Internal Control Focus

It stands to reason that accounting areas that are highly subjective and complex also are prone to fraud, errors, and breakdowns in internal controls.

A recent study by the Anti-Fraud Collaboration discovered challenges in these accounting areas and has led to new recommendations for company accounting policies and internal control over financial reporting (ICFR).

The details are described in the Anti-Fraud Collaboration report issued Thursday, Addressing Challenges for Highly Subjective and Complex Accounting Areas.

In examining SEC Accounting and Audit Enforcement Releases issued during 2013, 2014, and the first quarter of 2015, the study found nearly 40 unique filers that were targets of enforcement action that included some discussion of ICFR.

The accounting issues that caused problems for companies under investigation were revenue recognition, loan impairment, and valuation. All three areas are highly subjective and complex, and they were under stress during the most recent fi...