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In Case You Missed It: A Look Back at 2016

In 2016, the Journal continued our coverage of some of the unresolved accounting, auditing, and financial reporting issues that have plagued the profession since the 1930s. As always, a number of new ideas issues surfaced throughout the year and garnered the attention of our authors. In case you missed them the first time around, here is a look back at some of those pieces that the editors believe should be on your year-end reading list.

Auditing: Efficient, Deficient, Inefficient, Too Expensive, or Just Right?

In our February 2016 issue, thought leaders from different corners of the profession discussed the ever-changing auditing discipline and came out with many different perspectives on the topic. Jim Peterson, former corporate counsel at Arthur Andersen, proposed a radically different approach to the search for audit quality (“Audit Quality and the Expectations Gap,” p. 6). Cindy Fornelli, executive director of the Center for Audit Quality, suggested that audit quality is actually getting stronger due to enhanced communications and transparency (“Improving Audit Quality through Auditor Communication,” p. 10). Art Radin and Miriam Katowitz argued that the growth of audit requirements has added cost without providing commensurate value (“Have Audits Become Too Inefficient and Expensive?” p. 18). Could a simpler, principles-based audit be less expensive but more valuable to stakeholders and investors? This issue is a great place to begin the discussion.

Tone at the Top

The responsibility of auditors to protect investors and stakeholders against fraud is a responsibility no longer assumed. At least 300 pages of the PCAOB's literature are devoted to explanations of why auditors may miss it. Sri Ramamoorti, a CPA with a PhD in behavioral psychology, and his coauthor Barry Jay Epstein argued that we need to reexamine the tone at the top within the context of “dark triad” individuals—abnormal personality types who might actually have a propensity for rising through the executive ranks and be responsible for outsize frauds that current risk models do not anticipate. The authors suggest factoring in executives' personality types and the resultant behavioral/integrity risks as an integral part of risk assessment (“Today's Fraud Risk Models Lack Personality,” March, p. 14). They also stress that the entire corporate culture may be need be fundamentally reformed—a tall order to be sure (“When Reckless Executives Become Dangerous Fraudsters,” November, p. 6). Whether you are a financial executive or outside auditor, these are articles you should not miss.

Risks in the Modern Nonprofit

Last year witnessed the largest bankruptcy of a nonprofit in New York history. As one author in our special April issue devoted to nonprofits observed, “people today live with more uncertainty than in the past” (Ron Ries, “How to Evaluate Risk in the Modern Not-for-Profit Industry,” p. 6). Nonprofits that strive for the common good are also subject to internal and external challenges to fulfilling their mission in the long term (David Rottkamp and Nina Bahazhevska, “Financial Sustainability of Not-for-Profits,” p. 8).

Cybersecurity and the Role that CFOs Need to Play

Maintaining security in the digital age was a concern of people throughout the profession in 2016. CPAs need to be aware of their own responsibilities in this area, as well as how they can bring their own skills and knowledge to bear on this highly visible problem. In our May issue, Joel Lanz looked specifically at the roles of financial executives and audit committees in managing this risk from a business, as opposed to purely technological, perspective (“Communicating Cybersecurity Risks to the Audit Committee,” p. 6).

Sustainability Reporting and Integrated Thinking

Our June issue focused on the accounting profession's role in sustainability reporting—it's a must-read. This revolutionary movement is spreading through the business world, and CPAs are well positioned to play a leading role. Financial executives and outside advisors are increasingly aware of the need to identify, measure, and monitor the hidden assets that are not on the balance sheets of companies but make up 82% of the value of the modern corporation. Mervyn King, Jane Gleeson-White, and other thought leaders discussed how understanding the “six capitals”—not just financial and manufactured capital, but also human, intellectual, natural, and social capital—are crucial to the integrated thinking and reporting necessary for a sustainable form of capitalism.

Our June issue focused accounting profession's role in sustainability reporting.

Is Financial Reporting Meeting Users' Needs?

One of the unresolved issues in financial accounting is whether the explosion of standards and standards-setting bodies, oversight organizations, and advisory groups is actually improving financial reporting for the benefit of users. Our July issue focused on this topic, featuring commentary from PCAOB Member Jeanette Franzel, SEC Deputy Chief Accountant Wesley Bricker, and FASB Member Marc Siegel.

From Accounting Practice to Academia

Many practitioners want to pass their experience on to the next generation by transitioning into academia. Whether transitioning to a PhD program, trying out an adjunct role, or retiring to the classroom from public practice, many different opportunities, as well as hurdles, await. Our August issue drew heavily upon the experiences of the authors and their colleagues who have already blazed the path. It provided guidance for those who want to dive headfirst into academia or for those practitioners who prefer to get their feet wet with part-time teaching work. Practical and hands-on, this issue is a must-read for practitioners considering the jump.

Life Cycle Planning

Many CPA firm partners have grown up with their clients and helped them through the various stages of their business careers and personal life stages. Our September issue on financial planning was organized around the CPA's role in life cycle planning, from having children to buying a home to saving for college and preparing for retirement. Several articles in this issue explored the critical role CPAs need to play to ensure both the financial and personal well being of their clients throughout their lifetime.

Out with the Old

The October issue saw the introduction of a column featuring a new type of managing partner and a new type of CPA firm. Jason Ackerman, a 29-year-old CPA, discussed how he runs a 25-person firm as “paradigm shifts are changing the accounting profession” (p. 68). Jason began with the first of hopefully many “Managing Your Practice” columns on how the firms of the future will find success.

Turbulence and Change

We round out the year with some shocking revelations from our second annual Rosenberg Survey of New York State CPA firms. Readers can uncover them later in this issue.

 

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