Articles
Independence and Internal Control Issues: Do third parties get clear picture of impairments?
In the world of smaller private company financial reporting, it is not uncommon for management, or owner-managers of businesses, to engage practitioners to perform attest engagements and certain nonattest engagements as well. Attest engagements span a spectrum – from a high assurance engagement, an audit, to a limited assurance engagement, a review, and all the way to a nonassurance engagement, a compilation. When clients engage practitioners to perform any level of attest engagement, practitioners need to consider whether their independence is impaired.
Humbling Moments
Deepening insolvency claims present increased risk for auditors
Tough economic times force business owners to make tough choices. Management may have to decide whether to continue the fight to keep the company afloat or close up shop. Such times also force accountants to make difficult risk management decisions. Professional liability claims from audit engagements tend to increase following economic downturns. Business failures can lead to suits against the auditor by creditors, shareholders, and others. At a minimum, auditors should make sure that their decisions regarding the stability of the company and their advice to management is well-documented.