AICPA - Page 1

Summary - The AICPA has published the 2021 edition of its Audit and Accounting Guide, Prospective Financial Information. This authoritative guide assists with interpreting and applying the guidance related to prospective financial information, including Statement on Standards for Attestation Engagements No. 19, Agreed-Upon Procedures Engagements, and Statement on Standards for Accounting and Review Services No. 25, Materiality in a Review of Financial Statements and Adverse Conclusions. This resource provides interpretive guidance and implementation strategies for all preparation, compilation examination and agreed upon procedures on prospective financial information.

Key benefits and updates include the following:

Exposes potential pitfalls in the practice and helps with establishing proven best-practices.
Provides practical tools and resources to assist with compliance with the latest regulations.

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Accounting and Review Services – Accounting and Review Services Committee Meeting Highlights Published

The AICPA’s Accounting and Review Services (ARSC) Committee has published highlights from its June 11, 2020 meeting. Topics discussed included:

Communications with predecessor auditors; and
Open discussion on issues related to SSARs engagements.

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Agreed-Upon Procedures – New Edition of GAAS Update Service Discusses AT-C Section 215

We have published a new edition of the GAAS Update Service that discusses Statement on Standards for Attestation Engagements (SSAE) No. 19, Agreed-Upon Procedures Engagements, which is codified in AT-C Section 215 of the same name in AICPA Professional Standards, addresses the practitioner’s performance and reporting obligations when conducting an agreed-upon procedures engagement in accordance with the attestation standards. AT-C Section 215 is effective for agreed-upon procedures reports dated on or after July 15, 2021, with early implementation permitted.

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Preparation, Compilation, and Review Engagements – Knowledge-Based Preparation, Compilation, and Review Engagements Published

We have published the 2020-2021 edition of Knowledge-Based Preparation, Compilation, and Review Engagements. This new edition is organized to enable those performing any one of the SSARS engagements to do so without referring to standards related to the other engagements conducted under SSARS. This publication incorporates the provisions of SSARS 25, Materiality in a Review of Financial Statements and Adverse Conclusions - 2020.

SSARS 25 is effective for engagements performed in accordance with SSARSs for periods ending on or after December 15, 2021. Early implementation is permitted. If the user is not implementing the provisions of SSARS 25, the previous edition of this guide should be used.

standards recently issued by the AICPA.

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Checklist – New Edition of AICPA Professional Standards Checklist Published

We have published a new edition of our “Summary Checklist of Recent Authoritative AICPA Professional Standards" to reflect the issuance of SAS 142, Audit Evidence, and SAS 143, Auditing Accounting Estimates and Related Disclosures.
This new edition of the checklist is intended to serve as a reference to review those engagement and other related authoritative standards recently issued by the AICPA.

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Auditor Reporting – New Edition of GAAS Update Service Discusses SAS 139

We have published a new edition of the GAAS Update Service that discusses practice issues relating to AU-C Sections 800, 805, and 810, as a result of Statement on Auditing Standards (SAS) No. 139, Amendments to AU-C Sections 800, 805, and 810 to Incorporate Auditor Reporting Changes From SAS No. 134.

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Audit Evidence – AICPA Releases New Evidence Standard

Summary - The Auditing Standards Board (ASB) of the AICPA has issued its new evidence standard, Statement on Auditing Standards No. (SAS) 142, Audit Evidence. The SAS modernizes private company auditing standards by recognizing the critical value technology and information bring to today’s audit procedures.

“Our substantially revised standard addresses the evaluation of audit evidence and has been modernized to reflect our current business environment,” said Bob Dohrer, AICPA Chief Auditor. “It recognizes the use of automated tools and techniques such as audit data analytics, AI and remote observation tools to obtain audit evidence.”

What SAS 142 Does

New SAS 142 addresses the evolving nature of business, audit services and issues that have arisen since the ASB originally issued existing AU-C Section 500, Audit Evidence. The standard addresses:

Emerging technologies used by both preparers and auditors;
The application of professional skepticism;
The expanding sources of information to be used as audit evidence; and
The accuracy, completeness, relevance and reliability of audit evidence.

SAS 142 enhances’ the auditor’s assessment of whether sufficient and appropriate audit evidence has been obtained and establishes a multi-faceted consideration of attributes and factors in evaluating such audit evidence. It will primarily amend AU-C Section 500 in AICPA Professional Standards.

“The new standard is based on the premise that the auditor should evaluate information to be used as audit evidence notwithstanding the source from which it is obtained, or the procedures used to obtain the information,” explained Dohrer. “New attributes of information for the auditor to consider include, whether the information is corroborative or contradictory to management assertions, the authenticity of the evidence and its susceptibility to bias.”

Effective Date

SAS 142 will be effective for audits of financial statements for periods ending on or after December 15, 2022.

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Credit Losses – New Edition of AICPA Audit and Accounting Guide on Credit Losses

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Credit Losses. This new edition has been developed by the AICPA Current Expected Credit Losses 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).

Specifically, this guide is intended to help entities and auditors prepare for changes related to credit loss as a result of FASB Accounting Standards Update (ASU) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent ASUs amending FASB Accounting Standards Codification (ASC) 326, Financial Instruments—Credit Losses.

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Auditing Standards – AICPA Adds New Pre-SAS 134 to Auditing Standards

Summary - The AICPA’s Auditing Standards Board (ASB) has added to the AICPA Professional Standards a new section, Pre-SAS No. 134 U.S.Auditing Standards — AICPA (Clarified) [AU-C]. The ASB added this new section to assist auditors and firms that do not implement SAS Nos. 134-140 before December 15, 2021.

SAS 134

The ASB adopted SAS 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, in May 2019. Since that time, it has adopted several additional related auditing standards, SAS Nos. 135-140. SAS Nos. 134-140 also included amendments to other SASs, including Nos. 122–133, as amended.

As adopted, SAS Nos. 134, 136, 137, 139, and 140 and the amendments made by them had effective dates for audits of financial statements for periods ending on or after December 15, 2020. Further, SAS 134, 136-137 and 139-140 as issued did not permit early implementation.

To assist practitioners in compliance given the issues involved in the COVID-19 pandemic, the ASB adopted SAS No. 141, Amendment to the Effective Dates of SAS Nos. 134-140. SAS-141 provides a one-year deferral of the effective dates of the recently issued auditing standards due to the COVID-19 pandemic. SAS Nos. 134 through 140 and the amendments made to other standards are now effective for periods ending on or after December 15, 2021.

Pre-SAS No. 134

Not all auditors and firms plan to implement SAS Nos. 134-140 before December 15, 2021, and the ASB has released Pre-SAS No. 134 to assist them. New section Pre-SAS No. 134 includes SAS Nos. 122–133 and remains effective through 2021. Auditors and firms should follow these provisions when they have not implemented SAS Nos. 134–140.

Because the new section retains currently effective guidance, each AU-C section in it is designated with a “B” suffix (for example, “AU-C section 200B”) to denote content that does not reflect the codification of SAS Nos. 134–140 or the amendments to other SASs made by SAS Nos. 134–140.

We have updated the following AU-C sections for this new “B” suffix:

Section 260B: The Auditor’s Communication with Those Charged with Governance
Section 585B: Consideration of Omitted Procedures After the Report Release Date
Section 600B: Special Considerations - Audits of Group Financial Statements (Including the Work of Component Auditors)
Section 800B: Special Considerations - Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks
Section 805B: Special Considerations - Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement
Section 806B: Reporting on Compliance with Aspects of Contractual Agreements or Regulatory Requirements in Connection with Audited Financial Statements
Section 810B: Engagements to Report on Summary Financial Statements
Section 905B: Alert That Restricts the Use of the Auditor’s Written Communication
Section 910B: Financial Statements Prepared in Accordance with a Financial Reporting Framework Generally Accepted in Another Country
Section 920B: Letters for Underwriters and Certain Other Requesting Parties
Section 930B: Interim Financial Information

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Auditing Standards – ASB to Vote to Extend Effective Dates

Summary - The AICPA’s Accounting Standards Board (ASB) will meet by teleconference on Monday, April 20, 2020 from 2:00 – 4:00 p.m. (EDT).

As the sole item on the agenda, the ASB will discuss and vote to ballot to issue as a final standard Statement on Auditing Standards (SAS) No. 141, Amendment to the Effective Date of SAS Nos. 134 Through 140.

Recent Auditor Reporting Standards:
In background, the ASB agenda discussion paper discusses the recently issued auditor reporting standards that have effective dates for audits of financial statements for periods ending on or after December 15, 2020. These include:

SAS 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, as amended;

SAS 135, Omnibus Statement on Auditing Standards—2019;
SAS 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, as amended;
SAS 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports;
SAS 138, Amendments to the Description of the Concept of Materiality;
SAS 139, Amendments to AU-C Sections 800, 805, and 810 to Incorporate Auditor Reporting Changes From SAS No. 134; and
SAS 140, Amendments to AU-C Sections 725, 730, 930, 935, and 940 to Incorporate Auditor Reporting Changes From SAS Nos. 134 and 137.

Further, SAS 134 and SAS 136 – 140 do not permit early implementation.

ASB Proposal to Defer Effective Dates:
The ASB is proposing a one-year deferral of the effective dates of recently adopted auditing standards. due to the COVID-19 pandemic. As noted in the agenda discussion, the ASB has heard from firms that regardless of when the pandemic “is declared over or social distancing restrictions are lifted, small and mid-sized firms are expected to struggle for some time with meeting payroll, layoffs, paying bills, collecting invoices, losing portions of their client base whose business simply no longer exists, keeping up with training requirements, and so on as they are small businesses in their own right.”

Given these circumstances, the ASB believes that deferring these significant standards would provide needed relief to the small firms.

Effective Date Change:
Instead of the current effective date for audits of financial statements for periods ending on or after December 15, 2020, SAS 134 through SAS 140 would be effective for audits of financial statements for periods ending on or after December 15, 2021.

In addition, SAS 141 would provide for early implementation of the standards to permit firms to proceed if they are able to do so.

The meeting will be open to observers, who must register for the call. The week of the meeting, the ASB will send dial in information to those who register.

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Auditor Reporting – AICPA Releases SAS 140 to Complete Project to Conform GAAS with Reporting Provisions in SAS 134

Summary - AICPA’s Auditing Standards Board (ASB) has issued the final Statement on Auditing Standards (SAS) No. 140, Amendments to AU-C Sections 725, 730, 930, 935, and 940 to Incorporate Auditor Reporting Changes From SAS Nos. 134 and 137. SAS 140 completes the ASB’s project to conform U.S. generally accepted auditing standards (GAAS) with the recently issued auditor reporting standards, starting with SAS 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements.

Auditor Reporting Standards:
The ASB released SAS 134, the first of the recent auditor reporting amendments, in May 2019. Since that time, it has released the following SASs with the same effective dates:

SAS No. 135, Omnibus Statement on Auditing Standards—2019 (released with SAS 134);
SAS No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA;
SAS No. 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports;
SAS No. 138, Amendments to the Description of the Concept of Materiality; and
SAS No. 139, Amendments to AU-C Sections 800, 805, and 810 to Incorporate Auditor Reporting Changes From SAS No. 134.

Amendments to Standards by SAS 140:
SAS 140 makes conforming changes to AU-C Sections 725, 730, 930, 935, and 940 to incorporate auditor reporting changes from SAS 134 through 137. The amendments also include changes to other AU-C sections in AICPA Professional Standards to reflect practice issues that have arisen since the most recent revisions to these AU-C sections. It also amends AU-C section 935, Compliance Audits, to be consistent with current governmental requirements.

Effective Dates:
Although the effective date in SAS 140, as written, is for audits of financial statements for periods ending on or after December 15, 2020. As with SASs 134 through 139, early implementation is not permitted. However, the ASB has announced that it will hold a teleconference meeting on April 14, 2020 at which it will discuss extending the effective date for the suite of auditor reporting standards, including SAS 140, for one year, and to permit early implementation of the SASs.

The ASB is expected to release an exposure draft with the proposed amendments to SAS 134 through SAS 140 later this week.

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SOC for Supply Chain –New AICPA Guide Published

Summary - This AICPA Guide, SOC for Supply Chain: Reporting on an Examination of Controls Relevant to Security, Availability, Processing Integrity, Confidentiality, or Privacy in a Production, Manufacturing, or Distribution System, has been developed by members of the SOC for Supply Chain Working Group of the AICPA Assurance Services Executive Committee (ASEC) in conjunction with members of the Auditing Standards Board (ASB).

The purpose of the guide is to assist practitioners engaged to examine and report on a system that produces, manufactures, or distributes products, including controls over one or more of the:

Security of the entity’s system;
Availability of the entity’s system;
Processing integrity of the entity’s system;
Confidentiality of the information that the entity’s system processes or maintains for customers and business partners; and
Privacy of personal information that the entity’s system collects, uses, retains, discloses, and disposes of for customers and business partners

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Auditing Standards Board – AICPA’s ASB Publishes Summary of January Meeting

Summary - The AICPA’s Auditing Standards Board (ASB) met on January 13 through 16, 2020, in San Diego, California. The ASB has issued a High Level Summary of the meeting that includes an audit and attest standards update.

Matters discussed and decisions taken at the meeting include:

Voted to ballot for issuance the final Statement on Auditing Standards (SAS), Amendments to AU-C Sections 800, 805, and 810 to Incorporate Auditor Reporting Changes from SAS No. 134, to be effective for audits of financial statements for periods ending on or after December 15, 2020, aligning it with SAS 134;
Deliberations on enhancements of the requirements on the auditor’s responsibility to communicate actual or suspected occurrences of an entity’s noncompliance with laws or regulations (NOCLAR) or fraud to successor auditors;
The proposed SAS, Audit Evidence, planned to be finalized at the ASB’s May meeting;
The project to permit direct examination and review attestation engagements; and
Other ongoing projects.

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Materiality - AICPA Amends the Description of the Concept of Materiality

Summary - The ASB issued Statement on Auditing Standards (SAS) No. 138, Amendments to the Description of the Concept of Materiality, and SSAE No. 20 of the same title, to respectively amend various AU-C and AT-C sections in AICPA Professional Standards.

The ASB’s current description of the concept of materiality is consistent with the definition of materiality used by the IASB and the International Auditing and Assurance Standards Board (IAASB). SAS 138 and SSAE 20 align the materiality concepts discussed in AICPA Professional Standards with the description of materiality used by the U.S. judicial system, the auditing standards of the PCAOB, the SEC, and the FASB.

The ASB believes “it is in the public interest to eliminate inconsistencies between the AICPA Professional Standards and the description of materiality used by the U.S. judicial system and other U.S. standard setters and regulators.”

In addition, the ASB believes that, “because the revised definition is aligned with the FASB, the revised description is substantially consistent with current U.S. firm practices with respect to determining and applying materiality in an audit or attest engagement and, accordingly, the amendments are neither expected nor intended to change U.S. practice.”

SAS 138 and SSAE 20 are effective for periods ending, or for practitioners’ examination or review reports dated, on or after December 15, 2020, respectively.

Auditing Standards – AICPA Issues Exposure Draft of Conforming Amendments to Recent Standards

Summary - The AICPA has issued the Exposure Draft, Proposed Statement on Auditing Standards: Amendments to AU-C Sections 725, 730, 930, 935, and 940. The comment deadline is February 10, 2020.

The proposal would make conforming amendments to AICPA standards for the recently adopted statements on auditing standards (SASs) on auditor reporting and the auditor’s responsibilities relating to other information included in annual reports.

The AICPA’s Auditing Standards Board (ASB) adopted SAS No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, in May 2019. SAS 134 makes important changes to the requirements for the form and content of the auditor’s report issued as a result of an audit of financial statements. In addition, SAS 134 addresses the auditor’s responsibilities to form an opinion on the financial statements.

In July, the ASB adopted SAS 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports. SAS 137 addresses the auditor’s responsibilities relating to other information (financial or nonfinancial), other than financial statements and the auditor’s report thereon, included in an entity’s annual report.
The exposure draft also includes proposed amendments to:

SAS 117, Compliance Audits, as amended (AICPA, Professional Standards, AU-C sec. 935);
SAS 119, Supplementary Information in Relation to the Financial Statements as a Whole, as amended (AICPA, Professional Standards, AU-C sec. 725);
SAS 120, Required Supplementary Information, as amended (AICPA, Professional Standards, AU-C sec. 730);
SAS 122, Statements on Auditing Standards: Clarification and Recodification, as amended, section 930, Interim Financial Information (AICPA, Professional Standards, AU-C sec. 930); and
SAS 130, An Audit of Internal Control Over Financial Reporting That Is Integrated With an Audit of Financial Statements, as amended (AICPA, Professional Standards, AU-C sec. 940).

If adopted as proposed, the amendments will be effective for periods ending on or after December 15, 2020.

Credit Losses – AICPA Issues Working Drafts on Implementation Issues for Credit Loss Standard

Summary - The AICPA’s Financial Reporting Executive Committee (FinREC) has issued three new working drafts of guidance that will be included in the AICPA’s Audit and Accounting Guides. The new working drafts provide guidance on accounting issues for Insurance Entities related to the implementation of FASB Accounting Standards Update (ASU) No. 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts, and ASU No. 2016-13, Financial Instruments-Credit Losses, – Allowance for Credit Losses. The deadline for comments is February 10, 2020 for each of the working drafts.

The new FASB accounting standard on Long-Duration Contracts makes targeted improvements to the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance company. FinREC and the AICPA Insurance Expert Panel will continue to develop working drafts on accounting implementation issues that have been identified for the new standard.

Current Expected Credit Loss, or CECL, is a new standard that will change how many companies, including financial institutions, account for expected credit losses.

The new working drafts are:

Targeted Improvements to Long-Duration Contracts Implementation Issue – Issue #2: Considerations for the Allocation of the Liability for Future Policy Benefits to Revised Units of Account at Transition to FASB ASU 2018-12, for Blocks of Business that had Loss Recognition Prior to the Transition Date;
Allowance for Credit Losses Implementation Issue (with a focus on Insurance Entities) – Issue #34: Considerations Related to ASC Topic 326: Financial Instruments - Credit Losses, for Reinsurance Recoverables; and
Allowance for Credit Losses Implementation Issue (with a focus on Insurance Entities) – Issue #44: Considerations Related to ASC Topic 326: Financial Instruments - Credit Losses, for Premiums Receivable.

The final issues for the Long-Duration Targeted Improvements project will be included in the Audit and Accounting Guide: Life and Health Insurance Entities.

The final issues for the CECL project will be included in the new AICPA Audit and Accounting Guide: Credit Losses, as well as the Audit and Accounting Guides: Life and Health Insurance Entities and Property and Liability Insurance Entities.

Digital Assets – AICPA Issues Practice Aid on Accounting for and Auditing of Digital Assets

Summary - The AICPA has issued the Practice Aid, Accounting for and Auditing of Digital Assets, which includes nonauthoritative guidance for financial statement preparers and auditors in accounting for and auditing digital assets under GAAP and GAAS.
The guidance is divided into Accounting Content and Auditing Content. At the present time, the Practice Aid includes only the Accounting Subgroup, and the Auditing Subgroup will be added when available.

As provided in the Notice to readers, for purposes of the guidance, “digital assets” are defined broadly as digital records, made using cryptography for verification and security purposes, on a distributed ledger (referred to as a blockchain).”

The guidance notes that although digital assets may be described in many terms, the accounting treatment will be determined by the specific terms, form, underlying rights, and obligations of the particular digital asset.

Some of the guidance is in question and answer format. Guidance for the Accounting Subgroup includes questions and responses on the following general topics:

Classification and measurement when an entity purchases crypto assets;
Recognition and initial measurement when an entity receives digital assets that are classified as indefinite-lived intangible assets;
Accounting for digital assets classified as indefinite-lived intangible assets;
Measurement of cost basis of digital assets that are classified as indefinite-lived intangible assets;
Derecognition of digital asset holdings that are classified as indefinite-lived intangible assets; and
Recognition of digital assets when an entity uses a third-party hosted wallet service.

General Accounting and Auditing Developments – New Edition of AICPA Alert Published

Summary - The AICPA has published a new Audit and Accounting Alert, General Accounting and Auditing Developments. This alert provides auditors with an overview of recent economic, industry, technical, regulatory, and professional developments that may affect how auditors conduct audits and other engagements. Also, an entity’s internal management can use this alert to address areas of audit concern.

This alert will ensure you have a robust understanding of the business, economic, and regulatory environments in which you and your clients operate.

Key updates include the following:

Economic and Industry Developments;
Legislative and Regulatory Developments;
Audit and Attestation Issues and Developments;
Revenue Recognition;
New Lease Standard;
Accounting for Financial Instruments; and
Recent AICPA Independence and Developments.

Property and Liability Insurance Entities – New Edition of AICPA Guide Updated for New Indexes

Summary - The AICPA has issued a new edition of its updated its Audit and Accounting Guide, Property and Liability Insurance Entities. This edition is being released due to the addition of indexes.

AICPA Technical Q&As – AICPA Publishes New Technical Q&As

Summary - The AICPA has published new Technical Question and Answers (Q&As) within the Liabilities and Deferred Credits: Deferred Taxes and Specialized Industry Problems: State and Local Governments sections. These updates:

Adds the following Technical Questions and Answers (Q&A) sections to Liabilities and Deferred Credits: Deferred Taxes:

Q&A section 3300.01, “Background to Section 3300.02 — Revised Section 163(j) Limitation;” and
Q&A section 3300.02, “Evaluation of the Realizability of a Section 163(j) Carryforward.”

Adds the following Q&A sections to Specialized Industry Problems: State and Local Governments:

Q&A section 6950.23, “Background to Section 6950.24;” and
Q&A section 6950.24, “Auditor Assessment of a Special-Purpose Government's Only Immaterial Fiduciary Fund.”

Deferred Taxes – AICPA Issues New TQAs on Deferred Taxes

Summary - The AICPA has issued new Technical Questions and Answers (TQAs) under new Section 3300, Deferred Taxes. New TQA Section 3300, Deferred Taxes, includes guidance relating to the limitation on interest deductibility for certain companies adopted under Section 163(j) of the Internal Revenue Code (Code), as amended by the Tax Cuts and Jobs Act of 2017 (TCJA). Section 163(j) is effective for tax years beginning after 2017. The new TQAs are:

01 Background to Section 3100.02 — Revised Section 163(j) Limitation; and
02 Evaluation of the Realizability of a Section 163(j) Carryforward.

TQA Section 3300.01 discusses the background to the guidance under Section 3300.01. That discussion notes that Code Section 163(j) generally limits deductions for net interest expense to 30% of adjusted taxable income, except for certain small businesses. TQA Section 3300.01 notes that since the enactment of the TCJA, the disallowed interest deduction resulting from the revised Section 163(j) limitation has led to more entities having a deferred tax asset (DTA) for the unlimited interest deduction carryforward provided by the law. Moreover, entities with significant debt and interest expense may have experienced (and expect to continue to experience) disallowed interest deductions every year Section 3300.02, Evaluation of the Realizability of a Section 163(j) Carryforward, provides guidance for how an entity should assess realizability of its existing DTA related to disallowed interest deductions when there are (a) reversing deferred tax liabilities (DTLs) and (b) an expectation of future interest expense that also will be limited under Section 163(j).

Local Governments – AICPA Issues New TQAs on State and Local Governments

Summary - The AICPA has issued new TQAs under new Section 6950, State and Local Governments. The new paragraphs under TQA Section 6950, State and Local Governments, provide guidance under GASB Statement No. 84, Fiduciary Activities, effective for reporting periods beginning after December 15, 2018. The new paragraphs are:

23 Background; and
24 Auditor Assessment of a Special-Purpose Government's Only Immaterial Fiduciary Fund.

Paragraph .23, Background, discusses Statement 84, which changed the framework to evaluate whether activities are fiduciary and clarified that the reporting of fiduciary activities applies also to special-purpose governments engaged in business-type activities (BTAs). Under Statement 84, some BTAs will be reporting fiduciary activities for the first time A critical issue involved in implementing Statement 84 is the auditor’s consideration of materiality when a government omits reporting fiduciary activities New paragraph TQA 6950.24, Auditor Assessment of a Special-Purpose Government's Only Immaterial Fiduciary Fund, discusses a situation in which a BTA has not previously reported any fiduciary activities, after evaluation, omits to report its only identified fiduciary fund. Paragraph .24 discusses how the auditor should assess the appropriateness of the government’s omission of the fiduciary fund.

CPE – AICPA and NASBA Revise Standards for Continuing Professional Education Programs

Summary - The AICPA and the National Association of State Boards of Accountancy (NASBA) have revised the Statement on Standards for Continuing Professional Education (CPE) Programs (CPE Standards) as well as the NASBA Fields of Study document. The organizations approved the new standards during their respective October and November 2019 Board of Directors meetings. The new CPE Standards are effective as of December 31, 2019. The CPE Standards provide the framework for the development, presentation, measurement and reporting of CPE programs. The CPE Standards reference the NASBA Fields of Study document, which was reviewed and evaluated for currency and relevancy.

Among the most significant changes to the CPE Standards is allowing for adaptive learning self-study programs within the self-study standards with references to the two methodologies to be used in determining the CPE credit for an adaptive learning program. The 2019 CPE Standards permit the use of review questions or other content reinforcement tools in a nano learning program. Additional clarifications have been made with regard to awarding CPE credit in the different instructional delivery methods. Definitions and examples were also included to assist in the application of the 2019 CPE Standards.

The revisions to the CPE Standards “represent the collective efforts of the CPE Standards Working Group, the NASBA’s CPE Committee, and the Joint AICPA/NASBA CPE Standards Committee as well as various individuals and organizations that participated in the exposure draft process,” said Jessica Luttrull, NASBA’s Associate Director of the National Registry. “We are excited to include adaptive learning within the self-study standards. Adaptive learning allows for a more personalized approach by delivering content customized to the learner. Boards of Accountancy, CPAs and CPE providers have recognized the need for CPE to continue to evolve and we believe that the changes included in the 2019 Standards will help keep CPE relevant and meaningful to CPAs.”

The changes to the Fields of Study document focus on providing descriptions that are more current and relevant than the previous version.

CPA Exam – AICPA Targets Technology and Core Skills in CPA Exam Practice Analysis

Summary - The AICPA has issued the Exposure Draft and Invitation to Comment, Maintaining the Relevance of the Uniform CPA Examination, that also includes the AICPA 2019 Practice Analysis Report. The Exposure Draft proposes amendments to the CPA Exam Blueprints that would focus on CPA core knowledge and skills. Comments are due by April 30, 2020.

The Exposure Draft incorporates feedback from 80 AICPA volunteer subject matter experts in addition to input from more than 130 CPAs who directly supervise newly licensed CPAs. The resulting Exposure Draft details major themes from the research along with proposed Uniform CPA Exam content additions, changes, and deletions. The goal is for the updates to appear in the CPA Exam Blueprints no later than December 31, 2020. The 16-hour, four-section structure will remain the same.

At the same time, the AICPA and the National Association of State Boards of Accountancy (NASBA) are collaborating on CPA Evolution, a separate initiative that focuses on the future of the licensure model and the transformation of the profession as it relates to technology.

According to Michael Decker, AICPA vice president of examinations, the “last practice analysis laid a solid foundation with the creation of the CPA Exam Blueprints and the existing Exam structure.” Further, during “this year’s multi-phased research, we used a targeted approach that included working with ﬁrms of all sizes and their insights into technology, data analytics, and core competencies will help us ensure the Exam remains current and relevant.”

The Invitation to Comment gives stakeholders an opportunity to provide additional input on related topics or potential Uniform CPA Exam changes that are longer-term proposals and require further considerations. Given the need for more research, there are no deﬁnitive plans or anticipated implementation timelines.

Themes identiﬁed during the practice analysis included the following:

The current Uniform CPA Exam structure and Blueprints are well-positioned to accept changes that reﬂect a greater assessment of technology and data analytics;
Newly licensed CPAs must have an understanding of business processes, information systems, data ﬂows and internal controls;
Newly licensed CPAs must have a digital and data-driven mindset; and
The profession is placing greater reliance on SOC reports as clients are outsourcing more accounting processes, which impacts the work of newly licensed CPAs.

The AICPA proposes 46 changes to the CPA Exam Blueprints that include content to be added to the Exam in response to the identiﬁed themes. They also address content either to be removed or assessed at a diﬀerent skill level to better focus on the core knowledge and skills required of newly licensed CPAs to protect the public interest.

AICPA Auditing Standards Board – October 28-31, 2019 Meeting Minutes Published

Summary - The AICPA’s Auditing Standards Board has published minutes from its October 28-31, 2019 meeting. Topics discussed at this meeting included:

Attestation standards;
Audit evidence; and
Description of materiality.

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Gaming – AICPA Issues Working Draft for Gaming Industry Guide and Determination of Whether an Equipment Lease is Present

Summary - The AICPA’s Financial Reporting Executive Committee (FinREC) has issued a new working draft of guidance that will be included in the AICPA’s Audit and Accounting Guide – Gaming – Proposed Wording to be Included in the Gaming Industry Guide – Equipment Leases. The deadline for comments is December 19, 2019.

FinREC is requesting feedback on the proposed language that addresses gaming entities’ determination of whether various pricing arrangements convey a lease under FASB Accounting Standard Codification™ Topic 842, Leases.

The Working Draft and the Audit and Accounting Guide relate to the new leases standard adopted by the FASB in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). Issued in February 2016, ASU 2016-02 requires lessees to recognize assets and liabilities for all leases (with an exception for short-term leases). Lessor accounting is essentially unchanged. ASU 2016-02 also eliminates leveraged-lease accounting, and a lessor accounts for leases that would have qualified as leveraged leases under the previous rules consistently with other leases.

FinREC developed the Working Draft as part of an Audit and Accounting Guide discussing implementation of the rules for Leases. The Working Draft will be included in the Audit and Accounting Guide upon issuance.

The draft focuses on the types of gaming machine supply arrangements and determining whether those arrangements constitute a lease, including:

Identified assets and consideration of substitution rights;
Determination of whether a contract conveys the right to control the use of an identified asset;
Determination of lease term and assessment of factors indicating that renewals may be reasonably certain;
Scoping and application of practical expedients;
Participation and daily fee arrangements;
Wide area progressive (WAP) arrangements, including operator and manufacturing accounting; and
Utility products arrangements.

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Special Reports – AICPA Issues New TQAs

Summary - The AICPA has released new Technical Question and Answers (TQAs) for Section 9100, Special Reports, to assist users with compliance audits (single audits) performed under Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. The Oﬃce of Management and Budget (OMB) Compliance Supplement (supplement), issued annually, serves to identify existing important compliance requirements that the federal government expects to be considered as part of a single audit.

2019 Compliance Supplement
The OMB made signiﬁcant changes to the 2019 Compliance Supplement, compared to prior years. It revised the approach used by the federal government to identify the compliance requirements subject to the compliance audit. The 2019 Compliance Supplement, like previous annual Compliance Supplements, added, deleted, and modiﬁed prior Supplement sections. However, the OMB changed the maximum number of compliance requirements. In previous annual editions of the supplement, federal agencies identiﬁed all applicable compliance requirements for programs included in the supplement from 12 potential types of compliance requirements. The number of compliance requirements subject to the audit is now limited to six, with the exception of the Research and Development (R&D) cluster. The R&D cluster is permitted to identify seven compliance requirements as subject to the audit.

For purpose of determining the number of requirements, the requirements relating to A. Activities Allowed and Unallowed, and B. Allowable Costs and Cost Principles, are treated as one requirement. In addition, the OMB revised the Part 2 matrix to reﬂect this change for all programs, as well as the related program sections in Parts 4 and 5. Additionally, this requirement mandate does not apply to programs not included in the 2019 Supplement.

September TQAs
AICPA’s TQAs include nonauthoritative guidance in applying AICPA standards but are not themselves sources of established authoritative principles. The new TQAs provide guidance for single audits and for applying the 2019 Compliance Supplement. The new TQAs, 9110.24 through 9110.27 include:

24 Background to Sections 9110.25–.27 — OMB 2019 Compliance Supplement;
25 Opining on Compliance When the OMB Compliance Supplement Excludes Direct and Material Compliance Requirements From the Scope of a Single Audit;
26 Opining on Compliance When the OMB Compliance Supplement Excludes Direct and Material Compliance Requirements From the Scope of a Single Audit; and
27 Including an Other-Matter Paragraph to Describe the OMB Compliance Supplement Change in Approach for Identifying the Requirements Subject to the Single Audit.

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Auditing Standards Board – May 20-23, 2019 Meeting Minutes Published

Summary - The AICPA’s Auditing Standards Board has published meeting minutes from its May 20-23, 2019 meeting. Topics discussed at this meeting included:

Materiality;
Audit evidence;
Other information;
Estimates; and
Attestation standards.

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Portfolio Company Investments – AICPA Accounting and Valuation Guide Published

Summary - The AICPA has published the Accounting and Valuation Guide, Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds and Other Investment Companies. This guide has been developed by the AICPA PE/VC Task Force. This guide provides guidance and illustrations for preparers of financial statements, independent auditors, and valuation specialists regarding the accounting for and valuation of portfolio company investments of venture capital funds, private equity funds and other investment companies. The valuation guidance in this guide is focused on measuring fair value for financial reporting purposes.

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Materiality – AICPA Proposes Amendments to Materiality Standards

Summary - The AICPA’s Auditing Standards Board (ASB) has issued an exposure draft of a proposed Statement on Auditing Standards (SAS) anda proposed Statement on Standards for Attestation Engagements (SSAE), Amendments to the Description of the Concept of Materiality. Both exposure drafts are included in the same document and have the same title. Comments are due by August 5, 2019.

Materiality Definitions
The proposals, if adopted as proposed, would amend various AU-C and AT-C sections in AICPA Professional Standards. They would align the materiality concepts of the AICPA Professional Standards with the definition of materiality used by the U.S. judicial system and the PCAOB, SEC and FASB. The current ASB materiality standard is consistent with those of the International Accounting Standards Board (IASB) and the International Auditing and Assurance Standards Board (IAASB).

The ASB believes that eliminating inconsistencies between the AICPA standards and the definition of materiality used by the U.S. judicial system and other U.S. standard-setters and regulators would be in the public interest.

The current ASB, IASB and IAASB standards provide that “misstatements, including omissions, are considered to be material if they, individually or in the aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements” (emphasis added by the AICPA in the exposure draft Background section).

In contrast, the definition used by the U.S. judicial system, standard-setters and SEC provides that “an omission or misstatement” is material “if there is a substantial likelihood that a reasonable person would consider it important” (emphasis added by the AICPA in the exposure draft Background section).

Affected Auditing and Attestation Standards
Under the proposal, the definition of materiality would provide that: “Misstatements, including omissions, are considered to be material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment of a reasonable user made based on the financial statements.” The focus of the revised definition would be on whether the misstatement would have a “substantial likelihood” that it “would influence the judgment” of a reasonable user.

The proposed revisions would modify the following auditing standards:
• SAS 122, Statements on Auditing Standards: Clarification and Recodification, as amended;
• SAS No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements; and
• SAS No. 13X, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. The AICPA expects to issue SAS 13X in the third quarter of this year.
The proposed amendments would amend the following sections of SSAE No. 18, Attestation Standards: Clarification and Recodification:
• AT-C section 205, Examination Engagements; and
• AT-C section 210, Review Engagements.
Proposed Effective Dates

The ASB expects that the effective date for the proposed SAS and SSAE amendments will be for audits of financial statements for periods ending on or after December 15, 2020 or practitioners’ reports dated on or after December 15, 2020, respectively. It is possible that the proposed effective date may change, but the ASB has advised that the amendments will not be effective earlier than December 15, 2020.

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Auditing Standards Board – July 22-25, 2019 Meeting Minutes Published

The Auditing Standards Board met on July 22-25, 2019 and has published minutes from this meeting. Topics discussed include:

Estimates;
Conforming amendments;
Attestation standards; and
Other matters.

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Single Audits - AICPA Publishes New Edition of Audit and Accounting Guide

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Government Auditing Standards and Single Audits. This new edition presents guidance for the audits of financial statements conducted in accordance with Government Auditing Standards, 2011 Revision (also referred to as the Yellow Book), issued by the Comptroller General of the United States of the U.S. Government Accountability Office.

This edition also presents the recommendations of the AICPA Single Audit Working Group for the conduct of audits in accordance with the Single Audit Act and Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.

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State and Local Governments - AICPA Publishes New Edition of Audit and Accounting Guide

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, State and Local Governments. This new edition has been developed by the AICPA State and Local Government Audit Guide Revision Task Force (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.

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AICPA and NASBA Propose Changes to Fields of Study CPA Standards

Summary - The AICPA and the National Association of State Boards of Accountancy (NASBA) have jointly published an exposure draft with proposed revisions to the Statement on Standards for Continuing Professional Education Programs (CPE Standards). The organizations have also proposed changes to the NASBA Fields of Study document because the CPE Standards exposure draft references the Fields of Study document. The comment deadline for both exposure drafts is August 31, 2019.

The AICPA and NASBA jointly publish the CPE Standards, which provide a framework for the development, presentation, measurement, and reporting of CPE programs. The last revision of the CPE Standards was effective September 1, 2016.

The two exposure drafts were issued with the following accompanying documents:

Explanatory Memorandum detailing changes from existing Standards and requests for comment (discussed below);
Red-lined version of the 2016 CPE Standards, indicating where revisions are proposed (available on ARM); and
Red-lined version of the 2016 Fields of Study document, indicating where revisions are proposed (available on ARM).

The proposed amendments to the CPE Standards propose several new and revised definitions, including, for example, for adaptive learning, content reinforcement tools and content reviewer, and subject matter expert. There are also proposed amendments Article III – Standards for CPE Program Sponsors: Program Development.

Significant proposals for the program development standards:

Clarify that in certain limited circumstances, an element of engagement may not be appropriate, and that those cases must be documented;
Now refer to review questions as “review questions or other content reinforcement tools” to allow for flexibility and innovation by CPE providers;
Require compliant feedback for “true or false” questions even though they do not count towards the minimum number of required review questions;
Align terms of asynchronous and synchronous learning activities;
Clarify that a qualified assessment in blended learning must be completed with a minimum passing grade of 70 percent as in self-study programs; and
Clarify that courses offered for credit from an accredited university or college are deemed blended learning programs.

In addition, the exposure drafts also propose changes to the Program Presentation and Program Measurement sections.

The exposure draft of the NASBA Fields of Study Document includes a reminder to sponsors that a sponsor may re-issue a certificate of completion to a CPA in the instance that the field of study does not align to a CPA’s state board of accountancy’s accepted fields of study. The CPE sponsor is responsible for ensuring that the alternate, state-specific fields of study under which the credits are being awarded reasonably reflect the underlying content of the course. The Fields of Study document also proposes amendments to the Information Technology field of study language to reflect the organization of other fields of study in the document and ensure that current, relevant terms were used in the description.

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AICPA and NASBA Propose Changes to Fields of Study CPA Standards - Explanatory Memorandum Published

Summary - As discussed above, the AICPA and the National Association of State Boards of Accountancy (NASBA) have jointly published an exposure draft with proposed revisions to the Statement on Standards for Continuing Professional Education Programs (CPE Standards). The organizations have also proposed changes to the NASBA Fields of Study document because the CPE Standards exposure draft references the Fields of Study document. The comment deadline for both exposure drafts is August 31, 2019.

The proposal documents include an Explanatory Memorandum detailing changes from existing Standards and requests for comment. This memorandum discusses proposed changes to existing standards.

To view the Explanatory Memorandum, please click here.

Credit Losses – AICPA Accounting and Auditing Guide Published

Summary - The AICPA has published a new Accounting and Auditing Guide, Credit Losses. This new guide has been developed by the AICPA Credit Losses Task Forces, 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). Specifically, this guide is intended to help entities and auditors prepare for changes related to credit loss as a result of ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent ASUs amending FASB Accounting Standards Codification Topic 326, Financial Instruments—Credit Losses.

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AICPA Issues New Technical Q&As on Public Business Entities

Summary - The AICPA has released new Technical Questions and Answers (TQAs) Section 7100, Definition of a Public Business Entity. Section 7100 includes sixteen new questions and answers that provide guidance on terms and definitions and numerous other matters related to public business entities.

Technical Questions and Answers

AICPA's Technical Questions and Answers include guidance in applying AICPA standards but are not themselves sources of established authoritative principles. The AICPA developed the new TQAs to assist entities in defining their status as public business entities. The TQAs include detailed discussion specific to entities such as depository institutions, broker-dealers, insurance companies and not-for-profit entities.

Determination of Public Business Entity Status

The determination of whether an entity is a public business entity (PBE) is important because, as noted by Matthew Schell, CPA, who headed the effort on behalf of AICPA's Financial Reporting Executive Committee, "PBE status means an entity must comply with FASB's accounting standards, with implementation dates for several, including revenue recognition and lease accounting, just around the corner. Entities that are not public business entities, however, can take advantage of certain scaled disclosures and other accommodations, such as using Private Company Council-driven or other non-PBE accounting alternatives."

The FASB amended the Codification glossary in FASB Accounting Standards Update (ASU) No. 2013-12, Definition of a Public Business Entity-An Addition to the Master Glossary, to include one definition of public business entity in future use of accounting principles.

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