What is happening
Auditors are elevating procedures over the statement of cash flows (SoCF) and related disclosures, with heightened attention on classification judgments, completeness of noncash investing/financing (NCI&F) disclosures, restricted cash presentation/bridging, and the design and operation of internal controls over SoCF preparation (including spreadsheets and reports referred to as “information produced by the entity”).
Why This Matters Now
Regulatory Focus: Standard setters and regulators have emphasized SoCF quality and MD&A liquidity analysis; classification errors continue to drive restatements.
Inspection Pressure: PCAOB findings are flagging ICFR weaknesses over report logic, accuracy/completeness of information produced by the entity (IPE), and classification.
Investor Relevance: Cash flow trends, liquidity plans, and transparency around noncash activity are increasingly decision-useful and scrutinized in audits and reviews.
Areas Of focus
- ASC 230 classification: Cash inflows and outflows related to M&A activity; debt issuance/extinguishment and financing fees; supplier and receivable financing/factoring; lease cash flows (initial/variable/short-term); insurance proceeds; income taxes (gross vs. net).
- Restricted cash: Consistent presentation and a clear bridge from balance sheet amounts to totals in the SoCF.
- NCI&F: Completeness and clarity that tie to balance sheet movements (e.g., equity–settled compensation, leases commenced, non–cash consideration).
- MD&A / Liquidity narrative (public filers): Cause and effect analysis beyond repeating SoCF lines; plans for negative operating cash flows.
- Internal controls & evidence: Validation of SoCF mapping and spreadsheet inputs and formulas, change management over queries and spreadsheets, and IPE accuracy/completeness testing with retained audit evidence.
How virtas can help
Virtas has extensive expertise in technical accounting and financial reporting. We work alongside your team to ensure complex transactions, policies, and disclosures are properly assessed, documented, and communicated.
Our Professionals Provide:
- Expertise in U.S. GAAP and SEC reporting requirements
- Support to meet close and reporting deadlines
- Guidance to strengthen disclosures and internal controls and reduce compliance risk
- Practical insight to enhance readiness for transactions and investor engagement