the impact of the financial crisis on accounting & other professions
DESCRIPTION
The Impact of the Financial Crisis on Accounting & Other Professions. The Round-Up…. MODERATOR: John Iannotti, Esq ., Vice President, Everest Reinsurance Company PANELISTS: Debra A. Cutler, CPA, CFF, CFE , Shareholder, Debra A. Cutler CPA, P.C. - PowerPoint PPT PresentationTRANSCRIPT
2010 PLUS International Conference
The Impact of the Financial Crisis on Accounting
& Other Professions
2010 PLUS International Conference
The Round-Up…
MODERATOR:• John Iannotti, Esq., Vice President, Everest Reinsurance
Company
PANELISTS:• Debra A. Cutler, CPA, CFF, CFE, Shareholder, Debra
A. Cutler CPA, P.C.
• Mary Pat Joyce, Esq., RPLU, ASLI, Managing Director, Markel Corporation
• Jay Moroney, Esq., President, Lemme Insurance Group, Inc.
• H. Steven Vogel, Esq., Partner, Wilson Elser Moskowitz Edelman & Dicker LLP
2010 PLUS International Conference
Before and After
September 2008
September 2010 Results
Congress Republican Democrat Tea Party
DJIA 11,516 10,600 Rigged game?
Gold $871 an ounce$1,276 an
ounceHard Assets in
favor
Prime Rate 5.00% 3.25% Refinance?
CD Rates2.94%
one year CD1.23%
one year CD Bond Bubble?
2010 PLUS International Conference
Before and After (cont’d)
September 2008
September 2010
Poverty Line 13.2% or 39M 14.3% or 45MPoverty
threshold: family of four $21,756
Unemployment 6.2% 9.6% Foreclosures
Avg. Home Sale Price $290,300 $235,300
Decline in net worth
Bank Failures 30 in 2008 140 in 2009Balance sheet
issues
2010 PLUS International Conference
Legislation Post-Crisis
Legislation Purpose Cost2008 Stimulus Act Tax rebates, incentives to
stimulate investment$152B
TARP Stabilize system with cash infusions, purchase of distressed debt
$700B
Housing Recovery Act Insure $300B in mortgages; loans to those facing foreclosure
$800B
Housing Tax Act of 2008 Tax credit for home purchases
American Recovery Act 2009 Stimulate job creation $787B
2010 PLUS International Conference
Legislation Post-Crisis (cont’d)
Legislation Purpose Cost
American Recovery Act 2009 Stimulate job creation $787B
Helping Families Save Homes Act 2009
Help avoid foreclosure
Cash for Clunkers 2009 Incentives to buy new cars through rebates
$2.877B
Unemployment Compensation Act 2009
Extra 13 weeks unemployment
Restore Employment Act 2010
Tax incentives to hire
Health Care Act of 2010 Affordable Health Care $562B
Dodd Frank Reform Bill 2010 Financial Regulatory Reform $5B
TOTAL COST A lot of money
2010 PLUS International Conference
Lawyers Post Crisis
• Sub-Prime Victims
• Ponzi Scheme Victims
2010 PLUS International Conference
Real Estate Professional Post Crisis
• Depressed Housing Market
• Increasing number of bank-owned properties (REOs), short sales and auctions
• Mortgage Fraud on the rise
2010 PLUS International Conference
Who is at Risk??
• Real Estate Agents - Dabbling in REOs, short sales and auctions; cutting back on insurance coverage; engaging in ancillary services
• Real Estate Appraisers & Mortgage Brokers - Claims for overvaluation, misrepresentation and fraud
• Title Agents/Abstractors - Overturned foreclosures, clouded title and missed liens
• Notaries/Closers-Fraud and Robo-signing backlash
2010 PLUS International Conference
Accountants Post-crisis
• Madoff Victims
• Petters Victims
• Rothstein
• Dreier
• Stanford
2010 PLUS International Conference
• Auditors or Professional Advisors of Madoff, et al Investor Stand a Good Chance of Becoming a Defendant
• Auditors for the numerous feeder funds that invested all or a portion of their investors’ monies with Madoff. Likely to face lawsuits from their fund clients and their clients’ investors
• CPAs and Lawyers that served as Trustees and Personal Representatives of estates and foundations that invested with Madoff
Who Is At Risk??
2010 PLUS International Conference
Financial Reporting & Auditing Post Crisis
• FASB 168 “Accounting Standards Codification” Effective for financial statements issued for
interim and annual periods ending afterSeptember 15, 2009
• Changes in State Regulations
• Risk Assessment –Economic Conditions Auditing in High Risk Environments
2010 PLUS International Conference
Auditor’s Reports• Scope limitations
Inability of obtain sufficient appropriate audit evidence
• Emphasis of a Matter Not required but may reduce liability exposure
• Going Concern Qualifications Business bankruptcy filings are on the rise 8%
increase for 12 month period ending June 30, 20101
1www.uscourts.gov/bankruptcystatistics
Financial Reporting & Auditing Post Crisis
2010 PLUS International Conference
1The effective date for periods ending on or after Dec. 15, 2010. Early application is prohibited, with one exception.
Financial Reporting & Auditing Post Crisis
1. Engagement Letters – All SSARS engagements Requirement – written communication regarding the
services to be performed
2. Materiality – Review engagements A discussion of materiality
3. Lack of independence – Compilation engagement May include a description in the accountant’s compilation
report
SSARS 19 Compilation and Review Engagements1
2010 PLUS International Conference
1The effective date for periods ending on or after Dec. 15, 2010. Early application is prohibited, with one exception.
Financial Reporting & Auditing Post Crisis
4. Review Evidence Introduction of new term
5. Enhanced documentation requirements for compilation and review engagements
SSARS 19 Compilation and Review Engagements1
2010 PLUS International Conference
Dodd Frank Reform and Effect on CPAs
• Act adopted in response to Economic Crisis • Intended to create financial stability• Better protect consumers• Compliance of Client’s• Amendments to SOX-Exemption of 404(b)• Exempt from Consumer Financial Protection
Bureau (except ancillary services) • PCAOB creation of a program through which
it can monitor auditors of nonpublic broker-dealers
2010 PLUS International Conference
Impact of Bank Failures on Accountants
• Large number of potential claims submitted by Accountants who provided services to failed community banks
• What should underwriters look for in this new claim environment?
2010 PLUS International Conference
Other Updates Affecting CPAs
• International Financial Reporting Standards (IFRS)• IRS- Disclosure of Uncertain Tax Positions (UTPs)
For the 2010 tax year, the disclosure on Schedule UTP will be applicable for taxpayers where the company or a related party issued audited financial statements meeting certain criteria
• IRS Preparer Registration (PTIN Regulations)• Private Company Financial Reporting -Blue Ribbon Panel
Recommendations- October 2010 new model of GAAP- exceptions for private
companies new standard-setting board; people with private
company experience should set those standards
2010 PLUS International Conference
Final Thoughts
2010 PLUS International Conference
Questions&
Answers
2010 PLUS International Conference
Many Thanks To…
• John Iannotti
• Debra A. Cutler
• Mary Pat Joyce
• Jay Moroney
• H. Steven Vogel