Auditing during a recession could present several issues, according to the Public Company Accounting Oversight Board, which called together its standing advisory group Wednesday to discuss them. The greatest concern for the group's 36 members is the possibility of increased instances of fraudulent behavior. CFO.com reported:
Gregory Jonas, Managing Director, Moody's Investors Service, noted that senior managers are facing increased pressure to perform right now, and that "cooking the books" could become a problem. "The pressure is going to be enormous on people," Jonas said. "The temptation is growing."
Along with fraud, advisors say auditors will need to pay close attention to a business's liquidity as well as to consider how to handle those companies that have been rescued by the bailout package. Former CFO and SEC chief accountant Lynn Turner advises auditors to "take the blinders off" to potential problem areas, such as underfunded pensions, excess inventory and the like.
Finally, it will also become important to look at performance "quarter by quarter" rather than looking to historical trends. "You have to throw out historical trends and look at what is happening on a real-time basis. What was there in the past will no longer be there in the future," Turner said.