I had a call yesterday from a shareholder who asked some questions about our audit.  It caused me to do some thinking and in the course of answering his questions, I realized that the issue of public company audits is not very well understood.

Let me see if I can demystify the subject just a bit.

First, every public company in America has their financial results — financial statements really — audited annually and then those audited financial results are included in the company’s Form 10K, the annual report filed with the United States Securities and Exchange Commission.

In addition, public companies have their quarterly financial results “reviewed” on a quarterly basis by the same auditors.  This was a change driven by the Sarbanes-Oxley legislation.

An audit is an attempt to provide assurance by an independent auditor that the company’s financial statements — income statement, balance sheet, statement of cash flows — are presented fairly and accurately thereby providing a true and fair view of the company’s performance.  And also that any unusual information is disclosed and discussed.

You could say that the purpose of an audit is to provide an enhanced degree of confidence for shareholders that the financial statements achieve the essential objectives of fairness and accuracy.  An expert opinion from someone whose expertise is exactly that — auditing.

Let’s talk a bit about the mechanics.

An audit, at the end of the day, is essentially a test of the quality of the work done by the company’s Chief Financial Officer as he presents these financial statements.  He is presenting them both to the Chief Executive Officer and the Board’s Audit Committee.

The presentation to the Chief Executive Officer is the basis for the CEO to sign them as required by Sarbanes-Oxley.  The important work is done with the Audit Committee.

The company itself, at the board level, has an Audit Committee composed of only independent directors, one of who is designated as a Financial Expert.  The Financial Expert is usually an experienced Chief Financial Officer, a Certified Public Accountant or someone whose professional experience makes him or her well qualified to undertake this position.

The auditors are retained by the Audit Committee and work for them though that is a bit of a fiction as the company provides the auditors all of the source data and the company contracts to pay the auditors.  But this degree of independence between the auditors and the Audit Committee is real and, in my view, sacred.

I personally never talk to the auditors.  I never communicate with the auditors.  I never attend Audit Committee meetings and I do not initially receive their report.  I am as far removed from their work, deliberations and conclusions as possible.

In preparing for the audit, the auditors typically provide a list of information they would like to review — the Prepared by Client list or PBC list.  I then have the Chief Financial Officer prepare a memorandum for circulation to the Board, the Audit Committee and to me outlining the specifics of the audit — auditors, date and time, PBC list, location and time to render their report.

We also identify any special subjects which are worthy of a bit of additional attention which in our business is not too many.  The Chief Financial Officer and I discuss this prior to his completing his memorandum.  We might pay special attention to goodwill impairment, as an example, if we had a discontinued operation or something else which might impact goodwill accounting.

I think it irritates the Chief Financial Officer that I make him do this because in his world, this is pretty de rigueur and ordinary.  Nonetheless, I like having this done so there are no misunderstandings and everyone knows their role and dates.  There is nothing worse than having the auditors show up and not having the PBC info ready for them.  Their time costs us money.

One of my real purposes is to make the audit as easy as possible to drive the cost to the lowest level possible.  I suspect we are viewed as an “easy” audit because we are well prepared.  I know our audit costs have been pretty reasonable over the last few years.

Once the audit is underway, I am subjected to an interrogation by a single auditor as to a number of specific issues — corruption being an example — and that is my only direct role in the audit.  I usually introduce myself to the auditors as they go about their business in a conference room.

When the audit is completed, the auditors render an opinion to the Audit Committee in a face to face meeting.

The best opinion you can get is an “unqualified” opinion and that was the question that was raised in my conversation with a shareholder.  He mistakenly believed that an unqualified opinion was a less than meritorious outcome — “unqualified” means there are no qualifications or limitations to the opinion.  All is good.

An unqualified opinion means that the auditors found nothing which would challenge the truth, accuracy and fairness of the company’s financial statements as submitted.

An unqualified opinion is a clean bill of health and opines that the company’s financial statements do not contain any material misstatements and are represented fairly in accordance with Generally Accepted Accounting Statements.

It would be likely to see the following statements as part of an unqualified opinion:

1. The Financial Statements have been prepared using the Generally Accepted Accounting Principles which have been consistently applied;
2. The Financial Statements comply with relevant statutory requirements and regulations;
3. There is adequate disclosure of all material matters relevant to the proper presentation of the financial information subject to statutory requirements, where applicable; and,
4. Any changes in the accounting principles or in the method of their application and the effects thereof have been properly determined and disclosed in the Financial Statements.

The above is just a general set of statements and is not drawn from our Auditor’s Report.

So, there you have it, the issue of audits demystified.  Please comment below or call with questions.  Thanks.

The seasoned bingo player is over 60 years old and has likely been playing bingo for some considerable time.  She also plays to relax, reduce stress, socialize with friends, have fun and to win money.  She may even have more time to play bingo as her children are grown and she has fewer demands on her time.  She may be retired.

In general the seasoned bingo player is healthier, more energetic and enjoying life more than her predecessors from a decade or so earlier.  Sixty is the new 40!  Viva la difference!

The seasoned bingo player has a treat in store as she can rely upon electronic card minders to allow her to regain her youthful focus and to accommodate her deteriorating eyesight.  No messy dabbing or dabbers.  Just electronic precision!

Electronic card minders are computers which manage multiple bingo cards simultaneously — as many as 180 depending upon the jurisdiction — by receiving a RF signal as each bingo ball is called.  With the touch of a button, her 180 bingo cards are dabbed and her three best cards are displayed.  When she wins, the electronic card minder makes a sound to alert her to yell BINGO!

The electronic card minder also greatly improves the probability of winning as it can manage up to 180 cards, again, depending upon the jurisdiction.

The seasoned bingo player — a growing and important part of our bingo demographic — is able to enjoy playing bingo with her friends and at her favorite bingo hall for a long, long time.  In our bingo halls, we often offer a substantial discount for our seasoned bingo players over 80 years old.

Next time, I will discuss the Young Bingo Player.  That will be very interesting as most folks don’t appreciate how many young persons love playing bingo.

If you want to see a real bingo hall and all the fun go to austinbingo.com and look at the website for  American Bingo in Austin, Texas.

The traditional bingo player is a woman from 40-60 years old who enjoys playing bingo for the following reasons:

1. To relax;

2. To reduce stress;

3. To socialize with friends;

4. To have fun; and,

5. To win money.

We learned these things from the focus groups we conduct at every bingo hall.  I will write about focus groups in the future.  They are a very useful marketing technique used to refine and focus our bingo halls to specifically hit the objectives set by our customers.

The traditional bingo player sees bingo as gambling — “to win money” — only after fulfilling her social needs for relaxation, stress reduction, socialization and fun.  This is an important consideration.  It means a bingo hall is an entertainment destination first and a gambling venue thereafter.

In the above graphic, you can see the emergence of a bell shaped curve which shows the importance of the traditional customer to the overall patronage of the bingo hall.  Look at the dotted line that is the perspective before adding the impact of the Baby Boomers.

The Baby Boomers are coming and they represent a huge increase in the traditional bingo player profile.  They will make you work for their business but the supply of potential customers is growing.  Growing!

The other consideration of the traditional bingo customer is the fact that they include their families in their entertainment pursuits.

The inclusion of the nuclear family is an excellent marketing target.  One we have some additional work to do.

Next time I will discuss the Seasoned Bingo Player.

Want to learn more and see what a bingo hall website looks like?  Go to www.austinbingo.com and follow its Facebook page in addition.  You will enjoy seeing some of the videos and pictures.

Jeffrey L Minch
President, CEO

If you are reading this message, then you are on the new Littlefield Corporation website.

This is very much a work in progress and we will be continuing to develop the site for about a month with the objective of having it completed no later than the end of February.

We will be migrating content from the old website and creating new content until we have all the historic information pertinent to the Company on the new website.

The new website is part of an attempt on our part to take a more focused approach to the Company’s web presence, branding and messaging.

We are doing the same thing with our individual bingo halls.  You might want to check out one of our bingo hall websites — www.austinbingo.com — which is for American Bingo in Austin, Texas.

Please feel free to contact me at jminch@littlefield.com or 512-476-5141.