2010 PLUS International Conference2010 PLUS International Conference2010 PLUS International Conference2010 PLUS International Conference

The Impact of the The Impact of the Financial Crisis on Accounting Financial Crisis on Accounting

& Other Professions& Other Professions

2010 PLUS International Conference2010 PLUS International Conference

The Round-Up…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

2010 PLUS International Conference2010 PLUS International Conference

Before and AfterBefore and After

September 2008

September 2010

Results

Congress Republican Democrat Tea Party

DJIA 11,516 10,600 Rigged game?

Gold $871 an ounce$1,276 an

ounceHard Assets in

favor

Prime Rate 5.00% 3.25% Refinance?

CD Rates2.94%

one year CD1.23%

one year CDBond Bubble?

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Before and After (cont’d)Before and After (cont’d)

September 2008

September 2010

Poverty Line 13.2% or 39M 14.3% or 45MPoverty

threshold: family of four $21,756

Unemployment 6.2% 9.6% Foreclosures

Avg. Home Sale Price

$290,300 $235,300Decline in net worth

Bank Failures 30 in 2008 140 in 2009Balance sheet

issues

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Legislation Post-CrisisLegislation Post-Crisis

Legislation Purpose Cost2008 Stimulus Act Tax rebates, incentives to

stimulate investment$152B

TARP Stabilize system with cash infusions, purchase of distressed debt

$700B

Housing Recovery Act Insure $300B in mortgages; loans to those facing foreclosure

$800B

Housing Tax Act of 2008 Tax credit for home purchases

American Recovery Act 2009 Stimulate job creation $787B

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Legislation Post-Crisis (cont’d)Legislation Post-Crisis (cont’d)

Legislation Purpose Cost

American Recovery Act 2009 Stimulate job creation $787B

Helping Families Save Homes Act 2009

Help avoid foreclosure

Cash for Clunkers 2009 Incentives to buy new cars through rebates

$2.877B

Unemployment Compensation Act 2009

Extra 13 weeks unemployment

Restore Employment Act 2010

Tax incentives to hire

Health Care Act of 2010 Affordable Health Care $562B

Dodd Frank Reform Bill 2010 Financial Regulatory Reform $5B

TOTAL COST

A lot of money

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Lawyers Post CrisisLawyers Post Crisis

• Sub-Prime Victims

• Ponzi Scheme Victims

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Real Estate Professional Real Estate Professional Post CrisisPost Crisis

• Depressed Housing Market

• Increasing number of bank-owned properties (REOs), short sales and auctions

• Mortgage Fraud on the rise

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Who is at Risk??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

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Accountants Post-crisisAccountants Post-crisis

• Madoff Victims

• Petters Victims

• Rothstein

• Dreier

• Stanford

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• Auditors or Professional Advisors of Madoff, et al Investor 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??Who Is At Risk??

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Financial Reporting & Financial Reporting & Auditing Post CrisisAuditing 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

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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

Financial Reporting & Financial Reporting & Auditing Post CrisisAuditing Post Crisis

2010 PLUS International Conference2010 PLUS International Conference

1The effective date for periods ending on or after Dec. 15, 2010. Early application is prohibited, with one exception.

Financial Reporting & Financial Reporting & Auditing Post CrisisAuditing Post Crisis

1. Engagement Letters – All SSARS engagements Requirement – written communication regarding the

services to be performed

2. Materiality – Review engagements A discussion of materiality

3. Lack of independence – Compilation engagement May include a description in the accountant’s compilation

report

SSARS 19 Compilation and Review Engagements1

2010 PLUS International Conference2010 PLUS International Conference

1The effective date for periods ending on or after Dec. 15, 2010. Early application is prohibited, with one exception.

Financial Reporting & Financial Reporting & Auditing Post CrisisAuditing Post Crisis

4. Review Evidence Introduction of new term

5. Enhanced documentation requirements for compilation and review engagements

SSARS 19 Compilation and Review Engagements1

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Dodd Frank Reform Dodd Frank Reform and Effect on CPAsand Effect on CPAs

• 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

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Impact of Bank Failures Impact of Bank Failures on Accountantson 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?

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Other Updates Affecting CPAsOther Updates Affecting CPAs

• 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

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Final ThoughtsFinal Thoughts

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Questions&

Answers

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Many Thanks To…Many Thanks To…

• John Iannotti

• Debra A. Cutler

• Mary Pat Joyce

• Jay Moroney

• H. Steven Vogel