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By Joe Bailey
Issues around credit losses, leasing, and business risks highlight some of the challenges facing the auditing profession in a period of increasing financial reporting change, Christopher Rickli, PricewaterhouseCoopers LLP partner, told Bloomberg Tax.
There are “issues around estimating expected credit losses using forward looking information. That is new for people, so thinking about how to build those modeling systems have been a big topic of conversation recently” Rickli said in an interview videotaped Dec. 6 at the American Institute of CPAs conference on Securities and Exchange Commission and Public Company Oversight Board developments.
View video here: https://www.bna.com/during-change-pace-m73014474523/
“There are a lot of questions around the leasing standard, and identification of embedded leases.” Rickli said.
Asked what industries are the most affected by the credit impairment standard, Rickli said, “the short answer is everyone,” but “from a financial institution perspective, the credit impairment standard will be a significant change to financial institutions that have large loans, and held to maturity security portfolios.”
Non-financial service corporations also must heed the credit impairment rule. “Things as simple as trade receivables and how the reserving methodologies will change for trade receivables going forward is something that our non-financial services clients are focused on” Rickli said.
The business risks that companies must closely watch include cybersecurity, information technology (IT), and big data. Audit professionals will have to “up their game” with respect to “IT security, among other things, to be as relevant as [they] can as a profession going forward.”
“Audits are much more focused now on how to use big data, and audit in a more efficient and effective way,” Rickli said. “Folks with skillsets in data mining will be of significant value to the audit profession,” one that is “extremely bright, but very different” in the future.
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