EFPR Group Companies

For over 60 years, our knowledgeable and experienced team of CPAs and business consultants have been serving individuals and businesses in Western New York and around the nation.

Open Communications Will Save Time and Provide Peace of Mind

Publicly traded company quarterly reviews and annual audits command a significant amount of information and communication in order to ensure timely filing and disclosure in Forms 10-Q (Quarterly Report) and 10-K (Annual Report). This involves requests for many documents, interviews with company personnel, detailed account testing, and various other discussions. To facilitate a successful audit, I recommend that the management team of publicly traded companies keep an open line of communication with their accountants throughout the year. Audit and review engagements require a substantial amount of planning on behalf of the accounting firm.  This includes assessing the risk of material misstatement of the financial statements, preparing communications with third parties (i.e. bank confirmations, debt confirmations, and attorney representation requests) and identification of significant issues (i.e. significant amounts of new debt, issuance of complex financial instruments, and potential or threatened litigation). It also includes selecting account testing samples, and ensuring an adequate staffing to complete the engagements in a timely fashion.  When companies and their accountants openly communicate, it allows the accounting firm to adequately allocate the work with a much more effective outcome. Furthermore, when companies and their accountants are regularly communicating, it helps to identify and mitigate any unexpected issues arising when the accountants are on-site performing their fieldwork procedures or completing the engagement prior to filing of the Form 10-Q or Form 10-K. At this point, the accounting firm is busy reviewing their testing selections determined in the planning phase.  If unexpected issues arise during fieldwork or wrap-up, it can potentially change the preliminary risk assessment and overall audit approach. This could result in additional inquiries, discussions, and potentially more information requests. Management and the accountants should also have regular and open communications with audit committee. Auditing Standard No. 16 (“AS 16”), Communications with Audit Committees, establishes the requirements for timely communication of matters related to conducting the audit with the audit committee prior to the issuance of the auditors’ report. These matters include, but are not limited to, significant accounting policies and estimates, unusual transactions, corrected and uncorrected misstatements, disagreements with management, and difficulties encountered during the audit. This communication is essential because the audit committee has the ultimate determination in approving and hiring a public accounting firm to conduct the audit.  The committee should be kept abreast of all significant matters.  Timely communication of significant issues arising during the audit is essential to allow adequate time for proper resolution and agreement by all relevant parties. When management and the audit committee maintain open communication about the business activities of the company, the accounting firm can be a resource to vet management’s approach to complex accounting matters and ensure that management handles the situation appropriately.  When the transactions actually occur, management and the accounting firm will be in agreement with the selected approach and that the company’s action meets the relevant accounting standards dictated in the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) or other relevant guidance. To learn more about this process, please contact Charles Stebbins at (585) 295-0552 or cstebbins@efprgroup.com. Charles Stebbins, CPA is a member of the Public Company Service Department at EFPR Group.

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