If you feel like you need more support, or a mentor, who will help you maximize your study time, motivate you, and give personal recommendations, then now is your chance. You have a unique opportunity to meet with me individually through a drawing for a free 45 minute One to One with Brian Hock Session, which is normally $99.
Here is what you need do to enter to win a free session with me:
- Post a picture of you studying with HOCK materials on social media: Facebook, Twitter, LinkedIn, or Instagram.
- Tag the HOCK international home page, www.hockinternational.com
- Use hashtag #hock
- In your post, write why you chose HOCK and what you think about the HOCK materials
Deadline: September 20th.
Please leave us a comment below if you have any questions. I look forward to meeting you!
Brian Hock, CMA, CIA
While Critical Audit Matters (CAMs) were added to the PCAOB Standards in 2017, reporting of CAMs is only effective for fiscal years ending on or after June 30, 2019. Additionally, CAMs will be tested on the CPA Audit exam beginning July 1, 2019. Therefore, both practitioners and CPA exam candidates need to be familiar with CAMs.
CAMs are an additional section in the auditor’s report in which the auditor provides disclosure about any areas of the audit that were particularly difficult or had significant estimates or judgement in them. While I am not going to cover the requirements of CAMs here, I want to outline why this reporting is important and can help users of financial statements better understand a company. I will do this by giving brief examples of two companies that each have goodwill of $10,000,000 on their balance sheet.
First, let us imagine that Company A made a significant investment in Company Z three years ago and recognized $10,000,000 of goodwill related to 7 patents owned by Company Z. All of the patents are still valuable and there are no potential competing products in development. So, Company A has $10,000,000 of goodwill that is not impaired and not likely to become impaired in the near future. Assuming that Company A will receive an unqualified opinion from its auditor, there will be no specific mention about the goodwill in the auditor’s report and the only mention of the goodwill in the financial statements will be its inclusion on the balance sheet. (There may be some disclosure about the goodwill in a note if the amount is material to the financial statements.)
Next, let us assume that Company B made a significant investment in Company Y three years ago and recognized $10,000,000 of goodwill related to the brand name and reputation of Company Y. Now, the $10,000,000 of goodwill is being tested for impairment. Though the auditor feels that they did enough testing, and they are comfortable that the goodwill is not impaired, they know that there were a lot of estimates and believe that the goodwill could become impaired in the near future, or, if the industry changes rapidly enough, the goodwill may lose all of its value. In coming to this conclusion, the auditor knows that their decision involved especially challenging, subjective, and complex judgment. At this point, Company B will receive an unqualified opinion from their auditor, but unlike Company A there will be specific mention of the goodwill in the audit report as a Critical Audit Matter.
Prior to the PCAOB addition of Critical Audit Matters, the language of the reports for both companies could have been copied and pasted out of the Standards and would behave been the same for both companies. However, based on the situations, the $10,000,000 of goodwill that is on each balance sheet is different and was looked at very differently during the audit. With the addition of Critical Audit Matters in the audit report, the users of the financial statements will get more information about the goodwill of Company B in the report. Even more importantly, that information is coming from the perspective of the auditor and not management.
My unofficial definition of a CAM is that it is any material account or disclosure that could have been reported another way than it was reported in the financial statements. If there were extensive estimates, subjective decisions, or substantial use of auditor judgment, then I think that the users of those financial statements would want to know what the other considerations were for reporting it.
If you are taking the CPA Exam, you need to know Critical Audit Matters starting in July of 2019. If you are not a CPA Candidate, but prepare or audit financial statements for a publicly-traded company in the US, then this is something that you may have already started preparing for and doing during engagements.
To help all CPA candidates prepare for this new topic, we are offering our two videos covering Critical Auditor Matters free of charge. Use the buttons below to play each of the videos.
If you have written or read any CAMs as an auditor or user of financial statements, I would be interested to hear your experience so far with CAMs in the comments.
Brian Hock, CMA, CIA
Integrated reporting is one of the new topics on the syllabus of the CMA Part 1 Exam beginning in January 2020. The focus of integrated reporting is reporting more about the company than just the financial statements.
One way of looking at integrated reporting is that it is similar to companies applying the balanced scorecard approach to themselves. In the evaluation of employees, a balanced scorecard approach is when the evaluation consists of more than just the evaluation of the work of the person compared to the financial budget. While there are managers who are able to achieve short-term results, sometimes the way that they act towards their colleagues, customers, and suppliers means that the success does not carry into the long-term. The four traditional perspectives that are assessed under a balanced scorecard evaluation are: learning and growth, business processes, customers, and financial performance.
For companies, the financial statements provide only a limited picture of the health of the company based on what information is required to be reported. Integrated reporting is the process of companies reporting more than just their financial results, but also their impact on stakeholders, the environment, and anyone who comes into contact with the business. The primary purpose of integrated reporting is to explain not just how the company has created value in the past, but how it will continue to create value in the future.
If you are studying for the CMA exams in 2020, you will learn about Integrated Reporting in Part 1, Section A. Whether you are studying for CMA or not, you can learn more about Integrated Reporting here: https://integratedreporting.org/
Integrated reporting is a topic that will continue to become more important and is something that accountants will be working with increasingly in the future. Whether or not you need to study integrated reporting for the 2020 CMA exams, I encourage you to learn more about it, and if you have any experiences with integrated reporting already, you are welcome to share those experiences in the comments.
Brian Hock, CMA, CIA
In this video, get six tips for answering multiple-choice questions on the CMA exams, including how to quickly eliminate answer choices and use clues from the question to determine the correct answer.
For more information about the CMA exam scoring and grading including how many MCQs are not evaluated during the exam (and why) see How is my CMA Exam Score Determined?.
A special message from Brian Hock, President of HOCK international
Learning new concepts and mastering new skills requires a significant investment of time and energy. You, or people you know, may have worked with private coaches, tutors and/or counselors such as math tutors, piano teachers, sports coaches, career counselors, or even exam-specific tutors such as SAT or ACT tutors. We make these investments because we know that advice and guidance from experts can help us reach our full potential whether in the classroom, on the field, or in our careers.
I understand that passing the exams is an important step in your career. To fully support you in your preparations, I want to make certain that, in addition to having the knowledge to succeed, you also have the confidence, support, and motivation to pass on your first attempt. Because everyone has different methods of studying, there is no simple formula for preparing and knowing when you are ready. However, with almost 20 years of experience working directly with candidates, I understand what you are going through and how to help you pass.
If you are feeling anxious about whether you are studying in the right way or feel uncertain about some of the topics on the exam, I can help you gain the confidence you need. HOCK has a new opportunity for you to receive personal support and guidance directly from me in a 1-to-1 setting called One to One with Brian. Learn more about One to One with Brian and take advantage of this opportunity to invest in your future and success.
Please contact us with any questions that you have and we will be glad to help. I look forward to meeting with you, helping you pass your exams, and advancing your career!
In this video, HOCK international President Brian Hock answers a very common question about the CMA Exam, “Which Part of the CMA Exam Should I Take First?” Once you decide which Part you want to take first, you can learn more about HOCK international’s comprehensive CMA exam preparation and start studying today!
There is one question that you must be able to answer correctly in order to pass a professional exam. If you can answer this question correctly, you will pass the exam. If you cannot answer this question correctly, it is very unlikely that you will pass. Watch the video to find out the question!
So, before you start preparing for any question that is going to be on the exam, make certain you can first answer the question of why you are studying. Why are you studying?
In this video, HOCK international President Brian Hock discusses two of the main benefits of having professional certifications:
- Provides a differentiating factor when competing for a job
- Offers networking through a professional organization
In this video, HOCK international President Brian Hock offers some tips about how you can maximize your study time with distraction-free studying. Fewer distractions = more learning and more learning = passing your exams!
Some of the suggestions discussed in the video include:
- Have all of your materials ready when you start studying.
- Turn off all of your notifications (phone, email, etc.).
- Wear earplugs or play soft music.
- Try studying somewhere other than home or office (try the library!).
- Try different study times (maybe early morning or later at night).
In this video, HOCK international President Brian Hock offers some tips for how to study segregation of duties, a usually very difficult topic for CMA, CPA, and CIA exam candidates to master.