The risk assessment standards, FIN 48, valuation standards, convergence, the rewriting and codification of auditing and accounting standards, ethics interpretations, and other changes impacting the accounting and auditing regulatory landscape are being driven by a number of factors. But when push comes to shove on implementation, the burden squarely falls on the companies that these rules apply to, and on CPA firms’ A&A practice group and A&A practitioners.
As I write this, it is reported that the FASB refused to delay implementation of FIN 48. The indication was, this type of disclosure was needed now despite the expressions of difficulty. Although there had been some success in delaying implementation of certain aspects of Sarbanes-Oxley, it is becoming increasing apparent that there will be very limited future success in delaying or even staggering a standard’s effective dates (based on the type of entity) because of the difficulty or expense of implementation.
There are higher internal costs as a result of this flood of comprehensive reengineering of accounting and auditing standards, and accounting firms have to substantially modify their procedures as well as retrain their staff. Yes, it can add substantial revenue to the firm, whether in the form of higher fees or additional engagements. But on the flip side, some firms are not going after certain new engagements because of staffing shortages.
What I find missing somewhat in this flurry of accounting and auditing regulatory actions is sufficient consideration of the impact on smaller companies with limited resources for dealing with regulatory change overload. Although there is discussion of a special set of rules for financial reporting by private companies, that discussion seems to be off to the side. I believe that issue must be directly placed and debated in the context of the various accounting and regulatory changes being considered now.
Because of Sarbanes-Oxley and globalization, there is significant and increased attention to investors and third parties and their use and reliance on a company’s published financial information. Perhaps as a natural consequence, some companies and CPAs affected feel it is at the cost of their interests and concerns being adequately considered.
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