"I wanted to scream out, Obama, say, 'keep your accountant, they're allowing you to pay only 13 percent in taxes,' " Booker said. "The rest of us should have accountants like that." But, Booker conceded, the "right advice" for Obama was to "stay presidential." [The Hill]
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No One Is Giving Up Spreadsheets, So The IIA Figured It Better Put Some Audit Guidance Out There
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
Many finance departments would grind to a halt if forced to do without spreadsheets. They’re quick, easy and inexpensive tools for manipulating and analyzing data that just about anyone can master.
However, these attributes also mean that spreadsheets create a tremendous risk, particularly if their results are incorporated into the company’s financial reports or used to support a business’ operations.
With this in mind, the Institute of Internal Auditors (IIA) in June issued GTAG (global technology audit guide) 14, a guide for auditing what it calls “user-developed applications,” or UDAs. While spreadsheets are the most visible type of UDA, the term also can include applications like user-developed databases and reports. UDAs are “…created and used by end users to extract, sort, calculate, and compile organizational data to analyze trends, make business decisions or summarize operational and financial data,” the IIA states.
By their nature, UDAs present three types of risk. One is data integrity – the old “garbage in, garbage out.” User developed applications don’t follow a structured application development cycle, and lack any sort of change management or version controls – that is, any number of individuals may be able to update a spreadsheet. All this increases the risk of inaccurate data making its way into the application.
Next is the risk that confidential data is compromised. Many UDAs can easily be attached to an email and sent to someone who shouldn’t have access to the data.
Finally, there’s what the IIA calls “availability risk.” Because many UDAs reside on flash drives and individual PCs, they’re easy to overlook when the company is backing up data. Or, the information can easily be lost altogether.
Internal auditors can take several steps in their audits to reduce the risks any UDAs in use pose to their firms. A starting point is identifying key UDAs. These typically are those that are part of the financial or management reporting processes, or use to comply with regulations. One-off spreadsheets used on an ad-hoc basis probably aren’t key.
The auditors also need to assess the risks posed by the key UDAs. To understand this, they’ll need to know who uses the applications, and how. From this, they can estimate the financial, operational and regulatory risks the UDAs present. The more complex the applications are, the more embedded they are in organizational processes, and the greater their complexity, the more risk they present.
Next up is examining the controls in place around the UDAs to determine if they reduce the risks to an acceptable level for the organization.
Spreadsheets and other user-developed applications play a valuable role in many organizations. At the same time, they can expose companies to a great deal of risk. Appropriate management and control is critical to mitigating the risks they present.
Accountants Disgust Charlie Munger on a Multitude of Levels
If you piss off a billionaire, there will be repercussions. And Charlie Munger is not a typical billionaire.
He just so happens to be the BFF and business partner of the second richest person in this fair land of ours and since WB is too busy chasing tail with new friends, he recently felt the need to vent at the University of Michigan about, among other things, accountants and how they failed. FAILED US ALL!
The accountants utterly failed us. And by the way, there’s practically no sign of any intelligent reversal of the failure of that profession. I have yet to meet many accountants who are the least bit ashamed for their contribution to our recent troubles. But it was immense. Imagine when Enron comes down to the SEC and says “we want to write a little contract with A, and a little contract with B, and take all the profit we’re going to make from these complicated contracts over the next 20 years into earnings immediately, and put an asset on our balance sheet of $28 billion from signing two pieces of paper.” And the SEC, led by wonderful accountants who studied at great places, [says] “Why, of course you should have that kind of accounting!” What the hell were they thinking? How can anybody have any respectable understanding of human nature without realizing that the kind of people who were going to be tempted by that accounting were not going to be able to resist the temptations? It was disgusting.
Now you might think this is one of those situations where the old man says to you, “I’m not mad, I’m just disappointed.” This is bullshit. Charlie Munger is definitely pissed. He’s not putting all the blame at the doorstep of accountants but you definitely get the impression that if he could, he would.
But why? Why would Mungsy be so pissed? Why would he lump you in with likes of Jimmy Carter, Ryan Leaf and Andy Barker, P.I. (an accountant, no less)? Basically it’s because you people are a bunch of pansies, will politely nod to the whims of the clients you serve and that you’re a bunch of numbers nerds and that you can barely carry on a conversation with another human being let alone understand that greed trumps Debits = Credits:
Partly the establishment accountants want to please the people who are writing the checks. And partly the academic accountants get full of people who overdosed on mathematics. They want everything to be in balance. And they don’t think that that really isn’t rational when creating rules for a human behavioral system. They’re too mathematical and not rational enough when dealing with their fellow humans. You can’t give the average Wall Street CEO really lenient standards of accounting and expect the figures to be good.
Here endeth the lesson.
Charlie Munger on Communism, Botox, and Goldbug Jerks [Motley Fool]
Is Groupon Getting Cold Feet?
Maybe! The Wall St. Journal reports that the “site isn’t cancelling its initial public offering […] but is reassessing the timing for an IPO on a week by week basis,” because some people have gotten spooked by this big, scary economy. Okay, things are actually pretty frightening out there but Bloomberg’s sources say that the company also “needs time to address regulators’ questions, including possible revisions to a controversial accounting method used in its filing.” But all this – or insolvency, for that matter – isn’t any cause for concern since this just like a couple postponing a wedding. They just need more time. [WSJ, Bloomberg]