Livescribe: Note Taking Magic

Have you ever interviewed a client, feverishly taking notes, and straight away forgot critical facts (that you did not have time to write down)? You wish you had a recording of the conversation. Better yet, you wish you could magically touch a particular word in your notes and hear the words that were being spoken at that moment. What if I told you, you can?

IMG_0001_2Think about what you could record:

  • CPE class lectures
  • Walkthroughs of transaction cycles
  • Board or committee or partnership meetings
  • Fraud interviews

How? Livescribe.

What is Livescribe? It’s an electronic pen/recorder. As you write on special coded paper, you simultaneously record the conversation (the recorder is built into the pen). Once done, you touch a particular letter in a word (with the pen) and you will hear, from the pen, the conversation that was occurring at that moment. No more forgetting and not being able to retrieve what was said. And it’s efficient since you can go to any particular part of the conversation using your notes as signposts.

To start a recording, you press the tip of the pen to the “record” icon at the bottom of the page.


To stop the recording you press the “stop” icon above.

Once the recording is complete, you simply touch the tip of the pen to any letter and the audio recording will start playing–from the pen–at that point.


You can upload the pen notes and the audio to your computer desktop Livescribe software using a USB cord that connects to the pen. (Yes, you can play back notes from your uploaded desktop copy just as you can with your pen; click a letter with your mouse and the recording will play.)

IMG_0003I was surprised at the clarity of the sound from the pen and at the amount of audio that the pen will hold–200 hours (for the Echo version that you see above).

There are different versions of the pen; I bought the Echo version due to price–only $115. You can review the available pens on Amazon. I also bought additional Livescribe notebooks (they come in packs of four) and a portfolio (binder) to hold the notebook and pen.

Another Option 

If you have an iPad, you can buy the Notability app for $2.99 and record conversations with your notes (which play back similar to Livescribe); this is a new feature that Ginger Labs (maker of Notability) just added. You will need a stylus to take notes since you will write on your iPad screen.

One More Thought

If you are performing a walkthrough of a complex transaction cycle, consider using your phone to take pictures of what you are seeing (e.g., computer screens, documents). Between your notes (with audio) and your pictures, you will have an excellent understanding of what you have seen and heard.

Audits: Going Concern Issues

What are the current audit requirements for going concern issues?


Here are the two main points to remember:

  1. If substantial doubt about continued existence is present, the auditor has several issues to address including an addition to the auditor’s report and additional communications in the representation and governance letters.
  2. FASB has proposed a standard that, if passed, will require certain going concern disclosures; at present, U.S. GAAP provides no guidance about going concern disclosures.

Going Concern

SAS 126, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern, was effective for years ending on or after December 15, 2012, and is the most recent audit guidance. Based on the standard, the auditor should evaluate and conclude, based on audit evidence obtained, whether substantial doubt exists about the reporting entity’s ability to continue as a going concern for a reasonable period of time.

Reasonable Period of Time


How does the standard define a “reasonable period of time”?


A period of time not to exceed one year beyond the date of the financial statements being audited.



If substantial doubt exists, what are the considerations for the audit?

  1. Additional auditor’s report language
  2. Additional disclosures
  3. Additional representation letter language
  4. Additional communications to those charged with governance
  5. Additional work paper documentation

1. Additional Auditor’s Report Language

If the auditor concludes that substantial doubt exists, an emphasis-of-matter paragraph should be added to the auditor’s report such as:


Emphasis of Matter Regarding Going Concern

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 and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to 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 opinion is not modified with respect this matter.

The words “substantial doubt” and “going concern” must be used in the paragraph, and conditional language should not be used in addressing the “substantial doubt” conclusion.

2. Additional Disclosures

Consider whether sufficient disclosure has been made about the condition of the company and the plans of management.

The Financial Accounting Standards Board is presently reviewing a proposed standard (ASU 2013-300) that would require certain going concern disclosures.

U.S. GAAP presently provides no going concern disclosure guidance. (Perform a word search of a disclosure checklist and you will see no FASB references for going concern issues; all going concern disclosures are the result of auditing standards.)

FASB updated its Going Concern project information on April 1, 2014; the website says the Board is pursuing an approach that would “require disclosures when there is substantial doubt similar to disclosures provided today under existing auditing standards.” The website goes on to say, “the assessment period for substantial doubt would be one year from the date the financial statements are issued (or, for nonpublic entities, the date financial statements are available for issuance).” Note that this assessment period is different from the one required by SAS 126 (i.e., a period of time not to exceed one year beyond the date of the financial statements); remember, however, the FASB standard is still subject to deliberation and may change.

3. Additional Representation Letter Language

Written representations should be obtained from management regarding:

  • The plans that are intended to mitigate the adverse effects of conditions or events that indicate there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time and the likelihood that those plans can be effectively implemented, and
  • Whether the financial statements disclose all the matters of which management is aware that are relevant to the entity’s ability to continue as a going concern, including principal conditions or events and management’s plans

4. Additional Communications to Those Charged with Governance

The following should be included in the auditor’s communication to those charged with governance:

  • The nature of the conditions or events identified
  • The possible effect on the financial statements and the adequacy of related disclosures in the financial statements
  • The effects on the auditor’s report

5. Additional Work Paper Documentation

The auditor should document the following:

  • The conditions or events that led the auditor to believe that there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time.
  • The elements of management’s plans that the auditor considered to be particularly significant to overcoming the adverse effects of the conditions or events.
  • The audit procedures performed to evaluate the significant elements of management’s plans and evidence obtained.
  • The auditor’s conclusion as to whether substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time remains or is alleviated. If substantial doubt remains, the auditor also should document the possible effects of the conditions or events on the financial statements and the adequacy of the related disclosures. If substantial doubt is alleviated, the auditor also should document the auditor’s conclusion as to the need for, and, if applicable, the adequacy of, disclosure of the principal conditions or events that initially caused the auditor to believe there was substantial doubt.
  • The auditor’s conclusion with respect to the effects on the auditor’s report.

Going Concern in Compilations and Reviews

Though this post is about going concern issues in audits, let me briefly say that an emphasis-of-matter paragraph pertaining to going concern can be added to compilation or review reports but is not required. See my previous post.

FASB Guidance Issued Subsequent to This Post 

In August 2014, FASB issued its new going concern guidance; click here to see the related post.

Encouraging Others – Even in a CPA Firm

Through the years I have noticed that CPAs sometimes forget to say “thank you” and “good job” and “you are awesome”-especially to their work mates. The human soul craves affirmation and appreciation, yet CPAs seem to quash the very thing employees and bosses need. Why? I am not sure, but I think it has to do with how busy we are. Pressed to complete another project, we forget to encourage others.

This video, though a little long, captures the essence of what I am trying to say. Watch it and you will see life a little differently. You may even cry a tear or two.

Foot-Wedges, Amen Corner and the Green Jacket

I am sitting here watching the Masters and thinking of the lessons I learned as a high school golfer (that’s me below, second from left)–important nuggets of wisdom the game gave me. They apply equally as well to the game we play: Accounting.


Play the Ball as It Lies

No foot wedges.

The tendency in golf and life is to give ourselves an unfair advantage (also called fudging). We nudge the ball to a favorable location when no one is looking. The problem: We say we are a five handicap, but we are a twelve. And because we lie, we never pay the price to truly be a five. So we remain mediocre. Excellence is a product of honesty.

Always Applaud Your Opponent

We tell our kids to be a good sport and, meanwhile, we verbally trash–of course, not in their presence–our competitors. Speak well of those in your field. When you see your competitors do well, tell them. Give them a fist pump and smile. We are known by our words and never more so than when we speak of those with whom we compete.

Go with Mo

Realize, especially if you are young, success will come and go. When momentum (Mo) is your friend, roll with it. Ride it. Enjoy it.

But when failure comes (and it will), remember, “a better shot is coming.” See yourself as moving on, learning from the experience, and succeeding again. Focusing on the next good shot will enable you to leave your last shot–and, yes, to strike the ball well. Click. Don’t you love that sound?

Amen Corner is Key

Augusta has a pivotal set of holes called Amen Corner: a place where you sweat a lot and pray, more. It is here you win or lose. (I just watched Jordan Spieth hit his ball in the water on 12.) Identifying your strategic set of holes is important. And your caddie (those who counsel you) will never be more important. Take time to listen and reflect. Then trust your swing.

Be an Ambassador of the Game (Profession)

Arnold Palmer has always been a hero of mine. Not just because he was a winner on the tour, but because he honored the game, working unselfishly even after he left his playing days. He gives his time to the game and those associated with it–because of his affection for both.

The Green Jacket

Being a native-born Georgia boy, I take pride in the excellence of the Masters. A crowning moment each spring is the awarding of the Green Jacket. On this last day of the Masters, I hope it is you who will be wearing green (along with Bubba Watson–a graduate of my alma mater, the University of Georgia–Go DAWGS!).

New PCC Accounting Alternatives Affect Compilation, Review and Audit Reports

I recently provided  two posts about new Private Company Council (PCC) accounting alternatives: (1) VIE alternative and (2) Goodwill amortization.

If your client uses one of these accounting options and the effects are material, reporting changes may be requiredThose changes include:

  1. Adding an EOM paragraph to audit opinions
  2. Adding a departure paragraph to compilation and review reports if management does not disclose the change


TIS Section 9160.29, Modification to the Auditor’s Report When a Client Adopts a PCC Accounting Alternative provides the following:

If a private company adopts one or more of the PCC accounting alternatives and the effects are material, then the audit opinion should include an emphasis of a matter (EOM) paragraph in the period of change and in subsequent periods until the new accounting principle is applied in all periods presented. If the change is adopted retrospectively, the EOM paragraph is needed only in the period of change.

Here is an example EOM paragraph:

Change in Accounting Principle

As discussed in Note X to the financial statements, the Company has elected to change its method of accounting for goodwill in 2014. Our opinion is not modified with respect to this matter.

Compilations and Reviews

TIS Section 9150.33, Compilation or Review Report in Which Management Refuses to Include Disclosure Related to Adoption of a PCC Accounting Alternative provides the following:

This AICPA technical practice aid asks how an accountant should handle a situation where management adopts a PCC accounting alternative but refuses to disclose the change in accounting principle. If the effects are material, the practice aid directs the accountant to:

  • modify the compilation report (assuming management has not elected to omit substantially all disclosures) in accordance with paragraph .27-.29 of AR section 80 (Departures from the Applicable Financial Reporting Framework–see below), or
  • modify the review report in accordance with paragraphs .34-.36 of AR section 90 (Departures from the Applicable Financial Reporting Framework–see below).

AR section 80.28 (from Compilation of Financial Statements) states “If the accountant concludes that modification of the standard report is appropriate, the departure should be disclosed in a separate paragraph of the report, including disclosure of the effects of the departure on the financial statements if such effects have been determined by management or are known as the result of the accountant’s procedures.”

AR section 90.35 (from Review of Financial Statements) states “If the accountant concludes that modification of the standard report is appropriate, the departure should be disclosed in a separate paragraph of the report, including disclosure of the effects of the departure on the financial statements if such effects have been determined by management or are known as the result of the accountant’s procedures.”

Using Current Auditing Standards for Audits of Prior Periods

The AICPA has issued TIS Section 8100.03 (password required), Using Current Auditing Standards for Audits of Prior Periods.

The AICPA technical question and answer document asks one question:

An auditor is engaged to perform an audit of financial statements that are as of or for a period that ended prior to the effective date of the clarified auditing standards. May an auditor use the clarified auditing standards that are currently effective at the time the audit is performed even though the standards were not effective for that prior period? (Bold emphasis mine)

The question and answer document answers in the affirmative. So auditors can use the clarified auditing standards to audit an entity’s prior period financial statements even though the clarity standards were not effective for that prior period. The auditor’s audit documentation should state which auditing standards were used–pre-clarity or clarity.

Steal Like a Boss

How do fraudsters think and act?

Can you steal like a boss? White collar crime takes special skills and thoughts. Do you have what it takes? Here’s my tongue-in-cheek look at how I would steal.

Steal Like a Boss

Picture Courtesy of

To steal, I need to:

  1. Be Believable
  2. Have a Cause
  3. Calm My Conscience
  4. Develop My Plan
  5. Execute My Plan
  6. If Caught, Settle Out of Court

1. Be Believable

I must be seen as trustworthy. The more age, experience, and education I have, the better. The longer I work for the organization, the more I will be trusted.

And while I’m at it, I’ll do what I can to move to positions of higher authority which will provide me with greater opportunities. Being the boss will enable me to steal like a boss.

If possible, I will gain the ability to authorize or initiate purchases. Kickbacks (paid to those who authorize payments) are difficult to detect, even by professional fraud examiners, and the dollars can be significant. Like stealing candy from a baby.

2. Have a Cause

Any financial pressure will do–a gambling or drug habit, an affair, medical bills, or maybe I just want to appear more successful than I am. If I don’t have a need, I will create one. I am my own cause.

My unshareable need (cause) must not be known by others lest they suspect my need for cash.

3. Calm My Conscience

I hate when that little voice starts talking: “Charles, you can’t do this. Your grandmother would be so ashamed.” It takes skill and fortitude, but I must calm my conscience. All the more reason to have a cause (see point 2.). The more noble I can make my cause, the better. Something like, “I’ve earned this. The company should realize my greatness and provide me with appropriate compensation. I have three kids in college, and they need this. You know I really want to be good provider for my family.” I may need to start stealing borrowing or compensating myself in small amounts and then build up. This will make it easier for my conscience to adjust.

I need to think correctly. When that little voice speaks, I will reword those thoughts. I know I am right.

4. Develop My Plan

I will pay attention to control weaknesses.

Our auditors have told us for years that we lack appropriate segregation of duties. Opportunity awaits.

If I am going to steal be compensated appropriately, I need to make it worth my while. Be bold. Think big. I have noticed that one of our key vendors has been very kind to me, a free week-long trip to Vegas for the last three years. And a key contract renewal is coming up. I think cash would be better this year. Besides, I know the CFO received an even sweeter trip than I did last year. And bribes gifts don’t hurt anyone; the vendor pays for them (though I have noticed the vendor’s pricing seems to be increasing…actually, exploding).

5. Execute My Plan

Take Compensate myself in a steady under-the-radar kind of way. Most folks get greedy. I must be diligent to work in a measured way, not taking receiving more than would be noticed. Greed is my enemy, the element that lands good guys like me in the newspapers.

Also, I think I can consistently steal borrow money from the receipts cycle since I am in charge of daily deposits and all related accounting duties. This might cost me my vacation though. I need to be on the job to continue to hide perform my duties. But if the funds taken compensation is enough, I can forgo the Vegas trip.

6. If I Get Caught, Settle Out of Court

If I am discovered someone notices that I have borrowed funds, then I may have to beg for forgiveness and promise to pay it back. And, of course, I need to make sure the company understands my concern for its reputation; news like this does not coalesce well with the company’s mission statement: Honesty and Compassion for Those We Serve.

I don’t need a criminal record, especially if I need to steal borrow funds from my next employer.

More Fraud Information

You’ll find more information about fraud prevention in my book: The Little Book of Local Government Fraud Prevention.

Goodwill Amortization For Private Companies

Thanks to a new FASB standard, another albatross has been lifted from the necks of private companies. You can now amortize goodwill of a private company (defined as “all entities except for public business entities and not-for-profit entities…and employee benefit plans”).


The new FASB standard (ASU 2014–02; Intangibles – Goodwill and Other) has two main points:

  1. You can amortize goodwill over its useful life, not to exceed ten years
  2. You can test for impairment at the entity level or at the reporting unit level

Amortization of Goodwill 

Goodwill should be amortized on a straight-line basis over its useful life not to exceed ten years. If–at later date–you need to revise the original amortization period, do so prospectively on a straight-line basis over the remaining useful life.

Impairment Testing

If a triggering event occurs–an event or conditions that appear to impair goodwill–you should test goodwill for impairment.

Once the triggering event occurs:

Qualitative factors can be assessed to see if impairment has occurred. The qualitative factors are used to determine whether there is more than a 50% chance that goodwill is impaired. If there is (and only if), then compute fair value.

You have the option to bypass the qualitative test and perform a quantitative test for impairment.

The calculation–whether you bypass the qualitative test or not–is compared to the carrying value of goodwill. If the computed amount is less than carrying amount, then you will decrease the carrying amount to fair value–the calculated amount.

To use the alternative standard, an accounting policy election must be made to test for impairment at the entity level or the reporting unit level.


Goodwill should be shown as a separate line on the balance sheet, net of amortization.

The amortization or impairment expense should be recognized in continuing operations, unless such expenses are related to a discontinuance of operations–then recognize those expenses within discontinued operations.


Below are a few of the required disclosures (there are others not listed; see the standard for all required disclosures).

The following information shall be disclosed in the financial statements or the notes to the financial statements for each period for which a statement of financial position is presented:

  1. The gross carrying amounts of goodwill, accumulated amortization, and accumulated impairment loss
  2. The aggregate amortization expense for the period

For each goodwill impairment loss recognized, the following information shall be disclosed in the notes to the financial statements that include the period in which the impairment loss is recognized:

  1. A description of the facts and circumstances leading to the impairment
  2. The amount of the impairment loss and the method of determining the fair value of the entity or the reporting unit (whether based on prices of comparable businesses, a present value or other valuation technique, or a combination of those methods)
  3. The caption in the income statement in which the impairment loss is included

Effective Date

The accounting alternative, if elected, should be applied prospectively to goodwill existing as of the beginning of the period of adoption and new goodwill recognized in annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. 

Early application is permitted, including application to any period for which the entity’s annual or interim financial statements have not yet been made available for issuance.

The picture above is courtesy of istockphoto.