Fraud: Is Your Nonprofit Ripe for the Picking?

Fraud has always been a concern for nonprofit organizations, and it’s not going away. A recent Association of Certified Fraud Examiners report shows the median loss is more than $100,000.

Click on the following link for the article: armaninollp.com

Dave Tate’s Comments. Internal controls and the potential for fraud are very real issues for nonprofits, their management and officers, and their boards. If you are a nonprofit board member you cannot simply assume that internal controls, the accounting function, and the external audit, review or compilation are taking care of everything. Are these issues that the board has on its agenda, and that the board discusses and evaluates? Have you requested that these issues be put on the agenda? You should.

Dave Tate, Esq. and licensed CPA (inactive) in California.

Blogs: http://directorofficernews.com and http://californiaestatetrust.com

See also Tate’s Excellent Audit Committee Guide, which you can find at http://directorofficernews.com

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Tate’s Excellent Audit Committee Guide – 122 Pages – Updated August 7, 2015

Please click on the following link for the August 7, 2015, edition of Tate’s Excellent Audit Committee Guide (122 pages), Tate’s Excellent Audit Committee Guide 08072015.

Enjoy. Dave Tate, Esq. (San Francisco/California)

Tate’s Excellent Audit Committee Guide – Completed Initial Edition – 115 Pages Plus Additional Links

Click on the link at the bottom of this post for a pdf of the completed initial edition of Tate’s Excellent Audit Committee Guide 08042015. The guide is for boards and audit committees of public companies, private companies, nonprofits, and governmental entities. This edition of the guide is 115 pages, plus links to additional resources and materials. The guide is updated regularly as new developments occur, and developments will also be posted to this blog. Please do tell other people about the guide and pass it along. Enjoy, and best to you.

Dave Tate, Esq. (San Francisco/California)
Click on the following link for the guide: Tate’s Excellent Audit Committee Guide 08042015

Tate’s Excellent Audit Committee Guide (July 31, 2015, a work in progress)

For audit committee members and directors, I have attached three links below, the first for my 2007 audit committee chapter for the California Continuing Education of the Bar, the second for the new audit committee guide that is a work in progress but already contains substantial materials, and the third to the cover and table of contents to Accounting and Its Legal Implications.

Using my blog posts, the 2007 audit committee chapter (which is now unpublished, CEB subsequently cancelled the entire Director and Officer binder), and the new audit committee guide you should get a good feel for new developments and guidance about audit committee member functions and responsibilities.

I also ask that you tell other people about this blog and the new audit committee guide.

1. Here is a link to my 2007 audit committee chapter for the California Continuing Education of the Bar (the chapter and the entire D&O publication has been cancelled for some time), CLICK HERE

2. The following is a link to the new audit committee guide which contains substantial materials although it is a work in progress, Tate’s Excellent Audit Committee Guide (July 31, 2015 version), Tate’s Excellent Audit Committee Guide 07312015 CLICK HERE

3. Cover and Table of Contents from Accounting and Its Legal Implications – I expect to scan and post this entire material shortly – although some is outdated, it is still a good read – originally published by Business One/Irwin Publishing, CLICK HERE

Thank you. Dave Tate, Esq. (San Francisco / California).

PCAOB Issues Concept Release On Audit Quality Indicators – Important For Audit Committees And External Auditors

The PCAOB has released a concept release on audit quality indicators. You can find the release HERE, and the relevant PCAOB page HERE. These will be important for audit committees, external auditors, and other people.

As the PCAOB states:

“The indicators are a potential portfolio of quantitative measures that may provide new insights about how to evaluate the quality of audits and how high quality audits are achieved. Taken together with qualitative context, the indicators may inform discussions among those concerned with the financial reporting and auditing process, for example among audit committees and audit firms. Enhanced discussions, in turn, may strengthen audit planning, execution, and communication. Use of the indicators may also stimulate competition among audit firms focused on the quality of the firms’ work and, thereby, increase audit quality overall. Issues raised by the release include: (i) the nature of the potential indicators, (ii) the usefulness of particular indicators described in the release, (iii) suggestions for other indicators, (iv) potential users of the indicators, and (v) an approach to implementation over time of an audit quality indicator project.”

Dave Tate, Esq. (San Francisco / California)

What Really Matters For Audit Committee Member Actions – Considering Updating & Publishing My Audit Committee Guide

I have been considering updating and publishing again my audit committee guide. The most recent publication was as a new chapter to the 2007 California Continuing Education of the Bar publication Advising and Defending Corporate Directors and Officers, which was an excellent publication with 17 chapters on the various topics. Unfortunately for whatever reason the sales were not sufficient and CEB later discontinued the publication. I have attached a copy of my initial 2007 chapter HERE.

A lot has changed from 2007 to now. And the materials that I cover in my blog have also changed considerably. But as I have been considering a possible update and the table of contents it strikes me how much of the material consists of lists of qualifications, issues and topic areas that an audit committee and its member are required to consider. And the list is growing as we speak. Considerable detail is being added as to how an audit committee member should evaluate the sufficiency of the external auditor – in other words, a deliberate evaluation where perhaps before in many cases there might not have been any significant evaluation. This will also change how the external auditor goes about performing the audit, the value that the external auditor might provide to helping the audit committee member perform his or her oversight duties, and somewhat the relationship between the audit committee members and the external auditor. On the whole I believe the change is good. But I have also written for some time that I have concern about the long list of issues and topic areas that an audit committee member is required to consider, and that all audit committee members really do need to understand what their duties are, including what is in the audit committee charter (e.g., if the charter says “risk management” that description is simply too broad – risk management of what?).

It strikes me, however, that at the end of the day, the performance of an audit committee member’s oversight responsibilities requires:

Audit committee member understanding and competency;

Agenda;

Timely and active diligence;

Putting in the time;

Reasonable reliance on competent other people (the CEO, the CFO, internal audit if there is one, the external auditor, culture, reputation and tone at the top, the accounting and financial reporting functions and professionals, legal counsel and others);

Sufficiency of information;

Deliberative decision making; and

Anticipation and thinking ahead.

In other words, we are primarily talking about the business judgment rule.

I’m not sure that I will put in the time to update the audit committee guide. If I had a crystal ball that decision would be easy – if the guide will be read and used by enough people, or if I could find a law firm that is interested in these topics, then it is worthwhile. If I do the update, most likely I will post the updated materials in blog posts and then add to the materials as they progress. That will get the materials out considerably earlier. I doubt that I will use a publisher – in addition to many published articles I have previously formally published two audit committee related materials. The process takes longer than I prefer. And, on my blog the materials also will be free and available to everyone.

Those are my thoughts this July 3, 2015, morning. More to follow on this.

Dave Tate, Esq. (San Francisco / California)