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The Impact of the Financial Crisis on Accounting & Other Professions

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.

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The Impact of the Financial Crisis on Accounting & Other Professions

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  1. The Impact of the Financial Crisis on Accounting & Other Professions

  2. 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

  3. Before and After

  4. Before and After (cont’d)

  5. Legislation Post-Crisis

  6. Legislation Post-Crisis (cont’d)

  7. Sub-Prime Victims Ponzi Scheme Victims Lawyers Post Crisis

  8. Depressed Housing Market Increasing number of bank-owned properties (REOs), short sales and auctions Mortgage Fraud on the rise Real Estate Professional Post Crisis

  9. 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

  10. Madoff Victims • Petters Victims • Rothstein • Dreier • Stanford Accountants Post-crisis

  11. Auditors or Professional Advisors of Madoff, et alInvestor 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??

  12. 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

  13. Financial Reporting & Auditing Post Crisis 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

  14. 1The effective date for periods ending on or after Dec. 15, 2010. Early application is prohibited, with one exception. Financial Reporting & Auditing Post Crisis SSARS 19 Compilation and Review Engagements1 • Engagement Letters – All SSARS engagements • Requirement – written communication regarding the services to be performed • Materiality – Review engagements • A discussion of materiality • Lack of independence – Compilation engagement • May include a description in the accountant’s compilation report

  15. 1The effective date for periods ending on or after Dec. 15, 2010. Early application is prohibited, with one exception. Financial Reporting & Auditing Post Crisis SSARS 19 Compilation and Review Engagements1 • Review Evidence • Introduction of new term • Enhanced documentation requirements for compilation and review engagements

  16. 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 Dodd Frank Reform and Effect on CPAs

  17. 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?

  18. 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 Other Updates Affecting CPAs

  19. Final Thoughts

  20. Questions&Answers

  21. Many Thanks To… • John Iannotti • Debra A. Cutler • Mary Pat Joyce • Jay Moroney • H. Steven Vogel

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