Finance departments may be in for tough questioning from auditors. The Public Company Accounting Oversight Board (PCAOB) announced in mid-April that it will be prioritizing fraud-related risks in audit inspections this year, according to a new report.

The PCAOB, a nonprofit corporation under SEC jurisdiction that oversees public company audits and regulates auditors, inspects selected audits throughout the year to double check the quality and accuracy of auditors’ work, and sets annual priorities for those inspections.

This year, the PCAOB said that inspectors would be “increasing focus on fraud-related audit procedures” in its Staff Priorities for 2023 Inspections release, citing the potentially growing fraud risk posed by macroeconomic uncertainty and disruption.

“They [PCAOB] are saying that when there’s times of change, and there’s economic turbulence, the risk of fraud goes up,” Andi McNeal, vice president of education at the Association of Certified Fraud Examiners (ACFE), told CFO Brew. “And we expect auditors to be on the ball about that.”

As a result, finance departments at public companies may find that auditors are going to be probing a little deeper this year, including more questions about organizational fraud risks and controls, McNeal said.

“I would imagine some organizations are going to hear different lines of questioning,” she said. “Maybe you’re going to be asked by the more senior-level folks about some of these risks as opposed to just the staff levels sending the checklist of questions that they’ve been asked to send.”

Continue reading.—DA

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It’s probably cold comfort to the employees who lost their jobs, but tech titans regained their footing after laying off staff as part of efforts to trim costs. Meta, Alphabet, Microsoft, and Amazon all beat analysts’ expectations on earnings in the first quarter of 2023, and each laid off thousands of workers in recent months.

All four companies reported a beat on revenue expectations, but for all four, their earnings beats were far higher—showing that their control of costs is what really surprised Wall Street this quarter. Their revenues beat expectations by between 1.43% and 3.59%, but earnings per share beat expectations by 8.3% to 9.67% for three of the firms—and a massive 42.17% for Amazon. This led ZipRecruiter’s chief economist, Julia Pollak, to opine on Twitter that “the answer is yes" to the question, “But are the tech layoffs deep enough?”

While all those companies showed continued growth on the top line and an ability to find additional profits through cost reductions, signals about demand in the greater economy from them don’t seem apparent.

Continue reading.—SW

The layoff bug continues to bite, and Gap is the latest victim.

Last week, the company announced plans to lay off 1,800 workers in an effort to save $300 million. The cuts will affect workers from Gap’s headquarters, as well as those in “upper field” roles, i.e., leadership positions at regional stores.

Gap tooth: Gap, which also owns and operates Banana Republic, Old Navy, and Athleta, has struggled to boost its gross margin and reach profitability. Like many retailers, the company has dealt with obstacles including inflation, inventory, and air freight costs.

“We are taking the necessary actions to reshape Gap Inc. for the future—simplifying and optimizing our operating model, elevating creativity, and driving better delivery in every dimension of the customer experience,” interim CEO Bob Martin said in a statement.

Gap’s Q4 2022 sales were down 9% from 2019’s pre-pandemic level, largely due to the closure of 300+ Gap and Banana Republic stores that EVP and CFO Katrina O’Connell described as “nonproductive.”

Continue reading on Retail Brew.—KM

Today’s top finance reads.

Stat: 9.59 million. That’s how many job vacancies there were in March, according to the Labor Department. That’s the lowest since April 2021 and could be a sign that the labor market is loosening a bit. (CNBC)

Quote: “We are probably at a point where companies may be reassessing whether to push this. A reputation for being poor value for money stays for a long time.”—Paul Donovan, chief economist atUBS Global Wealth Management, talking about corporate profit driven inflation (the Wall Street Journal)

Read: How JPMorgan Chase came to acquire First Republic Bank, a move reminiscent of the country’s largest bank’s role in the 2008 banking crisis. (the New York Times)

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