clear financial statement disclosures
Apr 27

How to Write Clear Financial Statement Disclosures

By Charles Hall | Accounting and Auditing

Creating clear financial statement disclosures is not always easy. Creating (unintentional) confusion? Well, that’s another matter.

clear financial statement disclosures

Clear Financial Statement Disclosures

Let’s pretend that Olympic judges rate your most recent disclosures, flashing scores to a worldwide audience. What do you see? Tens everywhere—or something else?

Balance sheets tend to be clear. Why? The accounting equation. Assets always equal liabilities plus equity. But there is no disclosure equation (darn it), and without such, we flounder in our communication. 

CPAs tend to be linear thinkers. We enjoy Pascal more than Hemingway, numbers more than words, debits and credits more than paragraphs. Our brains are wired that way.

But accounting is more than just numbers. It is the communication of financial statements and disclosures. In the name of clear disclosures, I offer these suggestions.

Consider Your Readers

Who will read the financial statements? Owners, lenders, and possibly vendors. Owners—especially those of smaller businesses—may need simpler language. Some CPAs write notes as if CPAs (alone) will read them. While accounting is technical, we need—as much as possible—to simplify.  

Use Short Paragraphs

Lengthy paragraphs choke the reader. Breaking long paragraphs into shorter ones makes the print accessible. 

Less is more in many instances. When we try to say too much, we sometimes say…too much. Additionally, short sentences are helpful.   

Use Short Sentences

CPAs may have invented the run-on sentence. As I read one of those beauties, I feel as though I can’t breathe. And by the end, I’m gasping. Breaking long sentences into shorter ones makes the reader more comfortable. And she will thank you. 

Use Shorter Words

CPAs don’t receive merit badges for long, complicated words. Our goal is to communicate, not to impress. For example, split is better than bifurcate.  

Attorneys are not our model. I sometimes see notes that are regurgitations of legal agreements, copied word for word—and you can feel the stiltedness. Do your reader a favor and translate the legalese into digestible—and might I say more enjoyable—language. 

Use Tables

Long sentences with several numbers can be confusing. Tables are easier to understand.

Write Your Own Note

Too many CPAs copy disclosures from the Internet without understanding the language. Make sure the language is appropriate for your company.

Put Disclosures in the Right Buckets 

Think of each disclosure header as a bucket. For example, if the notes include a related party note, then that’s where the related party information goes. If the debt note includes a related party disclosure (and this may be necessary), place a reference in the related party note to the debt disclosure. You don’t want your reader to think all of the related party disclosures are in one place (the related party note) when they are not. The same issue arises with subsequent event notes.

Have a Second Person Review the Notes

When writing, we sometimes think we are clear when we are not. Have a second person review the note for proper punctuation, spelling, structure, and clarity. If you don’t have a second person available, perform a cold review the next day—you will almost always see necessary revisions. I find that reading out loud helps me to assess clarity.

I also use Grammarly to edit documents. The software provides grammar feedback as you write. If you don’t have a second person to review your financials, I recommend it.

Use a Current Disclosure Checklist

Vetting your notes with a disclosure checklist may be the most tedious and necessary step. FASB and GASB continue to issue new statements at a rapid rate, so using a checklist is necessary to ensure completeness.   

Winning Gold

I hope these suggestions help you win gold–10s everywhere. I think I hear the national anthem.

going concern
Mar 27

Going Concern in Compilation and Review Engagements

By Charles Hall | Preparation, Compilation & Review

Do you need to concern yourself with going concern in compilation and review engagements? Yes, if the financial statements are prepared in accordance with the FASB Codification. But is going concern relevant to special purpose frameworks such as the cash basis or tax basis financial statements. Yes, going concern is in play even with special purpose frameworks. This post provides an overview of what you need to know about going concern as it relates to compilation and review engagements.

going concern in compilation and review engagements

A while back I wrote a post about ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which was effective for years ending after December 15, 2016. This standard requires companies to include certain disclosures when substantial doubt is present. So, we know that financial statements prepared in accordance with GAAP must include these disclosures. Otherwise, there is a GAAP departure. And in an audit, we modify our opinion when there is a departure.

Going Concern in Compilation Engagements

But what about financial statements subject to a compilation engagement, especially when substantially all disclosures are omitted? Is it permissible for the CPA to ignore the going concern standard since it just requires disclosures? Yes, but be careful. Ask yourself whether the financial statements would be misleading (without the going concern disclosure). If they are misleading, then include a selected disclosure regarding going concern. Also, consider adding an emphasis-of-matter paragraph (regarding going concern) to your compilation report.

Consider the following scenario. Your client (who has significant going concern issues) takes your compilation report (which has no emphasis of a matter paragraph) and their financial statements (that has no disclosures) to a local bank. It’s obvious that the company is not doing well. But the bank makes a large loan anyway, and later, the company defaults on the loan. Then the bank files suit against you (the CPA) asserting that you issued the compilation report without the emphasis-of-matter paragraph and that you knew the financial statements had no going concern disclosure. The bank says the financial statements were misleading.

While the emphasis-of-matter paragraph is not required, consider adding one anyway.

Going Concern in Review Engagements

Since review engagements require full disclosure, going concern disclosures are not optional when substantial doubt exists in GAAP financial statements. They must be provided. If they are not, a GAAP departure exists.

So what going concern procedures should you perform in a review engagement?

In regard to going concern when the financial reporting framework includes going concern requirements (e.g. GAAP), AR-C 90.65 states:

If the applicable financial reporting framework includes requirements for management to evaluate the entity’s ability to continue as a going concern for a reasonable period of time in preparing financial statements, the accountant should perform review procedures related to the following: 

    1. Whether the going concern basis of accounting is appropriate
    2. Management’s evaluation of whether there are conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern
    3. If there are conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern, management’s plans to mitigate those matters
    4. The adequacy of the related disclosures in the financial statements

In regard to going concern when the applicable financial reporting framework does not address going concern (e.g., tax basis), AR-C 90.66 states:

If the applicable financial reporting framework does not include a requirement for management to evaluate the entity’s ability to continue as a going concern for a reasonable period of time in preparing financial statements and conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time existed at the date of the prior period financial statements (regardless of whether the substantial doubt was alleviated by the accountant’s consideration of management’s plans) or, in the course of performing review procedures on the current period financial statements, the accountant becomes aware of conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, the accountant should do the following: 

    1. Inquire of management whether the going concern basis of accounting is appropriate.
    2. Inquire of management about its plans for dealing with the adverse effects of the conditions and events. 
    3. Consider the adequacy of the disclosure about such matters in the financial statements. 

SSARS 24 does say that the nature and extent of procedures performed regarding going concern are a matter of professional judgment. If the audited entity has a history of profitable operations and access to financing, inquiry alone might be sufficient in a review engagement.

Going Concern Paragraph in a Review Report

If the accountant concludes that substantial doubt will remain for a reasonable period of time, an emphasis-of-matter paragraph is required in the review report. (Some reporting frameworks specify a “reasonable period of time.” For GAAP, it is one year from the date the financial statements are issued or are available to be issued.)

AR-C 90.A123 provides the following example of a going concern paragraph in a review engagement when (1) substantial doubt exists for a reasonable period of time, (2) management’s plans don’t alleviate the substantial doubt, and (3) the reporting framework requires a note disclosure.

Emphasis of Matter

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note X to the financial statements, the Company has suffered recurring losses from operations, has a net capital deficiency, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note X. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our conclusion is not modified with respect to this matter. 
 
Representation Letter in Review Engagements
 
Be sure to update your representation letter when performing review engagements. SSARS 24 tweaked some language in the letter and added additional wording such as the following:
 
  • Management has disclosed to the accountant all information relevant to use of the going concern assumption in the financial statements.

Special Purpose Frameworks and Going Concern

While the cash, modified cash, or tax bases of accounting do not address going concern, accountants still need to consider the effects of negative financial conditions and trends. Why? When using a special purpose framework (like the tax basis), the accountant should follow the guidance in GAAP. No, that doesn’t mean your disclosures are just like GAAP, but it does mean they are similar to GAAP.

Since GAAP tells the financial statement preparer to consider whether substantial doubt exists, then persons creating cash basis, modified cash basis or tax basis financial statements should do the same. If substantial doubt is present, going concern disclosures are necessary. 

So, what is substantial doubt? The FASB Codification defines it this way:

Substantial doubt about the entity’s ability to continue as a going concern is considered to exist when aggregate conditions and events indicate that it is probable that the entity will be unable to meet obligations when due within one year of the date that the financial statements are issued or are available to be issued.

If substantial doubt is present and going concern disclosures are not included in full disclosure compilations or reviews, then modify your accountant’s report (for the departure). 

efficient CPA
Mar 17

Efficient CPA: 10 Steps for Productivity

By Charles Hall | Accounting and Auditing , Technology

Do you want to be an efficient CPA?

Here are ten super easy ways to increase your productivity.

super easy ways to increase productivity

10 Ways to Become an Efficient CPA

1. Use Control f

First, I see too many CPAs hen-pecking around, trying to find information in their electronic piles. Many times the quickest route to finding information is Control f (Command f on a Mac). Hold your control key down and type f. This action will usually generate a find dialog box–-then key in your search words. Control f works in Excel, Word, PowerPoint, and Adobe Acrobat.

2. OCR Long Documents

Computers can’t read all electronic documents (that is, not all documents are electronically searchable). Sometimes you need to convert the document using OCR. OCR stands for optical character recognition. So how can you make an electronic document readable and searchable?

Scan documents into Adobe Acrobat and use the OCR feature to convert bitmap images into searchable documents. Then use Control f to locate words. When should you OCR a document? Typically when it’s several pages long. Do so when you don’t want to read the entire document to find a particular word or phrase.

For example, suppose your client gives you a one-hundred-page bond document, and you need to locate the loan covenants. Rather than reading the entire document, convert it to searchable text (using Adobe Acrobat) and use Control f to locate each instance of the word covenant

3. Dispatch Paper Quickly

A clean work surface enables you to think clearly.

So make filing decisions quickly–as soon as a paper or electronic document is received. Keep your desk (and computer desktop) clean.

If you can dispatch a document in less than two minutes, do so immediately. For documents that take more than two minutes to file, electronically scan them. Then place the document in an action folder on your computer’s desktop. (If you don’t have time to scan the document at the moment, create a To Be Scanned pile in a paper tray.)

You’re thinking, “But I’ll forget about the document if it’s not physically on my desk.” Allay this fear by adding a task in Outlook to remind you of the scanned document (you can even add the document to a task). I create tasks with reminders. So, for example, the reminder pops up at 10:00 a.m. on Tuesday; attached is the relevant document. That way I don’t forget.

For more information about scanning, see my post How to Build an Accountant’s Scanning System. I also recommend David Allen’s book Getting Things Done which provides a complete system for making filing decisions.

4. Close Your Door

An open door says what? Come in.

A cracked door says what? Knock and come in.

A closed door says what? Don’t enter, especially without knocking.

I close my door for about an hour at a time. Additionally, I turn off all electronic devices and notifications. Doing so allows me to focus on the task at hand. 

5. Use a Livescribe Pen

Do you remember everything someone says in a meeting? I sure don’t. Livescribe allows me to take notes and simultaneously record the conversation. Then I can hear any part of the discussion. For example, if–in a meeting–I write the words “intangible amortization,” I can (later) touch the tip of my pen to that phrase (in my Livescribe notebook) and hear what was said at that moment. The recording plays back through my Livescribe pen. That way, I don’t have to call and ask, “What did you say about intangible amortization?”

If you have an iPad, a cheaper alternative to Livescribe is Notability

6. Take Breaks and Naps

Another idea to become a more efficient CPA is to take breaks and naps.

Counterintuitive? Yes, but it works.

Breaks

I come from the old school of “don’t lift your head or someone will see how lazy you are.” I’m not sure where this thinking comes from, but you will be more efficient–not less–when you take periodic breaks. I recommend a break at least once every two hours.

Naps

Naps? You may be thinking, “Are you kidding?”

Research shows you will be more productive if you take a nap during the day. It doesn’t have to be long, maybe ten or fifteen minutes after lunch. You’ll feel fresher and think more clearly. According to Dr. Sandra Mednick, author of Take a Nap, Change Your Life, napping can restore the sensitivity of sight, hearing, and taste. Napping also improves creativity.

Michael Hyatt recently listed several famous nappers:

  • Leonardo da Vinci took multiple naps a day and slept less at night.
  • The French Emperor Napoleon was not shy about taking naps. He indulged daily.
  • Though Thomas Edison was embarrassed about his napping habit, he also practiced his ritual daily.
  • Eleanor Roosevelt, the wife of President Franklin D. Roosevelt, used to boost her energy by napping before speaking engagements.
  • Gene Autry, “the Singing Cowboy,” routinely took naps in his dressing room between performances.
  • President John F. Kennedy ate his lunch in bed and then settled in for a nap—every day!
  • Oil industrialist and philanthropist John D. Rockefeller napped every afternoon in his office.
  • Winston Churchill’s afternoon nap was non-negotiable. He believed it helped him get twice as much done each day.
  • President Lyndon B. Johnson took a nap every afternoon at 3:30 p.m. to break his day up into “two shifts.”
  • Though criticized for it, President Ronald Reagan famously took naps as well.

For empirical evidence that naps help, check out the book Rest, Why You Get More Done When You Work Less.

Also, here are more ideas to create energy in your day.

7. Answer Emails and Phone Calls in Chunks

If you pause every time you get an email or a phone call, you will lose your concentration. Therefore, try not to move back and forth between activities. Do one thing at a time since multitasking is a lie.

Pick certain times of the day (e.g., once every three hours) to answer your accumulated emails or calls. Doing so will make you a more efficient CPA.

See my article Text, Email or Call: Which is Best?

8. Exercise

I run (by myself) or walk (with my wife) six days a week–usually in the morning before work. Exercising helps my attitude and clears my mind. Also, I feel stronger late in the day.

9. Lunch at 11:30 a.m. or 1:00 p.m.

Another idea: Go to lunch at 11:30 a.m. or 1:00 p.m. Why stand in line? 

10. Take One Day Off a Week

Finally, I usually don’t work on Sundays (even in busy season). For me, it’s a day to worship, relax, see friends, and revive. I find the break gives me strength for the coming week.

Muddled minds destroy productivity.

Your Ideas?

These are my thoughts about becoming an efficient CPA. Please share yours.

Emphasis-of-matter and other-matter paragraphs
Mar 16

Emphasis of Matter and Other Matter Paragraphs

By Charles Hall | Auditing

Do you know what you need to know about emphasis of matter and other matter paragraphs? Sometimes auditors elect to or are required to add an extra paragraph after the opinion paragraph. You need to know why and when. (This article was written prior to the amendments made by SAS numbers 134, 137, 140, and 141. Those amendments are effective for periods ending on or after December 15, 2021. See my new article regarding the amended guidance for emphasis of matter and other matter paragraphs.)

This post gives you the leg up on emphasis of matter (EOM) paragraphs and other matter (OM) paragraphs

Emphasis of matter

Definitions

First, let’s first define the two terms.

AU-C 706.05 provides the following definitions:

Emphasis-of-matter paragraph. A paragraph included in the auditor's report that is required by GAAS, or is included at the auditor's discretion, and that refers to a matter appropriately presented or disclosed in the financial statements that, in the auditor's professional judgment, is of such importance that it is fundamental to users' understanding of the financial statements.

Other-matter paragraph. A paragraph included in the auditor's report that is required by GAAS, or is included at the auditor's discretion, and that refers to a matter other than those presented or disclosed in the financial statements that, in the auditor's professional judgment, is relevant to users' understanding of the audit, the auditor's responsibilities, or the auditor's report.

Notice that an EOM refers to “a matter appropriately presented or disclosed in the financial statements,” while an OM refers to “a matter other than those presented or disclosed in the financial statements.”

Now, let's take a look at sample EOM and OM paragraphs. 

Sample Emphasis of Matter Paragraph

Here’s a sample EOM paragraph:

Emphasis of Matter

As discussed in Note X to the financial statements, the Company has elected to change its policy for determining cash equivalents in 20X 7. Our opinion is not modified with respect to that matter.

Sample Other Matter Paragraph

Here is a sample OM paragraph:

Other Matter

In our report dated April 18, 20X5, we expressed a qualified opinion since the Company’s main office had a material unrecognized impairment loss. As noted in Note 12, the Company has now recognized the impairment in conformity with accounting principles generally accepted in the United States of America. Accordingly, our present opinion on the restated 20X4 financial statements, as presented herein, is different from that expressed in our previous report.

You also need to know the presentation requirements for EOM and OM paragraphs.

Presentation Requirements for an EOM

AU-C 706.06 and 706.07 provides guidance in reference to EOMs. The auditor should:

  • Refer only to information presented or disclosed in the financial statements
  • Include the EOM immediately after the opinion paragraph in the auditor’s report
  • Use the heading “Emphasis of Matter” or other appropriate heading
  • Include a clear reference to the matter being emphasized and to where relevant disclosures that describe the matter can be found
  • Indicate that the auditor’s opinion is not modified with respect to the matter emphasized

Presentation Requirements for an OM

AU-C 706.08 provides guidance in reference to OMs. The auditor should:

  • Include the OM immediately after the opinion paragraph and any EOM paragraph (or elsewhere in the auditor’s report if the content of the OM paragraph is relevant to the “Other Reporting Responsibilities” section – see AU-C 706.A6--.A11)
  • Use the heading “Other Matter” or other appropriate heading

AU-C Sections Requiring EOMs

Sometimes EOMs are required; here are examples:

  • AU-C 570.15-.16 The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern
  • AU-C 560-.16c Subsequent Events and Subsequently Discovered Facts
  • AU-C 708.08-.09 and .11-.13 Consistency of Financial Statements

See exhibit B of AU-C 706 for a complete listing of AU-C sections requiring EOM paragraphs.

An EOM is commonly required when a company has a change in an accounting principle (that has a material impact). AU-C 708 Consistency of Financial Statements paragraphs .07-.08 provides guidance on when the EOM is required.

The auditor also has an option to use an EOM to emphasize matters that are not required by audit standards. So, sometimes EOMs are included because they are required (e.g., going concern) and, other times, they are optional (e.g., to highlight a related party transaction).

AU-C Sections Requiring OMs

Sometimes OMs are required; here are examples:

  • AU-C 725.09 Supplementary Information in Relation to the Financial Statements
  • AU-C 800.20 Special ConsiderationsAudits of Financial Statements Prepared in Accordance With Special Purpose Frameworks

See exhibit C of AU-C 706 for a complete listing of AU-C sections requiring OM paragraphs.

Simple Summary

  • Use EOMs to OMs to highlight important matters
  • EOMs refer to matters presented or disclosed in the financial statements
  • OMs refer to a matter other than those presented or disclosed in the financial statements
  • EOMs and OMs are—in certain situations—required by audit standards
  • An EOM should immediately follow the opinion paragraph and should refer to the note that describes the issue; include the heading “Emphasis of a Matter” or other appropriate heading
  • An OM should immediately follow the opinion paragraph and any EOM (if one is included); include the heading “Other Matter” or other appropriate heading

Of course, creating your opinion is just a part of wrapping up your audits

audit risk model
Mar 10

Audit Risk Model: Supercharge Your Audit

By Charles Hall | Accounting and Auditing

The audit risk model enables you to focus on the important--and to ignore the unimportant. It is the key to performing efficient audits. So, today, we look at how to understand the audit risk model.

If you're into video, watch below. If you like to read, proceed.

The Good, The Bad, The Ugly

Remember the cowboy movie The Good, The Bad, The Ugly? Well, in audits we have the same.

The Good. The audit firm issues an unmodified opinion and the financial statements are fairly stated. Moreover, the audit file properly supports the opinion.

The Bad. The audit firm issues an unmodified opinion and the financial statements are fairly stated, but the work papers are weak. The audit firm just got lucky.

The Ugly. The audit firm issues an unmodified opinion but the financial statements are not fairly stated. Material error (or fraud) is present. And the audit file…well, we won’t go there. It’s ugly.

Audit failure occurs when an audit firm issues an unmodified opinion and the financial statements are not fairly stated. A material misstatement is present and the auditor doesn’t know it. 

Moreover, material misstatements occur and remain in financial statements when:

  • Internal controls (a responsibility of the company) fail or are improperly designed, and 
  • Audit work (a responsibility of the auditor) is lacking

Auditing standards (AU-C 200.14) define audit risk as “The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. Audit risk is a function of the risks of material misstatement and detection risk.”

In other words, audit risk is the result of what the company does (or does not do) and what the auditor does (or does not do).

Audit Risk Model

The audit risk model is defined as follows:

Audit Risk Model

Inherent Risk X Control Risk X Detection Risk

I like to think of these three factors as follows:

  • Inherent risk - the nature of the transaction or disclosure (risky or not risky)
  • Control risk - the chance that material misstatements will not be prevented or detected by internal controls 
  • Detection risk - the chance that material misstatement will not be detected by the auditors 

The first two (inherent risk and control risk) live in the company’s accounting system; the third (detection risk) lies with the audit firm. Inherent risk and control risk make up the risk of material misstatement (RMM) formula. 

Risk of Material Misstatement Formula

Risk of Material Misstatement Formula

Inherent Risk X Control Risk = RMM

 As the the risk of material misstatement (the company’s risk) increases, so should the auditors work. Proper audit work decreases detection risk (the risk that the auditor will not detect material misstatements).

To understand the audit risk model, consider the tale of a villain.

A Tale of a Villain

A villain (inherently a thief) desires to make his way into your home. You have locks on your doors and an alarm system (controls, if you will). But you forget to lock your back door and you don’t set the alarm. During the night, the thief comes in and steals your money. You see the thief fleeing away, but you don't know how much you've lost. So, what’s next? You call the police. Why? To see if everything is okay.

Audit Risk Model

This is the audit risk model in physical form. 

Think of a material misstatement as a villain. Its nature is to be wrong (inherent risk). If internal controls are weak or absent (control risk), the misstatement survives. And if the auditor fails (detection risk), the villain lives on without being caught.

Inherent Risk  

Some transactions are more likely to be misstated. They are inherently risky. Why? Reasons include:

  • The complexity of the transaction (e.g., derivatives)
  • The asset is easy to steal (e.g., cash)
  • The need for judgment (e.g., a bank’s allowance for loan losses)
  • The volume of transactions is high (e.g., cash)
  • The accounting personnel are inexperienced or lack sufficient knowledge 

Inherent risk is what a transaction is (independent of related controls). There is a higher risk of misstatement—or not. And where does this risk come from? The transaction’s nature or its environment.

Control Risk

Internal controls are necessary when a transaction is risky. Why? To monitor and manage the risk. Think about the words internal control. First, internal means the control occurs within the company. Second, control means to manage.

Since some transactions are more prone to theft or error, companies need internal controls to prevent or detect misstatements.

Examples of internal controls include:

  • The reconciliation of monthly bank statements to the general ledger
  • Receipting clerks are not allowed to reconcile bank statements (to enhance segregation of duties)
  • The cash supervisor reviews the daily work of collections personnel
  • A department head reviews and approves bi-weekly time records (before payroll is processed)
  • The accounting supervisor reviews all new vendors (added by payable clerks) to ensure legitimacy

If internal controls are designed appropriately and work correctly, the financial statements should be materially correct. But if the internal controls are absent or ineffective, material misstatements can occur. What then? Well, it’s up to the auditor.

Detection Risk

The auditor is tasked with detecting material misstatements. If he or she does not, audit failure occurs. The audit firm issues an unmodified opinion but a material misstatement is present.

Auditors decrease detection risk—the risk that material misstatements will not be detected—by appropriately planning and performing their work. Consider pricing your riskier audits at a higher amount.

Understanding the Audit Risk Model - A Simple Summary

  • Audit failure occurs when an auditor issues an unmodified opinion and a material misstatement is present
  • Audit Risk = Inherent risk X Control risk X Detection risk
  • Inherent risk is the nature of the transaction or disclosure (is it prone to misstatement?)
  • Control risk is the chance that material misstatements will not be prevented or detected by internal controls
  • Detection risk is the chance that material misstatements will not be detected by the auditor
  • Internal controls, if designed well and working correctly, prevent or detect material misstatements
  • Audits, if designed well and performed correctly, detect material misstatements
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