IFRS Best Practice - Early Conversion

A change in accounting standards, shifting from GAAP to IFRS, is virtually inevitable in the U.S. The shift globally is well underway with 100 countries having switched from country specific accounting standards to IFRS. Based on the experience of these countries, adoption impacts all aspects of operations and will affect a company’s people, processes, information systems and internal controls. IFRS conversion is a significant endeavor; Vonya Global contends that an early start will make a significant difference reducing both effort and cost.

There are parallels between IFRS Conversion and the initial Sarbanes-Oxley Compliance initiatives and applying the lessons learned from Sarbanes-Oxley will significantly reduce the cost of conversion. The most important lesson is to prepare early and start early.

The changing requirements of Sarbanes-Oxley compliance in the first years after the legislation was initially passed gave most companies a false sense of security in pushing off the start date. Each company in this situation found significant resource shortages, an inefficient compliance process, and increased fees from professional services firms. Starting early could have made the compliance process far easier and would have spread the cost over multiple financial periods.

Similarly, early IFRS conversion will streamline the process and spread the cost out over multiple financial periods. IFRS implementation has enterprise wide application – with implications beyond finance and financial reporting – reaching and affecting all parts of the business. It requires modification of processes and systems to support the new accounting and reporting requirements. Companies should begin embarking on their initiatives to achieve timely convergence with IFRS, taking a slower and methodical approach. Some of the advantages to early conversion to IFRS include:

- Simplified reporting
- Reduced operating costs
- Greater transparency
- Comparability for investors
- Improved access to capital

Eventually, GAAP will go away, and IFRS will be the lone standard. This is a historic event. It is accelerating. And it is inevitable. Those who embrace this early will be rewarded.

Vonya Global is Lowering the Cost of a SAS 70 Assessment

Statement on Auditing Standards Number 70 (SAS 70) issued by the AICPA requires service organizations to obtain an external opinion assessing internal controls. Issued in 1993, the SAS 70 is not a new requirement but it has increased in relative importance since the enactment of the Sarbanes-Oxley Act of 2002 (SOX, Sarbox), Gramm-Leach-Bliley Act (GLBA), and other new regulatory requirements. Any service organization holding third party data must provide assurance that the data is protected. The certification process can be quite costly for all service organizations, and disproportionally so for smaller companies.

Vonya Global has a history of working with companies on SAS 70 readiness. The work completed by Vonya Global helps companies streamline their internal processes and controls making it easier for the certifying agent to complete the assessment. The easier it is to certify, the lower the cost of certification. As the SAS 70 is an annual requirement, the cost savings are realized each year.

For a limited time, Vonya Global is offering its SAS 70 readiness services at a discounted price. For more information please contact a representative of the firm.

Responding to Fraud Risk: the CAE’s Role

Background: The Association of Certified Fraud Examiners (ACFE) conducts a bi-annual study on fraud investigations, the results of which get summarized in the ACFE Report to the Nation. The most recent report was issued in 2008 and revealed the following:

- U.S. organizations lose 7% of their annual revenues to fraud
- There is approximately $994 billion in fraud losses each year
- Fraud schemes typically last for at least 2 years before they are caught
- Corruption was the #1 scheme at 27% of all reported fraud cases
- False Billing was the #2 scheme at 24% of all reported fraud cases
- Frauds are most likely to be uncovered by a “tip” rather than any other method, including audit
- Roughly 38% of Frauds happened at small companies (>100 employees)
- Roughly 42% of Frauds happened at large companies (1,000+ employees)
- Roughly 39% of Frauds happened at Private Companies
- Roughly 28% of Frauds happened at Public Companies

What these statistics prove is while fraud may not happen at every company; no company is immune to fraud risk. As an inherent risk to business, fraud should be included in Enterprise Risk Management (ERM). Methods for managing and controlling the risk of fraud should include strategies for fraud prevention, fraud detection, and fraud deterrence.

The Chief Audit Executive (CAE) must be involved in the organizational anti-Fraud strategy. As with other business risks the CAE should be assessing Fraud Risk and evaluating the effectiveness of the anti-Fraud strategies. Here is a sample list of strategies:

Fraud Prevention

- Anti-Fraud Tone at the Top
- Strong Corporate Governance and Internal Control Environment
- Policies and Procedures to reflect mindset and actions
- Hire ethical employees (Background checks, signed forms, etc.)
- Code of Conduct – signed by every employee
- Conflict of Interest Statement (employees and business partners)

Fraud Detection

- Establish a Hotline
- Fraud Risk Assessment
- Fraud Penetration Study based on Schemes and Concealment Strategies
- Incorporate Fraud in every phase of an audit (SAS 99)
- Create/utilize a Red Flags Database
- Implement effective SOX Fraud Controls
- Data mine instead of sample testing
- Create a Toolkit including a resource roster of experts (Fraud expert, Investigator, Data mining, etc.)
- Continuously Monitor Transactions for possible Fraud

Fraud Deterrence

- Create an Internal Audit department
- Publicize Ethics Hotline
- Publicize Internal Fraud Cases and Punishment
- Publicize Continuous Monitoring Program

Vonya Global and the ACFE are not affiliated. Information in the opening paragraph is sourced from the ACFE 2008 Report to the Nation, which can be downloaded at the ACFE website.

House Financial Services Committee passes Garrett-Adler amendment

The anticipated roll-call vote on the Garret-Adler amendment happened today... passing by a 37-32 vote. The amendment would exempt Small Caps from SOX 404 compliance. There is a long way to go before this bill becomes law, but it is said that the White House supports the bill.

Is this amendment a good thing? You can start a discussion here or follow the one going on now on LinkedIn.

Small Caps Get Another SOX Reprieve

The SEC announced on Friday, October 2, 2009 that the SOX deadline for Small Caps is pushed to June 2010. The effort by the regulatory body to make the compliance process easier for the Small public companies makes one wonder if the compliance requirement will ever stick. If so, Vonya Global has a proprietary methodology geared to help Small Caps and IPO's (newly listed public companies). SOX OnPOINT(TM) is a top-down risk based approach which streamlines the compliance effort and is consistent with the PCAOB Audit Standard Number 5.

http://www.vonyaglobal.com/sarbanes-oxley-sox-sarbox.html

The full release from the SEC can be found at: http://www.sec.gov/news/press/2009/2009-213.htm