Accounting
Bessent says US barreling to crisis if tax cuts not extended
Treasury Secretary nominee Scott Bessent warned that the U.S. faces an economic crisis that will hammer middle- and working-class people if the 2017 Republican tax cuts aren’t extended when a swath of them expire at the end of this year.
“This is the single most important economic issue of the day — this is pass/fail,” Bessent said in answering questions at his Senate Finance Committee confirmation hearing Thursday.
In a wide-ranging series of questions during the hours-long session, Bessent, 62, also said that the federal government “is not going to default” on its debt under his watch and that he respected the Federal Reserve’s independence over monetary policy. Further, he
With his comments on taxes, Bessent drew an immediate contrast with outgoing Treasury Secretary Janet Yellen, who said on Wednesday that policies including a full extension of the 2017 cuts enacted under Donald Trump “could undermine our country’s strength, from the resilience of the Treasury market to the value of the dollar, even provoking a
Trump’s pick for the Treasury, a veteran hedge fund investor, said that “if we do not fix these tax cuts, if we do not renew and extend, we will be facing an economic calamity. And as always with financial instability, that falls on the middle-class people.”
Spending cuts
In his prepared remarks, Bessent also emphasized the importance of addressing the budget deficit, saying the U.S. “must work to get our fiscal house in order” by adjusting domestic discretionary spending. He said that discretionary spending — outlays aside from entitlements including Social Security and Medicare — had soared by an “astonishing 40% over the past four years.”
Bessent underscored that the popular entitlement programs for older Americans aren’t going to end up on the chopping board. “I want to emphasize that President Trump has said that Social Security and Medicare will not be touched,” he said.
“One of the tragedies of this blowout in the budget deficit is that we have to get our short-term house in order,” Bessent added.
But Bessent didn’t specify what areas of spending he’d support cutting, and refused to be nailed down on particular programs. Asked, for example, if he would recommend cutting Medicaid — a federal health program for lower-income households — he said that “it’s the business of Congress to do the budget. And I am in favor of empowering states and I believe that for some states that will be an increase, for some states that will be a decrease.”
Bessent also declined specifically to endorse Democratic Senator Elizabeth Warren’s call to eliminate the federal debt limit. He said that if Trump wanted to get rid of it, he would then work with the president and Warren on that idea. Meantime, he committed that “the United States is not going to default on its debt if I am confirmed.”
The debt ceiling kicked back in on Jan. 2, and the Treasury is expected to begin taking special accounting measures to avoid breaching it within the coming days.
Bessent said he wanted to conduct a survey of market participants on debt, in a potential hint that he would canvass with them on any change in the Treasury Department’s issuance strategy. Its next quarterly update on deciding what types of securities to sell in what amount comes Feb. 5.
When asked about the possible inflationary impact of Trump’s economic policy plans, Bessent said he believed the incoming administration’s policies will increase real wages and bring inflation closer to the Fed’s 2% target. He said he couldn’t think of any Trump policy that would push up inflation — despite some economists’ estimates that tariff hikes would generate at least a one-off step up in the inflation rate.
Bessent also sought to dispel notions that he or the president-elect would seek to tamper with the Fed’s independence. Trump last fall suggested he wanted to have a “say” on monetary policy.
“I think, on monetary policy decisions, the FOMC should be independent,” Bessent said, referring to the Fed’s rate-setting Federal Open Market Committee.
If confirmed as Treasury secretary, as is widely expected, Bessent will oversee U.S. policy on areas ranging from financial sanctions and currency policy to the U.S. fiscal outlook and management of the $28 trillion Treasury market. He will also be a key U.S. envoy abroad.
In his remarks, Bessent stressed that maintaining the dollar as the world’s reserve currency is critical to U.S. economic health and the nation’s future.
He also during the hearing painted the budget deficit as a national security issue, arguing that in the past, the Treasury has been called upon to use its borrowing capacity to help save the U.S. and the world in times of crisis like the Great Depression, World War II or COVID.
“What we currently have now, we would be hard pressed to do the same,” he said.
The Public Company Accounting Oversight Board released a staff publication highlighting problems it’s seeing with audits of journal entries.
The publication,
It includes reminders about understanding controls over journal entries, identifying and selecting journal entries to test, testing the completeness of the population of journal entries, and testing of journal entries.
The publication also includes some of the typical deficiencies seen by PCAOB staff, such as auditors not testing any of the journal entries that met their fraud criteria, auditors unduly limiting their procedures to certain journal entries meeting their fraud criteria, auditors not testing the completeness of the population of journal entries, and not obtaining an understanding of the financial reporting process and controls over journal entries and other adjustments. There’s a PCAOB auditing standard,
“Auditors should use professional judgment in determining the nature, timing and extent of the testing of journal entries,” recommends the publication.
The publication also includes some good practices observed by PCAOB staffers, including audit firms providing examples to engagement teams of characteristics of potentially fraudulent journal entries, training for all partners and firm personnel on the applicable PCAOB standard, and journal entry practice aids.
Software audit tools can also help. “To aid in testing the completeness of the journal entry population and identifying journal entries for testing, audit firms employ software audit tools,” said the publication. “Those audit firms also require consultations if an engagement team does not use the software audit tool, or if the journal entries identified by the software audit tool are not all selected for testing.”
Sen. Tommy Tuberville, R-Alabama, and Rep. Warren Davidson, R-Ohio, reintroduced legislation to repeal the Corporate Transparency Act and its requirement for beneficial ownership information reporting.
The requirement is currently on hold after a
The American Institute of CPAs has been asking for a delay in the requirements, which were supposed to take effect for older companies on Jan. 1 of this year, and Jan. 1, 2024 for new companies.
Tuberville and Davidson teamed up to reintroduce the Repealing Big Brother Overreach Act in the Senate and the House on Wednesday after originally introducing it during the previous congressional term last May.
“The Financial Crimes Enforcement Network infringes American small business owners’ privacy rights by forcing them to disclose sensitive information to the government,” Davidson said in a statement. “The CTA is a disaster for small businesses and must be repealed immediately. That is why I am re-introducing this legislation in the 119th Congress, and I urge my colleagues to join me in passing it.”
“I’m thankful that the Supreme Court is now deciding the legality of the CTA requirements, but we need to ensure that our business owners never have to worry about this again,” Tuberville said in a statement.
The bill has attracted the support of the National Federation of Independent Business and 60 trade associations, including the National Grocers Association, the American Supply Association, and Associated Builders and Contractors.
“Small businesses fear all the Corporate Transparency Act has done is impose tens of billions of dollars in compliance costs on Main Street while failing to stop the criminal activity it was intended to target,” said NFIB director of government relations Josh McLeod in a statement Thursday. “The Repealing Big Brother Overreach Act would eliminate this unconstitutional power grab by repealing the Corporate Transparency Act. NFIB strongly supports this legislation introduced by Sen. Tuberville and Rep. Davidson and urges Congress to enact it swiftly to provide relief and certainty to over 32 million small businesses.”
The Institute of Internal Auditors announced that its
The updated standards were
Since their release a year ago, the standards have been translated into 25 languages and downloaded nearly 600,000 times. The standards are designed to help elevate internal audit performance, quality and consistency across sectors, and have been updated with a focus on internal audit strategy, stakeholder relationships, and internal audit performance measurement and accountability. They also introduce the governance conditions essential for effective internal auditing. The standards were developed through a multiyear process engaging thousands of stakeholders globally including internal audit practitioners, service providers, standard-setters, and others with interests in effective internal auditing.
“The new standards going into effect represents a pivotal achievement in The IIA’s mission to advance the internal audit profession and empower auditors to deliver even greater value to the organizations they serve,” said IIA president and CEO Anthony Pugliese in a statement Thursday. “At the IIA, our priority is to equip practitioners with the agility and adaptability needed to navigate the profession’s ever-evolving demands. I’m immensely proud of our efforts to engage stakeholders throughout the IPPF Evolution process and to support our global members as they embrace these transformative Standards.”
Over the past year, the IIA has been educating audit practitioners, board members and senior management on the standards while encouraging early adoption and implementation of them. It’s been offering a set of resources including educational webinars, virtual and in-person courses, speaking engagements, and conference sessions and workshops.
The IPPF project is continuing this year with the release of
“The release of the Topical Requirements marks the next phase of our mission to ensure the IPPF remains relevant and valuable to practitioners worldwide,” said Benito Ybarra, IIA executive vice president of global standards, guidance and certifications, in a statement. “The Topical Requirements are intended to address the most pervasive global risks, helping ensure practitioners are well-equipped to review and respond to these priority risks in a consistent and uniform manner.”
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PCAOB staff puts focus on auditing journal entries
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