periods after December 15, 2016.  Private entities will have an additional year to …

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