logo-newlogo-newlogo-newlogo-new
  • Home
  • Blog
  • Audit Trail Academy
  • Advisory Services
  • Books
✕
  • Home
  • Chambers on Internal Audit
  • Uncategorized
  • Revenue Recognition: “The Next Big Thing” Is Here. Are You Ready?

Revenue Recognition: “The Next Big Thing” Is Here. Are You Ready?

10 Characteristics That Weak Internal Audit Leaders Demonstrate
June 3, 2014
5 Things Management is Reluctant to Say to Internal Auditors
June 16, 2014
June 10, 2014

Every few years, a game-changing event materializes that generates a significant impact on the internal audit profession. Take, for example, the U.S. Sarbanes-Oxley Act of 2002 and similar legislation around the world enacted more than a decade ago. Usually, we immediately recognize the importance of such an event, the risks it creates for our organization, and how it will impact our internal audit functions.​

When Sarbanes-Oxley became the “Next Big Thing” in internal auditing, almost all of us anticipated the call for immediate action. We sharpened our pencils, headed off for training, and renewed our focus on assessing the effectiveness of financial controls.

Because we promptly took action, we were well-prepared to provide assurance about our organizations’ readiness to members of management and the board. We also stepped to the plate when COSO 2013 was released. But Sarbanes-Oxley and COSO 2013 both focused on internal controls; and internal auditors are control experts. When the Next Big Thing in internal auditing is not specifically about internal controls, will we be ready?

Well, heads up! The Next Big Thing is here for many companies and their internal audit functions.

Recently announced changes to rules regarding revenue recognition — “Revenue from Contracts with Customers” — may, at first glance, seem to be little more than an issue for accounting. Indeed, the new standards aren’t specifically about internal controls. But if you don’t think this is important for internal auditors, think again. And it’s something that offers extraordinary opportunities for us to give senior management and our boards much-needed assurance.

The new standards are not simply a fine-tuning of some old rules. They replace more than 200 pronouncements from both the U.S. Financial Accounting Standards Board and the International Accounting Standards Board, and they will cause sweeping changes in accounting practices in a number of industries.

Revenue-recognition issues rank among the most common causes of restatements of financial statements. So, where do internal auditors come in? One of the primary purposes of internal auditing is to offer independent, objective assurance. Our senior management teams and governing bodies are going to need such assurance that the new rules are being implemented appropriately. So, if you haven’t included adequate coverage of revenue recognition in your audit plans, you are not serving your organization well and, worse, you could be putting it at risk.

To be sure, internal auditors know that control breakdowns often occur when changes are made. Given the extent of the revisions in revenue-recognition practices, it’s inevitable there will be some major bumps in the road. Your senior management team and board need to know your organization will not be one making headlines for the wrong reasons. Companies in software development, telecommunications, real estate, and asset management will likely see a major overhaul of accounting methods and systems, but all audit executives should become fluent with the new requirements.

If you are not yet up to speed on the new rules, you might want to start by reading summaries of the new standards by PricewaterhouseCoopers and Crowe Horwath. You also will find insight in industry publications including Compliance Week and Accountancy Age, as well as Financial Times and CFO Journal.

The new rules don’t take effect immediately, but like Sarbanes-Oxley and COSO, it will take time to lay the proper groundwork for this Next Big Thing. Odds are, the subject of revenue recognition will come up in the executive offices at your organization. Will you be leading or following that conversation?

I’d like to hear from you on how to prepare for the Next Big Thing, whether it’s revenue recognition or another milestone issue.​

Share

Related posts

March 13, 2023

New IIA Report Is a Timely Benchmarking Resource for Internal Auditors


Read more
May 16, 2022

THE STAGGERING TOLL OF COVID RELIEF FRAUD: WHERE WERE THE THREE LINES?


Read more
February 3, 2022

To Live a Life in Color, You May Have to Change Channels


Read more

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

What’s Trending

03-20-23

New Report Reveals Surprising Insights from Internal Audit Executives


03-13-23

New IIA Report Is a Timely Benchmarking Resource for Internal Auditors


03-02-23

6 Things Audit Committee Members Often Won’t Say to Internal Audit


Read More

Archive

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009

Contact Us

PO Box 1441
New Smyrna Beach, FL 32170

+1-407-463-9389
rchambers@richardchambers.com

About AuditBeacon.com

AuditBeacon.com is a resource center for internal auditors and risk professionals from around the world. In addition to more than 500 blogs authored by Richard Chambers, the site includes links to news and insights on internal audit and other information that illuminates the value of this important profession. AuditBeacon.com is provided as a service by Richard F. Chambers and Associates, LLC.

Copyright © 2023 Richard F. Chambers & Associates. All Rights Reserved.
  • Home
  • Blog
  • Audit Trail Academy
  • Advisory Services
  • Books