ParenteBeard Weekly Audit & Accounting e-alert for February 7, 2022
February 7, 2022

IOSCO Reports on Risks and Benefits of Crowd-Funding

The Research Department of the International Organization of Securities Commissions (IOSCO) has published a Staff Working Paper entitled Crowd-funding: An Infant Industry Growing Fast (Report).

“Crowd-funding” is the use of small amounts of money, obtained from a large number of individuals or organizations, to fund a project, a business or personal loan, and other needs through an online web-based platform. The IOSCO Report analyses financial return crowd-funding (FR crowd-funding), which refers to peer-to-peer lending and equity crowd-funding.

The Report provides a global overview of the crowd-funding industry as well as information on the global regulatory regimes and trends. The Report discusses investor protection issues and whether crowd-funding poses a systemic risk to the global financial sector.

FR crowd-funding is a type of market-based finance that could help stimulate economic recovery by channeling capital to small and medium-sized enterprises (SMEs). The FR crowd-funding market has grown to an estimated $6.4 billion in 2013, driven by annual growth of 90% in peer-to-peer lending. Peer-to-peer lending has spread across the globe, making FR crowd-funding a global phenomenon. The equity crowd-funding market is more modest in size and has grown at a slower pace.

However, FR crowd-funding poses many risks and investor protection issues. The Report concludes that the challenge facing regulators and governments around the globe is to strike a balance between encouraging crowd-funding and mitigating the risks associated with its growth, while protecting investor interests.

According to the Report, the FR crowd-funding does not present a systemic risk to the global financial sector at present, but does involve some risks, primarily risks of default, fraud, illiquidity, and investor inexperience. However, the benefits of FR crowd-funding are significant and include:

  • Boosts economic growth through credit to SMEs and other users in the real economy;
  • Fills credit gaps left by banks;
  • Offers a lower cost of capital/high returns, leveraging off a lower cost basis; and
  • Provides a new product for portfolio diversification.

An IOSCO press release on the Report is available here.

The Report is available here.

GASB Issues Implementation Guidance for Pension Standards

The Governmental Accounting Standards Board (GASB) has published an implementation guide for the new GASB standards regarding accounting and financial reporting for pensions. The Guide to Implementation of GASB Statement 68 on Accounting and Financial Reporting for Pensions (Guide) is an authoritative resource designed to assist preparers and auditors of state and local government financial statements as they implement GASB Statement No. 68, Accounting and Financial Reporting for Pensions, which is effective for periods beginning after June 15, 2014.

GASB Implementation Guides are classified as category (d) in the hierarchy of generally accepted accounting principles, which category also includes practices that are widely recognized and prevalent in state and local governments.

The Guide is in question and answer format and answers key questions about putting the new standards into practice. Topics addressed in the Guide include:

  • The scope and applicability of GASB Statement No. 68;
  • Considerations regarding the identification of special funding situations;
  • Measurement of defined benefit pension liabilities of employers and nonemployer contributing entities;
  • Pension expense and deferred inflows and outflows of resources related to pensions;
  • Note disclosures and required supplementary information;
  • Unique issues related to cost-sharing employers and certain nonemployer contributing entities; and
  • Transition to the new standards.

The Guide supplements the questions and answers with several appendices, including a glossary of terms and nonauthoritative illustrative material. Illustrations include material based on that initially presented in Statement 68, accompanied by five additional illustrations developed specifically for the guide.

The GASB press release on the Guide is available here.

The Guide is available here.

GAO Extends Comment Period on Draft Green Book

On September 3, 2013, the U.S. Government Accountability Office (GAO) published the exposure draft of its 2013 update to the Standards for Internal Controls in the Federal Government (Green Book). The deadline, previously set for Wednesday, January 15, 2014, has been extended by the GAO to Tuesday, February 18, 2014.

Internal control is the plans, methods, policies, and procedures an organization employs to ensure effective resource use in fulfilling its mission, goals, objectives, and strategic plan. The GAO Standards for Internal Control in the Federal Government, known as the Green Book, sets these standards for federal agencies.

The proposed revision to the Green Book will be the third since the GAO first issued the standards in 1983 and will replace the current version, issued in 1999. The proposed changes update the Green Book to reflect major developments in the accountability and financial management profession and emphasize specific considerations applicable to the government environment.

This revision does not change the previous standards on a conceptual level. The revised standards retain the five components of internal control, but introduce 17 principles to assist management in achieving an effective internal control system. These principles were adopted from the Committee of Sponsoring Organizations of the Treadway Commission’s revision of its Internal Control: Integrated Framework and adapted for the government environment. The revised standards also introduce attributes that support these principles and further define the requirements for an effective internal control system.

The 2013 exposure draft, Standards for Internal Controls in the Federal Government, is available here.

A summary of the 2013 exposure draft, Standards for Internal Controls in the Federal Government, is available here.

The podcast overview for the 2013 exposure draft, Standards for Internal Controls in the Federal Government, including a downloadable transcript, is available here.

PCAOB Extends Comment Period for Reproposed Amendments to Auditing Standards

The Public Company Accounting Oversight Board (PCAOB) has announced it has extended until Monday, March 17, 2014, the comment period on the reproposed amendments to PCAOB auditing standards that would provide greater transparency into audits of public companies, brokers, and dealers about the engagement partner and certain other participants in the audit.

The exposure draft, Improving the Transparency of Audits: Proposed Amendments To PCAOB Auditing Standards To Provide Disclosure In The Auditor’s Report Of Certain Participants In The Audit (PCAOB Release No. 2013-009), was reproposed by the PCAOB on December 4, 2013, with a comment deadline of February 3, 2014.

The reproposed amendments would require disclosure in the auditor’s report of:

  • The name of the engagement partner who led the audit for the most recent period, and
  • The names, locations, and extent of participation (as a percentage of the total audit hours) of other public accounting firms that took part in the audit, and the locations and extent of participation of other persons (whether an individual or a company) not employed by the auditor who performed procedures on the audit.

The PCAOB press release on the exposure draft and link to the exposure draft is available here.

Our strategic partnership with CCH, a Wolters Kluwer business, has enabled us to craft our Audit & Accounting eAlert. The articles have been selected from CCH’s Accounting Research Manager Daily and/or Weekly Summary and we hope you find them valuable and relevant. Please feel free to contact ParenteBeard Chief Risk Officer Phil Santarelli at Philip.Santarelli@ParenteBeard.com or 215.557.2290 if you have any questions related to these stories or ParenteBeard’s services.

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