AICPA - Page 2

Summary - The AICPA has issued new TQAs under Section 320, Breach of an Independence Interpretation. TQAs include nonauthoritative guidance in question and answer format provided by the AICPA on various topics.

The AICPA has added the following guidance under TQA section 320, Breach of an Independence Interpretation, with the following questions and answers:

TQA section 320.01, “Communication of an Independence Breach to Affiliates of an Attest Client That Are Also Attest Clients;”
TQA section 320.02, “Communication to Affiliates That Are Not Affected by an Independence Breach at an Attest Client;”
TQA section 320.03, “Communication and Confidentiality After an Independence Breach,” and
TQA section 320.04, “Manner of Communication After an Independence Breach.”

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Independence –AICPA Issues New Independence TQA

Summary - The AICPA has issued new Technical Questions and Answers (TQAs) under Section 100, Independence. TQAs include nonauthoritative guidance in question and answer format provided by the AICPA on various topics.

The AICPA has added TQA section 100.07, “Operating Node Software on a Blockchain,” of section 100, Independence.

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Public Interest Entities –AICPA PEEC Issues Guidance on Public Interest Entities

Summary - The AICPA’s Professional Ethics Executive Committee (PEEC) has released its New and revised definitions related to public interest entities, which amends the Code of Professional Conduct, under ET Section: 0.400 Definitions. The PEEC adopted the changes at its meeting in November.

The affected definitions are as follows:

New definition “publicly traded entity” (ET Section 0.400.45) includes entities that issue financial instruments that are transferable and traded through a publicly accessible market mechanism, including through listing on a stock exchange. For an entity that is required to file a registration statement with the SEC, the entity becomes a publicly traded entity when its registration statement is effective.
Revised definition “public interest entity” (ET Section 0.400.43) includes entities that meet one of several categories, including entities the auditors of which are subject to Regulation S-X, SEC Rule 2-01; certain entities that take deposits from the public; certain entities that provide insurance to the public; and SEC registered investment companies.

Effective dates

The new definition of “publicly traded entity” is effective December 15, 2023. The revision of “public interest entity,” as noted in the introduction to the release document, “is effective for periods beginning on or after December 15, 2024, with early implementation allowed. For an entity that, under the revised definition, is no longer considered a public interest entity, the revised definition is effective December 15, 2023.

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Tokens – AICPA Proposes Framework for Reporting on Stablecoins and Sufficiency of Assets for Redemption

Summary - The AICPA’s Assurance Services Executive Committee (ASEC) has released the Exposure Draft, Proposed Criteria for the Presentation of the Sufficiency of Assets for Redemption: Specific to Asset-Backed Fiat-Pegged Tokens. The comment deadline is January 29, 2024.

The Exposure Draft sets forth what ASEC intends to be a comprehensive set of criteria to help increase transparency around stablecoins, a type of digital asset backed by traditional currency or other types of assets. The AICPA believes that, if adopted as proposed, these criteria would constitute the first framework of its kind to those issuing stablecoins, backed by fiat currency, for reporting relevant information to stakeholders. The AICPA also intends this framework to provide the basis for attestation services around this asset class and for practitioners to use the criteria when conducting an attestation engagement to perform procedures and generate a report on the issuer's claims about the sufficiency of assets for redemption linked to asset-backed, fiat-pegged tokens (that is, stablecoins).

Crypto assets and other digital assets make news for reasons ranging from their novelty, unpredictability, or utility in various markets. Stablecoins in particular have gained prominence for their role in trading, making them attractive to investors and businesses, although information available to token holders for stablecoins has not been consistent. The AICPA intends the draft criteria to remedy this.

Certain regulatory bodies, including the New York State Department of Financial Services (DFS), at the present time require reporting on and attestation of stablecoins, underlining the increasing importance of regulatory compliance.

The AICPA believes that the criteria will provide transparency to benefit token issuers as well as token holders, regulators, and the wider industry. By creating a standardized framework, the AICPA aims to reduce inconsistencies in measuring and reporting issued tokens and available assets backing those tokens.

For more information, click here.

Preparation, Compilation, and Review Engagements –New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Preparation, Compilation, and Review Engagements. This edition of the guide has been revised by AICPA staff to include certain changes necessary due to the issuance of authoritative guidance since the guide was originally issued, and other revisions as deemed appropriate. Relevant guidance issued through September 1, 2023, has been considered in the development of this edition of the guide. However, this guide does not include all preparation, compilation, review, accounting, reporting, regulatory, and other requirements applicable to an entity or a particular engagement. This guide is intended to be used in conjunction with all applicable sources of relevant guidance. Relevant guidance that is issued and effective on or before September 1, 2023, is incorporated directly in the text of this guide.

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Professional Qualifications –AICPA Code of Professional Conduct Updated

Summary - The AICPA has published updates to its Code of Professional Conduct. Items updated include:

ET Part 1: Members in Public Practice: 1.400 Acts Discreditable;
ET Part 1: Members in Public Practice - ET sec. 1.230.030 Determining Fees for an Attest Engagement, ET sec. 1.230.040 Fee Dependency, ET sec. 1.210.010 Conceptual Framework for Independence, ET sec. 1.224.010 Client Affiliates.1.200.001 Independence Rule;
ET Part 2: Members in Business - ET sec. 2.400.020 Professional Qualifications or Competencies; and
ET Part 3: Other Members - ET sec. 3.400.020 Professional Qualifications or Competencies.

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Attestation Engagements –AICPA’s ASB Proposes SSAE for Consistency with AICPA Quality Management Standards

Summary - The AICPA’s Auditing Standards Board (ASB) has issued the Exposure Draft, Proposed Statement on Standards for Attestation Engagements – Amendments to the Attestation Standards for Consistency With the Issuance of AICPA Standards on Quality Management, and supplementary material to the Exposure Draft. The deadline for comments is December 1, 2023.

Reasons for the Proposed SSAE

The Exposure Draft proposes amendments to the Statements on Standards for Attestation Engagements (SSAE) to make the SSAEs consistent with the quality management (QM) standards issued by the ASB and the Accounting and Review Services Committee (ARSC) in the summer of 2022.

The Exposure Draft, if issued as proposed, would amend (a) SSAE No. 18, Attestation Standards: Clarification and Recodification, AT-C sections 105, Concepts Common to All Attestation Engagements, and 320, Reporting on an Examination of Controls at a Service Organization Relevant to User Entities’ Internal Control Over Financial Reporting; (b) SSAE No. 19, Agreed-Upon Procedures Engagements, AT-C section 215; (c) SSAE No 21, Direct Examination Engagements, AT-C section 205, Assertion-Based Examination Engagements; and (d) SSAE No. 22, Review Engagements, AT-C section 210.

The previously issued QM standards include:

Statement on Quality Management Standards (SQMS) No. 1, A Firm's System of Quality Management;
SQMS No. 2, Engagement Quality Reviews;
Statement on Auditing Standards (SAS) No. 146, Quality Management for an Engagement Conducted in Accordance with Generally Accepted Auditing Standards; and
Statement on Standards for Accounting and Review Services (SSARS) No. 26, Quality Management for an Engagement Conducted in Accordance with Statements on Standards for Accounting and Review Services.

The ASB and the ARSC developed the previously issued QM standards to converge with standards issued by the International Auditing and Assurance Standards Board (IAASB).

In developing the QM amendments for the SSAEs, the ASB was concerned with issues of engagement quality, “a firm’s responsibilities to design, implement, and operate a system of quality management for its accounting and auditing practice”; and firm leadership responsibilities. The ASB does not believe that the amendments, if issued as proposed, will “significantly affect practice,” given that the ASB’s intention with the proposals is to amend the SSAEs to require that practitioners comply with the existing QM standards.

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SOC 1 – AICPA Publishes New Technical Question and Answers

Summary - The AICPA has published Technical Questions and Answers Section 9560, Information About Controls Over Cryptographic Keys in a SOC 1® Report. This publication includes the following question and answers:

Q&A section 9560.01, “Controls Over Cryptographic Keys Relevant to an Entity’s Internal Control Over Financial Reporting in Relation to Performing a SOC 1 Engagement;”
Q&A section 9560.02, “Risks Associated With Cryptographic Keys;”
Q&A section 9560.03, “Inclusion of Controls Over Cryptographic Keys in a SOC 1 Report;”
Q&A section 9560.04, “Description of Tests of Controls and Results Thereof Related to a Prior-Period Key Ceremony;”
Q&A section 9560.05, “Providing Evidence of Suitability of Design and Operating Effectiveness of
Controls Over Key Ceremony That Occurred in a Prior Period;” and
Q&A section 9560.06, “Chain-of-Custody Controls That Depend on a Cryptographic Key Generated in a Prior Period.”

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Publicly Traded Entities –AICPA Ethics Division Proposes Definitions Related to of Publicly Traded Entity and Public Interest Entities

Summary - The AICPA Professional Ethics Executive Committee (PEEC) has issued the Exposure Draft, Proposed New Definition of Publicly Traded Entity and Revised Definition of Public Interest Entity (ET sec. 0.400).

The PEEC is proposing the new and revised definitions under its project to converge the AICPA Code of Professional Conduct with the standards of the International Ethics Standards Board for Accountants (IESBA). Last year, the IESBA amended its definitions of listed entity and public interest entity (PIE). Recently, the IESBA staff released a questions and answers (Q&As) publication on the revisions to these definitions as well as a Database of Public Interest Entity (PIE) Definitions, organized by jurisdiction, that it believes will further support the adoption and effective implementation of the 2022 revisions.

The IESBA revisions include within PIEs several mandatory categories, including publicly traded entities, entities one of the main functions of which is to take deposits from the public, and entities one of the main functions of which is to provide insurance to the public, as well as certain other entities specified by law or regulation. The proposed PEEC definitions include some but not all of the IESBA categories.

Publicly Traded Entity (ET sec. 0.400.45)

The PEEC Exposure Draft provides that a publicly traded entity includes “[a]n entity that issues financial instruments that are transferable and traded through a publicly accessible market mechanism, including through listing on a stock exchange.” As noted in the Explanation, if adopted as proposed, this would also include “financial instruments of certain nonissuers, such as governmental bonds, as well as certain entities listed on OTC trading platforms.”

Public Interest Entity (ET sec. 0.400.43)

The Exposure Draft revises the PEEC definition of public interest entity to include entities that fall within any of the following categories:

A publicly traded entity whose auditor is subject to the SEC issuer independence rules;
An entity wherein one of the main functions of which is to take deposits from the public and that has consolidated total assets of $1 billion or more as of the beginning of the fiscal year;
An entity wherein one of the main functions of which is to provide insurance to the public that is subject to the National Association of Insurance Commissioners Annual Financial Reporting Model Regulation (Model Audit Rule) and that has $500 million in annual direct written and assumed premiums; and
An investment company, other than an insurance company product, that is registered with the SEC pursuant to the Investment Company Act of 1940.

Comment Deadline and Effective Date

The comment deadline for the proposal definitions is September 15, 2023. The “PEEC recommends that the proposed revisions be effective for periods beginning on or after December 15, 2024, with early implementation allowed” to align with the effective date of similar changes by the IESBA.

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QM Appendixes – AICPA Publishes Analysis Compares the ISQMs and SQMSs

Summary - The AICPA has published QM Appendix: Substantial Differences between the ISQMs and the SQMSs. This analysis was prepared by the AICPA Audit and Attest Standards staff to highlight substantive differences between the International Standards on Quality Management (ISQMs) and the Statements on Quality Management Standards (SQMSs) codified in QM sections 10-20, and the rationale therefore.

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SOC 1 Reports – AICPA Publishes Technical Question and Answer

Summary - The AICPA has published Technical Question and Answer Section 9560: Information About Controls Over Cryptographic Keys in a SOC 1® Report. TQAs provide nonauthoritative guidance in question and answer format provided by the AICPA on various topics. As explained in a Note introducing the specific paragraphs, TQA Section 9560 “addresses the inclusion of information about controls over cryptographic keys in management’s description of a service organization’s system in a SOC 1 report.

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Comparative Financial Information –AICPA Issues TQA on Reporting on Comparative Financial Information

Summary - The AICPA has issued a new Technical Question and Answer (TQA) under Section 9150, Preparation, Compilation, and Review Engagements.

AICPA TQA Section 9150.35, “Reporting on Comparative Financial Information in a Document Containing Current-Year Financial Statements That Were Subjected to a Review or Compilation Engagement,” provides non-authoritative guidance on how an accountant should report when the entity presents comparative information in a document containing the current-year financial statements that were subjected to a review or compilation engagement.

The TQA explains at the outset that “’Comparative information’ is prior-period information presented for purposes of comparison with current-period amounts or disclosures” but “is not considered comparative financial statements because it is not a complete set of financial statements.” As such, the “accountant would consider any comparative information an entity presents to be supplementary information.”

As provided in AR-C section 80A, paragraph .34, and AR-C section 90A, paragraph .126, “when supplementary information accompanies financial statements and the accountant’s compilation or review report . . . the accountant should clearly indicate the degree of responsibility, if any, the accountant is taking with respect to such other information in either” (a) a report on supplementary information; or (b) “a separate paragraph in the accountant’s compilation report or an other-matter paragraph in the review report on the financial statements.”

TQA Section 9150.35 also provides three sample paragraphs practitioners may include in the accountant’s report or in the current year’s financial statements.

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AICPA Standards –AICPA’s ASB Releases SAS 149

Summary - The AICPA’s Auditing Standards Board (ASB) has released Statement on Auditing Standards (SAS) No. 149, Special Considerations — Audits of Group Financial Statements (Including the Work of Component Auditors and Audits of Referred-to Auditors), and Statement on Quality Management Standards (SQMS) No. 3, Amendments to QM Sections 10, A Firm’s System of Quality Management, and 20,Engagement Quality Review. The ASB developed SAS 149 to provide “a risk-based approach to planning and performing a group audit.” SAS 149 supersedes SAS No. 122, Statements on Auditing Standards: Clarification and Recodification, section 600, Special Considerations âŽ¯ Audits of Group Financial Statements (Including the Work of Component Auditors. It also includes conforming amendments to other standards. SAS 149 applies to an audit of group financial statements (a group audit) and to all group audits. It also “addresses special considerations that apply to a group audit, including in circumstances in which component auditors are involved or when the group auditor makes reference to the audit of a referred-to auditor.

As noted in the At-a-Glance document issued with SAS 149 and SQMS 3, New Statement on Auditing Standards for Group Audits, the “most significant change introduced by SAS No. 149 is that it provides a risk-based approach to planning and performing a group audit.” While former AU-C section 600 required the identification of “significant components at which to perform audit work,” SAS 149 “directs the group auditor to use professional judgment in determining the components at which to perform procedures, based on assessed risks. The ASB also intends SAS 149 to “better [align] the standard with other recently issued SASs and [clarify] the interaction between the SAS and other AU-C sections.

SAS 149 also provides a definition of the new term, “referred to auditor,” which includes: “an auditor who performs an audit of the financial statements of a component to which the group engagement partner determines to make reference in the auditor’s report on the group financial statements.” The referred to auditor is not a component auditor or a part of the engagement team for a group audit. In contrast, a component auditor is a part of the engagement team.

Effective Dates

SAS 149 is effective for audits of group financial statements for periods ending on or after December 15, 2026.

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AICPA Standards –AICPA’s ASB Releases SQMS 3

Summary - The AICPA’s Auditing Standards Board (ASB) has released Statement on Quality Management Standards (SQMS) No. 3, Amendments to QM Sections 10, A Firm’s System of Quality Management, and 20,Engagement Quality Review. The ASB has issued SQMS 3 concurrently with SAS 149. SQMS 3 amends QM Sections 10 and 20 to conform terminology to the language in SAS 149 “and provide guidance on differentiating between a resource and an information source.

The amendment to QM section 10 is effective concurrently with a firm’s implementation of SQMS Nos. 1 and 2 on December 15, 2025. The amendment to QM section 20 is effective for (a) audits or reviews of financial statements for periods beginning on or after December 15, 2025, and (b) other engagements in the firm’s accounting and auditing practice beginning on or after December 15, 2025.

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Service Organizations –New Edition of AICPA Audit and Accounting Guide Published

Summary -The AICPA has published a new edition of its Audit and Accounting Guide, Reporting on an Examination of Controls at a Service Organization Relevant to User Entities' Internal Control Over Financial Reporting (SOC 1®). This publication has been developed by the AICPA Service Organizations Guide Task Force to assist practitioners engaged to examine and report on controls at a service organization that are likely to be relevant to user entities’ internal control over financial reporting.

This edition of the guide has been revised by AICPA staff to include certain changes necessary due to the issuance of authoritative guidance since the guide was originally issued and other revisions as deemed appropriate. Relevant attestation guidance issued through September 1, 2022, has been considered in the development of this edition of the guide. This means that in updating this guide, all guidance issued up to and including SSAE No. 22, Review Engagements, was considered, but not necessarily incorporated, as determined based on applicability.

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Various New Editions of AICPA Guides Published

Engagements on Sustainability Information –New Edition of AICPA Audit and Accounting Guide Published

The AICPA has published a new edition of its Audit and Accounting Guide, Attestation Engagements on Sustainability Information (Including Greenhouse Gas Emissions Information and Climate-Related Financial Disclosures) (Updated As of December 1, 2022). This new edition has been developed by the AICPA Auditing Standards Board (ASB) Sustainability Task Force to assist practitioners in performing and reporting on their attestation engagements that address an entity’s sustainability information.

Risk Assessment –New Edition of AICPA Audit and Accounting Guide Published

The AICPA has published a new edition of its Audit and Accounting Guide, Risk Assessment in a Financial Statement Audit (Updated As of January 1, 2023). This new edition has been developed under the supervision of the AICPA Risk Assessment Audit Guide Task Force. The purpose of the guide is to help practitioners fulfill their responsibilities for identifying and assessing risks of material misstatement in a financial statement audit that is performed in accordance with generally accepted auditing standards (GAAS) as established by the ASB. GAAS established by the ASB are applicable to audits of non-issuers. Audits of non-issuers are audits of the financial statements of those entities not subject to the oversight authority of the PCAOB (that is, entities not within its jurisdiction).

Noncompliance with Laws –New AICPA Q&A Published

The AICPA has published Q&A Section 90: Responding to Noncompliance With Laws and Regulations. This Q&A provides guidance on whether the new "Responding to Noncompliance With Laws and Regulations" interpretations under the “Integrity and Objectivity Rule” (ET sec. 1.180.010 and 2.180.010) general guidance or do they impose specific responsibilities when a member becomes aware of noncompliance with laws and regulations (NOCLAR) or suspected NOCLAR?

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Auditing Standards –AICPA Publishes Update to U.S. Auditing Standards

Summary - The AICPA has published updated U.S. Auditing Standards. This update adds Interpretation No. 1, “Considerations Related to the Use of a SOC 2® Report in an Audit of a User Entity’s Financial Statements” (AU-C sec. 9402 par. .01–.05), of AU-C section 402, Audit Considerations Relating to an Entity Using a Service Organization.

This update also amends the following sections due to the effective dates of Statement on Auditing Standards (SAS) Nos. 142, Audit Evidence (AU-C sec. 500), and 148, Amendment to AU-C Section 935:

AU-C section 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards ;
AU-C section 230, Audit Documentation ;
AU-C section 315A, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement ;
AU-C section 330, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained ;
AU-C section 501A, Audit Evidence — Specific Considerations for Selected Items ;
AU-C section 530, Audit Sampling ;
AU-C section 540A, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures; and
AU-C section 935, Compliance Audits .
This update also adds AU-C section 935A to retain currently effective guidance until SAS No. 148 becomes fully effective.

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Quality Control –AICPA Issues Exposure Draft for Standard on Criteria for Quality Control Materials

Summary - The AICPA’s Assurance Services Executive Committee (ASEC) issued the Exposure Draft, Proposed Criteria for a Description of the Content of Quality Control Materials (QCM) and the Content of QCM Related to the Relevant Standards and Interpretive Guidance. Comments are due by December 15, 2022.

The new Exposure Draft was developed by ASEC and the Quality Control Materials Tax Force of the AICPA Peer Review Board (Task Force). As noted in the Explanatory Memorandum, the Exposure Draft “presents proposed criteria for measuring or evaluating . . . a description of the content of quality control materials (QCM), . . . referred to as QCM description criteria,” and “the content of QCM as it relates to the relevant standards and interpretive guidance, . . . referred to as QCM content criteria.“ The Exposure Draft refers to the QCM description criteria and content criteria together as the QCM criteria.

The Exposure Draft indicates that the proposed criteria will be used to evaluate QCM content in a new assertion-based examination to be performed under the Statements on Standards for Attestation Engagements (SSAEs). Although the proposal does not require this, a QCM provider, including a CPA firm, may enter into an engagement with a practitioner to examine its QCM content as it relates to the relevant standards and interpretive guidance. ASEC and the Task Force intend the examination to assist CPA firms using QCM and their peer reviewers to address the risks associated with the use of QCM and monitor their practices.

The proposal helps the user firm address those risks and monitor its practice with a provision to permit a user firm to request that a QCM provider supply a practitioner’s report on “whether the QCM are in accordance with suitable criteria for the evaluation of the content of QCM related to the relevant standards and interpretive guidance.” ASEC and the Task Force intend the QCM criteria to provide such suitable criteria.

If adopted as proposed, the QCM description criteria and QCM content criteria would be effective when issued.

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Revenue Recognition –New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Revenue Recognition. This AICPA Audit and Accounting Guide has been developed by the AICPA Industry Revenue Recognition Task Forces, Revenue Recognition Working Group, and Auditing Revenue Task Force, to assist practitioners in performing and reporting on their audit engagements and to assist management in the preparation of their financial statements in accordance with U.S. generally accepted accounting principles (GAAP).

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Analytical Procedures –New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Analytical Procedures. This AICPA guide has been developed by the AICPA Analytical Procedures Working Group to assist practitioners in performing and reporting on their audit engagements. This guide includes illustrations that demonstrate the importance of forming expectations and considering the precision of the expectation, two of the most misunderstood concepts when applying analytical procedures.

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Audit Risk –New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Assessing and Responding to Audit Risk in a Financial Statement Audit (Updated As of October 1, 2016). This AICPA Audit Guide has been developed under the supervision of the AICPA Risk Assessment Audit Guide Task Force. The purpose of the guide is to help practitioners fulfill their responsibilities for assessing risk in a financial statement audit that is performed in accordance with GAAS as established by the AICPA Auditing Standards Board.

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Cybersecurity Risk Management –New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Cybersecurity Risk Management (Updated As of May 1, 2017). This guide has been developed by the AICPA’s Assurance Services Executive Committee (ASEC) Cybersecurity Working Group, in conjunction with the Auditing Standards Board (ASB), to assist practitioners engaged to examine and report on an entity’s cybersecurity risk management program.

This guide provides guidance to practitioners engaged to examine and report on an entity’s cybersecurity risk management program. In April 2016, the ASB issued SSAE No. 18, Attestation Standards: Clarification and Recodification, (AICPA, Professional Standards), which includes AT-C section 105A and AT-C section 205, Examination Engagements.

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Employee Benefit Plans –New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Employee Benefit Plans (Updated As of August 1, 2022). This AICPA Audit and Accounting Guide has been developed by the AICPA Employee Benefit Plans Expert Panel, the Guide Overhaul Task Force and the Employee Benefit Plans Guide Task Force to assist practitioners in performing and reporting on their audit engagements and to assist management of employee benefit plans in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles (GAAP).

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Oil and Gas Producing Activities –New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Entities with Oil and Gas Producing Activities - Clarified (Updated As of August 1, 2018). This AICPA Audit and Accounting Guide has been developed by the AICPA Entities With Oil and Gas Producing Activities Task Force to assist practitioners in performing and reporting on their audit engagements and to assist management in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles (GAAP).

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Compliance Attestation –AICPA Publishes Interpretation

Summary - The AICPA Auditing Standards Board has issued Attestation Engagement Interpretation No. 1, “Examination and Review Engagements on Subject Matter Measured or Evaluated in Accordance With Criteria Specified in Laws, Regulations, Rules, Contracts, or Grants," of AT-C section 315, Compliance Attestation, in AICPA Professional Standards.

Interpretation No. 1 addresses whether a practitioner is required to perform an engagement in accordance with AT-C section 315 when either the:

Measurement or evaluation criteria are specified in a law, regulation, rule, contract, or grant; or
Assertion relates to the responsible party’s measurement or evaluation in accordance with such criteria.

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Business Combinations –AICPA Publishes Working Draft of Business Combinations Accounting and Valuation Guide

Summary - The AICPA has published for public comment a working draft of its Accounting and Valuation Guide, Business Combinations. This guide provides guidance and illustrations for preparers of financial statements, independent auditors, and valuation specialists regarding the accounting and valuation considerations for business combination transactions.

This guide addresses many accounting and valuation issues that have emerged over time to assist companies in addressing the challenges associated with accounting for business combination transactions as well as valuation of assets acquired and liabilities assumed.

Comments on this working draft should be provided by January 15, 2023.

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Peer Reviews –AICPA Proposes Update and Technical Corrections to Peer Review Standards

The AICPA has proposed for public comment an Exposure Draft, Proposed Peer Review Standards Update No. 1, Omnibus Enhancements and Technical Corrections. This proposal includes updates and technical corrections to be applied to the AICPA Standards for Performing and Reporting on Peer Reviews that are issued by the AICPA Peer Review Board.

Comments on the proposal are due by January 31, 2023.

Employee Benefit Plans –New Edition of AICPA Employee Benefit Plans: Best Practices in Presentation and Disclosure Published and;

State and Local Governments –New Editions of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of Employee Benefit Plans: Best Practices in Presentation and Disclosure. This publication provides illustrative disclosures for financial statements of employee benefit plans. It has been issued by the AICPA and is intended to provide practitioners with nonauthoritative practical guidance on such disclosures.

Among other things, this publication has been updated to reflect the following:

Illustrative disclosures in accordance with ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement; and
Illustrative auditor’s reports in accordance with SAS No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, as amended (AU-C sec. 703).

The AICPA has published a new edition of its Audit and Accounting Guide, State and Local Governments. Featuring insights and best practices for some of the more complex areas such as leases, fiduciary activities, pensions and postemployment benefits other than pensions (OPEB), this authoritative guide provides complete coverage of audit and accounting considerations critical for both preparers and auditors.

This edition of the guide includes a new chapter that addresses accounting and financial reporting standards for leases for both lessees and lessors and auditing considerations for lessees. This chapter is designed to provide readers with an overview of the accounting and practical application of the lease guidance under GASB Statement No. 87, Leases, as amended. The chapter also addresses auditing considerations for lessees. Although no specific audit guidance is included for lessors, the audit guidance for lessees may be adapted as appropriate for lessors.

The guide has also been updated for the following guidance:

GASB Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period;
GASB Statement No. 91, Conduit Debt Obligations;
GASB Statement No. 92, Omnibus 2020;
GASB Statement No. 93, Replacement of Interbank Offered Rates;
GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements;
GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans — an amendment of GASB Statements No. 14 and No. 84, and a supersession of
GASB Statement No. 32; and
GASB Statement No. 98, The Annual Comprehensive Financial Report.

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Information System Services –AICPA Issues New TQAs on Information Systems Services

Summary - The AICPA has issued additional Technical Questions and Answers (TQAs) under Section 250, Nonattest Services — Information Systems Services. TQA Section 250 includes nonauthoritative guidance in question and answer format provided by the AICPA’s Professional Ethics Division Staff on whether various types of information system services outsourced to a member by an attest client would result in the member assuming a level of managerial responsibility for the client that would impair independence.

The new TQAs include the following:

TQA section 250.02, “IT Help Desk;”
TQA section 250.03, “Hypercare;” and
TQA section 250.04, “IT Network Maintenance and Updates.”

TQA section 250.02, “IT Help Desk,” asks whether a member operating or managing an attest client’s information technology (IT) help desk results in the member assuming a level of management responsibility that impairs independence. The reply lists factors based on the activities and the level of responsibility and decision-making undertaken by the member that would threaten independence. Section 250.02 also provides a table of examples of “activities that indicate that the member’s professional services related to performing network maintenance (such as updating virus protection solutions, applying routine updates and patches, or configuring user settings) will or will not result in the member assuming a management responsibility.”

TQA section 250.03, “Hypercare,” discusses whether “postproduction stabilization support (that is, hypercare)” is “considered an implementation service or post-implementation service” and whether the services provided impair independence. The guidance notes that hypercare should last for “only a reasonably short period of time” depending on the scope and complexity of the implemented system. The member should use professional judgment determining what a reasonable period of time would be considering the specific client and software. Providing hypercare for a commercial off-the-shelf financial information system software solution would not impair independence, assuming all the nonattest services requirements are met.

TQA section 250.04, “Network Maintenance and Updates,” discusses the impairment of independence if the member is responsible for performing ongoing network maintenance and what a member should consider when evaluating whether the particular services provided would involve the member assuming management responsibilities. The answer provides a table with examples of activities that will or will not result in the member assuming a management responsibility of the client.

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Life and Health Insurance Entities – New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Life and Health Insurance Entities. This guide was developed by the former Insurance Companies Committee and the Life Insurance Audit Guide Task Force to assist practitioners in performing and reporting on their audit engagements, and to assist management in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles (GAAP) and statutory accounting practices.

This guide is being updated due to the revision of appendix A, “FASB ASU No. 2018-12, Financial Services: Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, Accounting Implementation Papers.” The implementation issue, Market Risk Benefits: Measurement Considerations, has been added.

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Tax Standards – AICPA Proposes Revisions to Tax Standards

Summary - The AICPA has released an Exposure Draft proposing revisions to its Statements on Standards for Tax Services (SSTSs) and an Invitation to Comment (ITC). The comment deadline is December 31, 2022.

The proposed changes to the SSTSs include revisions to the existing standards as well as three new standards. Additionally, the invitation to comment requests feedback on the subject of quality management in tax. The combined document is divided into two separate sections, with the exposure draft of the proposed new standards in part one, and the invitation to comment on the subject of quality management in tax in part two.

Part One: Proposed New Standards

If adopted as proposed, in addition to inclusion of three new standards, the amendments to the SSTSs would reorganize the tax standards to provide what the Exposure Draft describes as “a new practice-based organizational structure for the standards.” The Exposure Draft sets out this new framework as follows:

Standard 1, which provides “general tax guidance,” including “new standards on data protection and reliance on tools;”
Standard 2, which “includes tax return preparation guidance;”
Standard 3, which provides guidance relating to provision of tax advice; and
Standard 4, which is a new standard for “members providing tax representation services.”

Part Two: Invitation to Comment

The ITC includes proposals for quality management in tax practice. The introduction to the ITC notes that discussions on the topic gave rise to a “resonating theme … defined as a proactive, risk-based, scalable approach to ensure that an individual or firm possesses the necessary competence to practice.”

The ITC is separate from the proposed SSTSs and has been issued for consideration and discussion. The proposals in the ITC are not expected to be adopted with the proposed SSTS amendments, because of the likelihood that they will require additional research and investigation, depending on the comments received.

Effective Date for SSTS Amendments

The AICPA expects that the proposed SSTSs, if adopted, will be approved by May 31, 2023, and effective January 1, 2024.

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Government Auditing Standards and Single Audits – New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Government Auditing Standards and Single Audits. This guide addresses the auditor's responsibilities when conducting an audit of financial statements in accordance with Government Auditing Standards and provides guidance on the auditor's responsibilities when conducting a single audit or program-specific audit in according with the Single Audit Act and the Uniform Guidance.

This edition also includes a new Disclaimer of Opinion on Compliance report. Additionally, “COVID-19 Considerations” boxes have been placed throughout the chapters in this guide in order to alert you to pandemic related considerations.

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Health Care Entities –New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Health Care Entities. This guide has been developed by the AICPA Health Care Expert Panel and the AICPA Health Care Audit and Accounting Guide Overhaul Task Force to assist practitioners in performing and reporting on their audit engagements and to assist management in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles (GAAP).

This edition of the guide has been revised by AICPA staff to include certain changes necessary due to the issuance of authoritative guidance since the guide was originally issued, and other revisions as deemed appropriate. Relevant guidance issued through September 1, 2021, has been considered in the development of this edition of the guide. However, this guide does not include all audit, accounting, reporting, regulatory, and other requirements applicable to an entity or a particular engagement. This guide is intended to be used in conjunction with all applicable sources of relevant guidance.

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Not-for-Profit Entities – New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Not-for-Profit Entities. This guide has been developed by the AICPA Not-for-Profit Entities Expert Panel and Guide Task Force to assist practitioners in performing and reporting on their audit engagements and to assist management of not-for-profit entities (NFPs) in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles (GAAP).

This edition of the guide has been modified by AICPA staff to include certain changes necessary due to the issuance of authoritative guidance since the guide was originally issued (March 1, 2013, edition) and other revisions as deemed appropriate. Relevant guidance issued through March 1, 2022, has been considered in the development of this edition of the guide. However, this guide does not include all audit, accounting, reporting, regulatory, and other requirements applicable to an entity or a particular engagement. This guide is intended to be used in conjunction with all applicable sources of relevant guidance.

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New Edition of AICPA Guides Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Health Care Entities. This new edition contains minor editorial changes.

The AICPA has published a new edition of its practice aid, Accounting for and Auditing of Digital Assets. The objective of this practice aid is to develop nonauthoritative guidance on how to account for and audit digital assets under U.S. generally accepted accounting principles (GAAP) and generally accepted auditing standards (GAAS), respectively. This guidance is intended for financial statement preparers and auditors with a fundamental knowledge of blockchain technology.

The AICPA has published a new edition of its Audit and Accounting Guide, Not-for-Profit Entities. This resource for not-for-profit accounting and auditing professionals is an essential reference which will assist you with the distinctive aspects of accounting and financial statement preparation and auditing for not-for-profit entities.

This new edition of the guide includes updates on the following topics:

Auditor reporting changes;
Statement on Auditing Standards (SAS) No. 142, Audit Evidence (AU-C sec. 500);
SAS No. 143, Auditing Accounting Estimates and Related Disclosures (AU-C sec. 540);
SAS No. 145, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (AU-C sec. 315);
Leases; and
Revenue recognition.

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Beneficial Owners –AICPA Ethics Division Proposes Revisions Related to Officers, Directors, and Beneficial Owners

Summary - The PEEC recently revised certain Ethics Code interpretations “to update the threshold that defines where threats exist with ownership interests.” The Exposure Draft, Proposed Revisions Related to Officers, Directors, and Beneficial Owners”, proposes revisions to additional Interpretations to align with the updated threshold. These include revision to the Interpretations:

“Offering or Accepting Gifts or Entertainment” (ET sec. 1.120.010);
“Offering or Accepting Gifts or Entertainment” (ET sec. 1.285.010); and
“Conceptual Framework for Members in Public Practice” (ET sec. 1.000.010).

Comments on this Exposure Draft are due July 5, 2022. The PEEC recommends that these proposed amendments be effective on December 31, 2022, with early implementation permitted. This effective date “aligns the effective date of these revisions with the effective date of revisions from the loans, acquisitions, and other transactions project.”

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Auditing Standards Board – ASB Meeting Held

Summary - The Auditing Standards Board (ASB) met on March 9, 2022, and voted to issue one Statement on Auditing Standards (SAS) for public exposure and one SAS as a final standard. The ASB unanimously voted to issue for public exposure proposed SAS, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors and Audits of Referred-to Auditors). While the proposed SAS is based on the draft of International Standard on Auditing (ISA) 600 (Revised), Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors) that was discussed and approved at the International Auditing and Assurance Standards Board’s December 2021 meeting, unlike ISA 600, the proposed SAS would continue to allow the group auditor to choose to make reference to the report of another auditor. The proposed SAS defines such auditors as “referred-to auditors.” Referred-to auditors are not component auditors and are not members of the engagement team. The exposure draft is expected to be issued by early April 2022 and will have a 90-day comment period.

The ASB members present unanimously voted to issue as a final SAS, Inquiries of the Predecessor Auditor Regarding Fraud and Noncompliance with Laws and Regulations. This SAS amends generally accepted auditing standards with respect to communication requirements between predecessor and successor auditors about: (1) identified or suspected fraud; and (2) matters involving noncompliance or suspected noncompliance with laws and regulations. The amendments align with revisions to the Code of Professional Conduct regarding responding to noncompliance with laws and regulations recently adopted by the Professional Ethics Executive Committee. Consistent with the effective date of the Code revisions, the new SAS will have an effective date for audits of financial statements for periods beginning on or after June 30, 2023.

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Group Audits – AICPA’s ASB Issues Proposal on Group Audits

Summary - The AICPA’s Auditing Standards Board has issued the Exposure Draft, Proposed Statement on Auditing Standards, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors and Audits of Referred-to Auditors). The comment deadline is June 21, 2022.

The ASB has issued this Exposure Draft as part of its efforts to converge its auditing and other standards with those of the International Auditing and Assurance Standards Board (IAASB). The ASB has drafted this Exposure Draft to converge with the IAASB’s International Standard on Auditing (ISA) 600, Special ConsiderationsâŽ¯Audits of Group Financial Statements (Including the Work of Component Auditors) (ISA 600 [Revised]). The ASB decided to converge their group audit standard with that of the IAASB because the ASB “believes that the issues that led the IAASB to revise its standards are of equally critical importance in the United States. [and] . . . for firms that perform engagements in accordance with standards of the IAASB and the ASB, complying with fundamentally different group audit standards is not feasible.”

The Exposure Draft

According to the ASB, the proposed SAS, if adopted as final, would strengthen the auditor’s approach to planning and performing a group audit and to improve the quality of group audits by:

Requiring that all applicable AU-C sections be applied in a group audit engagement;
Including subsections of each section of the proposed SAS that describe the requirements that apply when component auditors are involved; and
Providing greater clarity on the scope and applicability of the proposed SAS, including through enhancements to the definition of group financial statements.

Among other provisions, the proposed standard would supersede SAS No. 122, Statements on Auditing Standards: Clarification and Recodification, as amended, section 600, Special Considerations âŽ¯ Audits of Group Financial Statements (Including the Work of Component Auditors). It would also amend other SASs to conform to the group audits standard.

Proposed Effective Date

The Exposure Draft provides that the SAS, if adopted as proposed, “would be effective for audits of group financial statements for periods ending on or after December 15, 2026.”

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Ethics –AICPA’s PEEC Publishes New Interpretation on Assisting Attest Clients with Implementing Accounting Standards

Summary - The AICPA’s Professional Ethics Executive Committee (PEEC) has published a new Interpretation, Assisting Attest Clients With Implementing Accounting Standards. This new interpretation provides guidance on when an AICPA member assists an attest client with planning and executing the implementation of an accounting standard and possible impacts to compliance with the Independence Rule.

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Unpaid Fees –AICPA’s PEEC Publishes New Edition of Interpretation on Unpaid Fees

Summary - The AICPA’s PEEC has published a new edition of its Interpretation, Unpaid Fees. This new edition provides guidance on the existence of unpaid fees related to an attest client and possible impacts to compliance with the Independence Rule.

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Noncompliance with Laws and Regulations –AICPA’s PEEC Publishes New Interpretation on Attest Clients Noncompliance with Laws and Regulations

Summary - The AICPA’s PEEC has published a new Interpretation, Noncompliance with Laws and Regulations. This new interpretation provides guidance on an attest clients noncompliance with laws and regulations and possible impacts to compliance with the Independence Rule.

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Loans –AICPA’s PEEC Publishes New Edition of Interpretation on Loans, Acquisitions and Other Transactions

Summary - The AICPA’s PEEC has published a new edition of its Interpretation, Loans, acquisitions, and other transactions. This new edition provides guidance on loans, acquisitions, and other transactions with attest clients and possible impacts to compliance with the Independence Rule.

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Life and Health Insurance Entities –New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Life and Health Entities. This guide was developed by the former Insurance Companies Committee and the Life Insurance Audit Guide Task Force to assist practitioners in performing and reporting on their audit engagements, and to assist management in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles (GAAP) and statutory accounting practices.

This edition of the guide has been revised by AICPA staff to include certain changes necessary due to the issuance of authoritative guidance since the guide was originally issued and other revisions as deemed appropriate. Relevant guidance issued through October 1, 2021, has been considered in the development of this edition of the guide. However, this guide does not include all audit, accounting, reporting, and other requirements applicable to an entity or a particular engagement. This guide is intended to be used in conjunction with all applicable sources of relevant guidance.

Relevant guidance that is issued and effective for entities with fiscal years ending on or before October 1, 2021, is incorporated directly in the text of this guide. Authoritative guidance issued but not yet effective as of October 1, 2021, but becoming effective on or before December 31, 2021, is also presented directly in the text of the guide, but shaded gray and accompanied by a footnote indicating the effective date of the new guidance. The distinct presentation of this content is intended to aid the reader in differentiating content that may not be effective for the reader’s purposes (as part of the guide’s dual guidance treatment of applicable new guidance).

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General Ethics – AICPA Publishes FAQs on General Ethics

Summary - The AICPA has published Frequently Asked Questions (FAQs), General Ethics. The answers to these FAQs are based on guidance the AICPA Professional Ethics Division staff provided in response to members’ inquiries. The FAQs are not rules, regulations, or statements of the Professional Ethics Executive Committee and, therefore, are not authoritative guidance.

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Compliance Audits Standards – AICPA’s ASB Proposes Amendments to Compliance Audits Standard

Summary - The Auditing Standards Board (ASB) of the AICPA has issued the Exposure Draft, Proposed Statement on Auditing Standards (SAS) Amendment to AU-C Section 935, to amend SAS No. 935, Compliance Audits. The comment deadline is May 16, 2022. As noted in the Background memorandum to the Exposure Draft, “AU-C sections 200-900 address audits of financial statements as well as other kinds of engagements” and “can be adapted to the objectives of a compliance audit.”

On the other hand, “certain AU-C sections, or portions thereof, are not applicable to a compliance audit because (a) they are not relevant to a compliance audit environment, (b) the procedures and guidance would not contribute to meeting the objectives of a compliance audit, or (c) the subject matter is specifically covered in AU-C section 935.” The Appendix to AU-C section 935 identifies the AU-C sections that are generally not applicable to compliance audits.

The new SAS, if adopted as proposed, would amend AU-C section 935 to update the Appendix and conform the Compliance Audit standard with SAS 142, Audit Evidence, and SAS 145, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement. If adopted as proposed, the proposed amendments in this Exposure Draft relating to AU-C section 501, Audit Evidence — Specific Considerations for Selected Items, would align with the effective date for SAS 142 and would be effective for compliance audits for fiscal periods ending on or after December 15, 2022.

All other proposed amendments would be effective for compliance audits for fiscal periods ending on or after December 15, 2023. Early implementation would be permitted.

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Digital Assets – New Edition of AICPA’s Practice Aid: Accounting for and Auditing of Digital Assets Published

Summary - The AICPA has published a new edition of its Practice Aid, Accounting for and Auditing of Digital Assets Published. The objective of this practice aid is to develop nonauthoritative guidance on how to account for and audit digital assets under U.S. generally accepted accounting principles (GAAP) for nongovernmental entities and generally accepted auditing standards, respectively. This guidance is intended for financial statement preparers and auditors with a fundamental knowledge of blockchain technology.

Digital assets and the associated underlying technology are an evolving area, and the expectations and experiences of stakeholders such as preparers, auditors, and regulators may change accordingly. Therefore, questions, examples, challenges, risks, considerations, and potential procedures listed in this practice aid should not be considered exhaustive. Preparers, auditors, and those charged with governance need to stay abreast of developments and consider the implications of those developments.
The guidance in this practice aid is based on existing professional literature and the experience of members of the Digital Assets Working Group. This nonauthoritative guidance represents the views of the Digital Assets Working Group and AICPA staff. This publication is not approved, disapproved, or otherwise acted on by the Auditing Standards Board, the membership, or the governing body of the AICPA, and is not an official pronouncement of the AICPA.

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Health Care Entities – AICPA Issues New TQA for Health Care Entities on Accounting for Earmarked Free Items

Summary - The AICPA has issued an additional Technical Questions and Answer (TQA) under Section 6400, Health Care Entities, .71, “Accounting by a Recipient Entity for Vaccines or Other Pharmaceuticals, Medical Supplies, or Equipment Received for Distribution to Specified Patients.”

TQA Section 6400, Health Care Entities, includes guidance in the form of questions and answers for practitioners in application of FASB standards by hospitals, physician’s offices, and other health care providers and entities.

New TQA section 6400.71 “pertains to the accounting used by health care entities for the receipt of vaccines or other pharmaceuticals, medical supplies, or equipment in such circumstances.” It does not, however, address the accounting related to conditional contributions or to the dispensing of the vaccines or other pharmaceuticals, medical supplies, or equipment.

The TQA asks whether a health care entity that receives items free of charge to dispense to specified patients should recognize the fair value of the items within their financial statements. As noted in the Background discussion, health care entities may receive pharmaceuticals or other items from resource providers to distribute to patients participating in right-to-try programs, clinical trials, prescription assistance programs, or other programs designed to distribute pharmaceuticals to a specified patient or patients free of charge. Under these arrangements, the health care entity is not permitted to dispense the items to other than the specified patients. These arrangements also typically require return of the items to the resource provider if they cannot be dispensed to the specified patients.

The appropriate accounting for the items depends on a number of factors, including whether the recipient health care entity is a for-profit or not-for-profit entity, the relationship between the health care entity and the specified beneficiary, and whether the entity has the unilateral power to redirect the use of the transferred assets to another beneficiary.

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Presentation and Disclosure –AICPA Publishes 2021 Edition of Best Practices in Presentation and Disclosure Publication

Summary - The AICPA has published the 2021 edition of U.S. GAAP Financial Statements — Best Practices in Presentation and Disclosure. This publication provides reporting and disclosure examples from real world financial statements, providing accounting professionals with an invaluable resource for incorporating new and existing accounting and reporting guidance into financial statements using presentation techniques adopted by companies across numerous industries, all of which are headquartered in the United States.

This new edition surveyed annual reports of 350 entities of various sizes representing over 100 industries with fiscal periods ending between January and December 2020.

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