Audit & Accounting

Until 1991, the accounting profession was largely guided by historical cost, transaction-based accounting.Granted, fair market value and historical cost at the point of the transaction were deemed equivalent, provided that arm’s-length transactions were involved. However, those making decisions — investors, auditors and regulators — grasped that unless someone gave and accepted consideration for something, its underlying value was arguable.

As investors and regulators increasingly question the role of fair value measurements and mark-to-market accounting in contributing to the global economic downturn, a group of speakers weighed in at a panel discussion sponsored by the CFA Institute Centre for Financial Market Integrity.

CPAs who conduct valuations in the normal course of their practices are now required to comply with detailed standards.

At the Financial Planning Association business solutions conference last month, Julie Littlechild, president of Advisor Impact, presented new information based on a survey of investors about the economics of loyalty. In effect, she was showing what turns a client from satisfied-but-passive to actively engaged in the growth of an advisor’s business. “Client engagement is the outcome of a practice that is structured effectively and a driver of future growth in an advisor’s business,” she says. “Advisors can achieve a balance between a level of service that is both meaningful to their clients and profitable to then, but which encourages clients to be actively engaged in the growth of the advisor’s business.” Vanguard Financial Advisory Services sponsored the study and notes the results underscores that there is a direct economic correlation between having engaged clients and having a thriving practice. Littlechild says that of the investors surveyed (some 1,000), 17 percent were disgruntled, 19 percent were complacent, 31 percent were content, and 33 percent were “engaged.” Actually all of those in the disgruntled section had thought about switching advisors. Obviously, the thrust of any practice is to move clients into the “engaged” category because the economics of loyalty are simply too great to ignore. Keep in mind that the higher up the scale clients move—from disgruntled to complacent to content to engaged—the more services they utilize, including comprehensive financial planning, retirement income planning, tax planning, estate planning, and trust services. Also, it may go without saying that the engaged clients are more loyal clients. They are unlikely to switch advisors. So, how to get clients into this category? Littlechild offers a few tips:

A team of accounting students from Brigham Young University has captured first place honors as winners of the Deloitte National Student Case Study Competition.

PricewaterhouseCoopers has released a report showing an increase in federal class-action shareholder lawsuits last year, after two straight years of decline.

A study of corporate audit committees finds that members increasingly expect their companies' internal auditors to focus on operational, strategic and business risks.

Accounting Today's eagerly anticipated Top 100 Firms report ranks the largest U.S. Accounting firms by revenue, offering both a wealth of statistical data and insightful analysis of what makes the best firms tick, as well as their plans for the future. This annual ranking includes a breakout of the biggest tax firms, and takes an in-depth look at what strategies the Top 100 are using to recruit and retain qualified staff in the current environment.

The Center for Audit Quality has issued a report on a recent meeting of the Treasury Department's Advisory Committee on the Auditing Profession.

The Securities and Exchange Commission is offering investors a new interactive tool for comparing the costs, risks, investment strategies and past performance of mutual funds using Extensible Business Reporting Language.