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New Edition of AICPA Guides Published

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

Auditing Standards Board – ASB Meeting Held

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

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

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

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

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

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

General Ethics – AICPA Publishes FAQs on General Ethics

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

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

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

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

CARES Act –AICPA Publishes New TQA on Reporting on the CARES Act Provider Relief Fund 

Construction Contractors –AICPA Publishes 2021 Edition of Audit and Accounting Guide 

Credit Losses –AICPA Publishes 2021 Edition of Audit and Accounting Guide 

Employee Benefit Plans –AICPA Publishes 2021 Edition of Audit and Accounting Guide 

Investment Companies –AICPA Publishes 2021 Edition of Audit and Accounting Guide 

Property and Liability Insurance Entities –AICPA Publishes 2021 Edition of Audit and Accounting Guide 

Life and Health Insurance Entities –AICPA Publishes 2021 Edition of Audit and Accounting Guide 

Quality Management Standards –AICPA’s ARSC Proposes Amendments to Quality Management Standards for Consistency with ASB’s Proposed Standards 

Independence –AICPA’s Ethics Board Proposes New Independence Interpretation 

Unpaid Fees –AICPA’s PEEC Proposes Revisions to Unpaid Fees Interpretation 

Auditing Standards Board –Summary of July 20-22 Meeting Published 

COVID-19 –AICPA Issues New TQA on Accounting for Certain Grants Received under COVID-19 Programs 

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

Digital Assets – 2021 Edition of AICPA Practice Aid on Accounting for and Auditing of Digital Assets Published 

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

Auditing Standards Board – Highlights of AICPA Auditing Standard Board’s March 10, 2021 Meeting Published 

Sustainability Reporting – Study by AICPA, IFAC and CIMA Shows Lack of Standardization in Sustainability Assurance 

Agreed-Upon Procedures – AICPA Issues SOP on Agreed-Upon Procedures Related to Rated Exchange Act Asset-Backed Securities Third-Party Due Diligence Services 

Construction Contractors –AICPA FinREC Proposes New Construction Contractor Illustrative Financial Statements 

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

Responding to Legal Non-Compliance – AICPA’s Ethics Division Proposes Interpretations on Responding to Legal Non-Compliance 

AICPA Auditing Standards Board – Summary of January 11-14, 2021 Meeting Published

Review Engagements – AICPA Issues SSAE 22 on Review Engagements 

Employee Benefit Plans – 2020 Edition of Audit and Accounting Guide Published

Depository and Lending Institutions – New Edition of AICPA Audit and Accounting Guide Published 

Investment Companies – New Edition of AICPA Audit and Accounting Guide Published 

Use of Specialists – AICPA’s ASB Proposes New SAS on the Use of Specialists and Pricing Information Obtained from External Information Sources 

Single Audits – GAQC Alert 416 Published

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

Direct Examination Engagements – AICPA Issues SSAE 21 on Direct Examination Engagements

Digital Assets – AICPA Updates Digital Assets Practice Aid to Include Additional Questions & Answers

Material Misstatements – AICPA Proposes Standard on Assessing Risks of Material Misstatement 

Accounting Estimates – AICPA Releases Updated Standard on Auditing Accounting Estimates 

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

Articles

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.

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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.” 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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 Considerations⎯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 ⎯ 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.” 

For more information, click here.

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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. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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). 
 
For more information, click here.

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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. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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. 

For more information, click here.

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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. 

For more information, click here.

© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

CARES Act –AICPA Publishes New TQA on Reporting on the CARES Act Provider Relief Fund

Summary - The AICPA has issued the Technical Question and Answer (TQA) section, 9160.36, “Reporting on the Provider Relief Fund in the Schedule of Expenditures of Federal Awards in Relation to the Financial Statements in a Single Audit.”

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) authorized the Provider Relief Fund (PRF), which provides relief funds to eligible providers of health care services and support for health care-related expenses or lost revenues attributable to the coronavirus. The PRF has $178 billion in funding and is administered by the U.S. Department of Health and Human Services (HHS). HHS has provided funding to hospitals and other health care providers, which include governmental, not-for-profit, and for-profit entities.

PRF funding is subject to single audit requirements which require the auditor to determine and report on whether the Schedule of Expenditures of Federal Awards (SEFA), presented as supplementary information (SI), is fairly stated in all material respects, in relation to the financial statements as a whole.
Amounts to be reported on the SEFA under other programs subject to single audit generally represent expenditures during an entity’s fiscal year. Initially, though, HHS linked the amounts to be reported on a recipient’s SEFA to expenditures and lost revenue required to be calculated and reported to HHS in the HHS Reporting Portal. Because the HHS Reporting Portal was delayed and did not open until July 2021, the HHS uses a reporting timeframe for PRF funds based on the date of the receipt of funds rather than the reporting period in which the funds were expended.

HHS included guidance and reporting portal requirements in the Office of Management and Budget (OMB) 2020 Compliance Supplement Addendum, but indicated in the OMB 2021 Compliance Supplement that entities with years ending prior to June 30, 2021, would not include PRF on the related SEFA. It also provided a table to illustrate reporting requirements for fiscal years ending on or after June 30, 2021. Auditors have had questions about how they can meet the single audit requirement to report on the SEFA in relation to the audited financial statements (an in-relation-to opinion), in accordance with AU-C section 725, Supplementary Information in Relation to the Financial Statements as a Whole, in situations when expenditures and lost revenues included on the SEFA do not relate to the same period as the financial statements (that is, they are out-of-period amounts).

TQA Inquiry
The TQA asks whether an auditor may report on a SEFA with PRF funding in relation to the audited financial statements when some of the amounts relate to an entity’s prior fiscal year and confirms that it can even if the SEFA and financial statements do not match exactly. According to the TQA, such reporting would be acceptable, and there are other situations in practice where the SEFA and financials do not precisely align. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Construction Contractors –AICPA Publishes 2021 Edition of Audit and Accounting Guide

Summary - The AICPA has published the 2021 edition of the AICPA Audit and Accounting Guide, Construction Contractors. Key benefits and updates in this new edition include the following:
Full implementation of the accounting and auditing considerations of ASU No. 2014-09, Revenue from Contracts with Customers;
Includes industry specific accounting guidance;
Auditing guidance and procedures are tailored specifically for the construction industry; and
Full implementation of the Auditors’ Reporting Standards (Statement on Auditing Standards [SAS] Nos. 134–140, as appropriate.

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Credit Losses –AICPA Publishes 2021 Edition of Audit and Accounting Guide

Summary - The AICPA has published the 2021 edition of the AICPA Audit and Accounting Guide, Credit Losses. This AICPA Guide has been developed by the AICPA CECL Task Force to assist management in applying FASB ASC 326 in the preparation of their financial statements in accordance with GAAP and to assist practitioners in performing and reporting on their audit engagements. The guide summarizes key provisions of FASB ASC 326, including disclosures, and addresses key considerations in accounting for and auditing the allowance for credit losses related to loans under FASB Topic 326.
 
This guide highlights key areas within the auditing process, including obtaining an understanding of the entity, assessing the risks of material misstatement, identifying the controls relevant to the audit, designing an audit response, performing audit procedures, and evaluating the audit results. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Employee Benefit Plans –AICPA Publishes 2021 Edition of Audit and Accounting Guide

Summary - The AICPA has published the 2021 edition of the AICPA Audit and Accounting Guide, Employee Benefit Plans. This AICPA Guide is designed to bridge the gaps between the “what, why and how” to satisfy your auditor responsibilities in accordance with new auditing standards, including SAS No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, as amended, and give you confidence when issuing your audit reports, or when others are evaluating your work.

This new edition includes the following updates:
New multiemployer plan chapter and illustrative financial statements;
Address the issuance of FASB ASC 606;
Highlight select recent developments in standards impacting employee benefit plan auditing and accounting; and
Added additional auditor reports.

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Investment Companies –AICPA Publishes 2021 Edition of Audit and Accounting Guide

Summary - The AICPA has published the 2021 edition of the AICPA Audit and Accounting Guide, Investment Companies. This AICPA Guide provides guidance to help the user understand the complexities of the specialized accounting and regulatory requirements for investment companies. This new edition includes the following updates:
General auditing content and independent auditor’s report illustrations affected by recently issued SASs such as SAS No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, and related guidance; and
Regulatory content affected by recently issued SEC Releases such as SEC Release No. IC-34128, “Good Faith Determination of Fair Value.” 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Property and Liability Insurance Entities –AICPA Publishes 2021 Edition of Audit and Accounting Guide

Summary - The AICPA has published the 2021 edition of the AICPA Audit and Accounting Guide, Property and Liability Insurance Entities. This AICPA Guide provides a good grounding on the industry, its products and regulatory issues, and the related transaction cycles that a property and liability insurance entity is involved with.

Key benefits and updates in this new edition include the following:

  • Get authoritative and nonauthoritative accounting and auditing guidance applicable to property and liability insurance entities;
  • Get illustrative audit reports that reflect recent changes from SAS No. 134 and related guidance;
  • Understand current GAAP and statutory accounting for property and liability insurance entities; and
  • Properly develop an audit plan for auditing loss reserves. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Quality Management Standards –AICPA’s ARSC Proposes Amendments to Quality Management Standards for Consistency with ASB’s Proposed Standards

Summary - The AICPA’s Accounting and Review Services Committee (ARSC) has released the Exposure Draft, proposed Statement on Standards for Accounting and Review Services (SSARS), Quality Management for an Engagement Performed in Accordance With Statements on Standards for Accounting and Review Services. The comment deadline is January 31, 2022.

The Exposure Draft proposes amendments to SSARS No. 21, Statement on Standards for Accounting and Review Services: Clarification and Recodification, that, if adopted as proposed, would align with the quality management standards being proposed by the AICPA’s Auditing Standards Board (ASB). These proposals would make sure that certain concepts in SSARS related to quality management are consistent with the ASB’s proposals. These proposed amendments are to SSARS No. 21, AR-C sections 60, General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services, and 90, Review of Financial Statements.

Proposed Amendments to ASB Quality Management Standards
Earlier this year, the ASB issued an exposure draft that included three proposed standards for quality management at the firm and engagement levels that were prompted by concerns about audit quality. These proposed standards included:

  • Proposed Statement on Quality Management Standards (SQMS), Quality Management:A Firm’s System of Quality Management (proposed SQMS No. 1);
  • Proposed SQMS, Engagement Quality Reviews (proposed SQMS No. 2); and
  • Proposed Statement on Auditing Standards (SAS), Quality Management for an Engagement Conducted in Accordance With Generally Accepted Auditing Standards (QM SAS).

The ASB intends its proposals to converge with the quality management standards of the International Auditing and Assurance Standards Board (IAASB), International Standard on Auditing (ISA) 220, Quality Management for an Audit of Financial Statements, as adopted in December 2020. The ASB’s proposals revised the language of the IAASB standards and examples to conform to usage in the United States.

These proposals, if adopted as written, would apply a risk-based approach to quality management systems within firms. They would “focus a firm’s attention on risks that may have an impact on engagement quality,” and require a firm “to customize the design, implementation, and operation of its system of quality management based on the nature and circumstances of the firm and the engagements it performs.”

The ASB received numerous comment letters and held 15 roundtables on the Exposure Draft. Many comments “focused on the proposals related to the proposed prohibition on self-inspection and the proposed two-year cooling-off period for engagement quality reviewers.” The ASB is currently in the process of evaluating these concerns, and the ARSC has indicated that if its proposals are inconsistent with revisions the ASB makes to the proposed SQMS, the ARSC will revise the proposed SSARS as necessary.

Planned Effective Date
The ARSC is proposing that, if issued as final, the proposed amendments to AR-C sections 60 and 90 will be effective for engagements performed in accordance with SSARS for periods ending on or after December 15, 2023, with early implementation permitted. A proposed technical correction to AR-C section 90, paragraph .16, would be effective upon issuance. 

For more information, click here.

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Independence –AICPA’s Ethics Board Proposes New Independence Interpretation

Summary - The AICPA's Professional Ethics Executive Committee (PEEC) has issued the exposure draft, Accounting Standards Implementation Services (Exposure Draft), and an accompanying invitation to comment, on a new independence interpretation. The comment deadline is December 20, 2021.

Purpose of New Interpretation
In response to the increased complexity of accounting standards, PEEC is seeking to provide guidance on how independence could be affected when a member assists an attest client with implementing new or existing accounting standards.

Although, as the PEEC noted, there is existing guidance on auditor independence, the proposed interpretation would combine “key elements from extant nonattest services guidance (for example, advisory, information systems services, and internal audit)….” The PEEC believes that the combination of these elements “will further foster understanding and, therefore, compliance with independence requirements.”

The specific elements of the guidance that practitioners should keep in mind when performing nonattest services include:
Not performing any management responsibilities; and
Making sure that the person overseeing the nonattest service is able to oversee the service and make “all significant judgments and decisions.”

If adopted as final, the interpretation will be in ET section 1.295.113 of the AICPA Code of Professional Conduct (Code) and will be applicable to members in public practice.

Effective Date
PEEC recommends that the interpretation be effective 90 days after it appears in the Journal of Accountancy. 
 
For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Unpaid Fees –AICPA’s PEEC Proposes Revisions to Unpaid Fees Interpretation

Summary - The AICPA’s Professional Ethics Executive Committee (PEEC) has issued the Exposure Draft, Proposed Revised Interpretation, Unpaid Fees, as well as an Invitation to Comment. The comment deadline is December 20, 2021.

Principles-Based Framework
The proposal revises the “Unpaid Fees” interpretation that has a “bright line” one-year provision with a “principles-based framework.” The extant interpretation provides guidance on when unpaid fees impair independence. Under the proposal, the member is required to determine whether unpaid fees create a threat to independence and whether those threats are at an acceptable level. If those threats are not at an acceptable level, the member is to determine whether safeguards can reduce them to such a level. If not, the “member should discontinue the engagement until such time as threats can be so reduced.”

  • Contents of the Proposal
    The proposed revisions:
  • Remove references to an advocacy threat, which does not apply to unpaid fees;
  • Provide the principles-based framework to evaluate the possible impairment of independence;
  • Include factors to consider in evaluating whether threats to independence are acceptable; and
  • Include examples of safeguards to eliminate or reduce threats to independence.

If adopted as proposed, the revised material will be in ET section 1.230.010 of the AICPA Code of Professional Conduct (Ethics Code) and will apply to members in public practice. Effective DateThe PEEC has recommended that these proposed amendments become effective six months after publication of notice in the Journal of Accountancy, with early adoption permitted.

For more information, click here.

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Auditing Standards Board –Summary of July 20-22 Meeting Published

Summary - The AICPA has published a summary of the Auditing Standards Board meeting held on July 20-22, 2021. The ASB continued its discussion from the January, March and May 2021 ASB meetings of issues arising from the comment letters received in connection with the Exposure Draft of proposed SAS Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment. The ASB plans on voting about issuing the proposed standard as final at its meeting on August 18, 2021. 

For more information, click here.

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COVID-19 –AICPA Issues New TQA on Accounting for Certain Grants Received under COVID-19 Programs

Summary - The AICPA has issued new Technical Question and Answer (TQA) 5270: Other Income, under Section 5270.01, Recipient Accounting for Shuttered Venue Operators Grants and Restaurant Revitalization Fund Grants Received Under the Small Business Administration COVID-19 Relief Programs.

The TQA includes guidance on how a recipient should account for a Shuttered Venue Operators Grant (SVOG) or a Restaurant Revitalization Fund (RRF) Grant issued under the Small Business Administration COVID-19 Relief Programs. The guidance indicates that “[U]nder the terms of both the SVOG and RRF grants, recipients are not required to repay the funding as long as funds are used for eligible uses by the dates specified by each respective program.”

The TQA provides guidance on accounting for these grants for private business (for-profit) entities and not-for-profit entities. SVOG and RRF grants are not available to publicly traded entities. SVOG and RRF grants are available for private business entities, although not-for-profits are eligible only for SVOG grants. TQA 5270.01 discusses in detail the differing accounting models that apply, depending on whether the entity is not-for-profit or for-profit. 

For more information, click here.

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

Summary - The AICPA has published a new edition of its Best Practices in Presentation and Disclosure: Employee Benefit Plans. This new edition provides guidance to navigate the multitude of employee benefit plan requirements relating to GAAP disclosure, regulatory reporting, GAAS auditor reporting, and communication of other deficiencies in internal control.

  • This edition delivers an extensive refresher of the chapters dedicated to illustrative disclosures specific to:
  • Defined benefit pension plans;
  • Defined contribution retirement plans;
  • Health and welfare benefit plans; and
  • Other financial statement disclosures that may be applicable to all plans.

For more information, click here.

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Digital Assets – 2021 Edition of AICPA Practice Aid on Accounting for and Auditing of Digital Assets Published

Summary - The AICPA has published the 2021 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 and generally accepted auditing standards, respectively. This guidance is intended for financial statement preparers and auditors with a fundamental knowledge of blockchain technology. 

For more information, click here.

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

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, State and Local Governments. This new editions features 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.

Topics covered also include:

  • Financial reporting and the financial reporting entity;
  • Revenue and expense recognition;
  • Capital asset accounting;

The elements of net position;

  • Accounting for fair value;
  • Municipal securities offerings; and
  • Tax abatements.

For more information, click here.

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Auditing Standards Board – Highlights of AICPA Auditing Standard Board’s March 10, 2021 Meeting Published

Summary - The AICPA’s Auditing Standards Board (ASB) has published highlights from its March 10, 2021 meeting. The ASB discussed issues arising from the comment letters received in connection with the Exposure Draft related to the proposed Statement on Auditing Standards (SAS), Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment.

The objective during the meeting was to continue the discussion of the feedback arising from the comment letters received in connection with the Exposure Draft and to obtain the Board’s feedback with respect to select items prior to proposing revisions to address the feedback received. The ASB’s discussion was focused on matters that require the ASB’s strategic direction, and the Task Force’s preliminary views on certain matters raised by responders. 

For more information, click here.

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Sustainability Reporting – Study by AICPA, IFAC and CIMA Shows Lack of Standardization in Sustainability Assurance

Summary - The AICPA & CIMA (representing the Association of International Certified Professional Accountants) and the International Federation of Accountants (IFAC) have released the report, Benchmarking Global Practice: The State of Play in Sustainability Assurance (Report). The Report, based on a study done by these organizations, concluded that global practices for sustainability reporting and assurance over that information, including the prevalence of assurance, level of assurance, and standard and practitioner used, varies widely by jurisdiction.

This study provides a global picture of the current status of sustainability reporting and related assurance. The study further contextualizes this analysis with data on how and where sustainability-related information is reported, and how this relates to assurance practices.

As the drive toward a global system for sustainability-related reporting continues, investors, regulators and policymakers are turning their attention to the important role of assurance in promoting high-quality reporting. With the growing importance of—and reliance on—sustainability information, low-quality assurance is an emerging investor protection and financial stability risk.

“Companies that publish sustainability information that is subject to assurance by professional accountants have an opportunity to bring trust and reliability to their sustainability information. Engaging a licensed professional accountant who possesses the right combination of professional skills, qualifications, experience and is subject to independence, ethical and monitoring requirements can result in truly meaningful assurance and transparency,” said Susan S. Coffey, CPA, CGMA, CEO of Public Accounting at the Association of International Certified Professional Accountants. “As it stands, only around half of the companies reviewed in this study publish sustainability information that is subject to any assurance.”

In performing the study, IFAC and AICPA-CIMA partnered with Audit Analytics to understand the environmental, social, and governance (ESG) reporting and assurance practices on a global basis by capturing reports containing ESG information in 22 jurisdictions. 100 companies were reviewed from each of the largest six economies, with 50 companies reviewed in the remaining 16 jurisdictions. The study provides a discussion of the full methodology used. 
 
For more information, click here.

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Agreed-Upon Procedures – AICPA Issues SOP on Agreed-Upon Procedures Related to Rated Exchange Act Asset-Backed Securities Third-Party Due Diligence Services

Summary - The AICPA has released Statement of Position (SOP) 21-1, Performing Agreed-Upon Procedures Related to Rated Exchange Act Asset-Backed Securities Third-Party Due Diligence Services as Defined by SEC Release No. 34-72936, under the authority of the Auditing Standards Board (ASB).

A Note accompanying SOP 21-1 indicates that the ASB’s Asset-Backed Securities Agreed-Upon Procedures Task Force developed the SOP to “provide guidance to practitioners regarding the application of Statements on Standards for Attestation Engagements (SSAEs) to agreed-upon procedures (AUP) attestation engagements related to third-party due diligence services performed in connection with rated asset-backed securities (ABS) issued in accordance with the Securities Exchange Act of 1934, as amended (Exchange Act), as those services are defined in the SEC rules as amended or adopted by SEC Release No. 34-72936, Nationally Recognized Statistical Rating Organizations, and the accompanying text” (the Release).

SOP 21-1 supersedes SOP 17-1, Performing Agreed-Upon Procedures Related to Rated Exchange Act Asset-Backed Securities Third-Party Due Diligence Services as Defined by SEC Release No. 34-72936, when applying SSAE No. 19, Agreed-Upon Procedures Engagements, in an agreed-upon procedures engagement that addresses rated Exchange Act asset-backed securities third-party due diligence services as defined by SEC Release No. 34-72936.

Agreed-Upon Procedures
In December 2019, the ASB issued Statement on Standards for Attestation Engagements No. 19 (SSAE 19), Agreed-Upon Procedures Engagements, which supersedes AT-C Section 215 of the same title in SSAE 18, Attestation Standards: Clarification and Recodification, and provides flexibility to practitioners performing agreed-upon procedures (AUP) engagements. SSAE 19 allows practitioners to perform AUP engagements in more situations than they have historically.

SSAE 19 is effective for agreed-upon procedures reports dated on or after July 15, 2021, with early implementation permitted.

Application of SOP 21-1
Practitioners frequently perform agreed-upon procedures engagements in relation to securitization transactions. These transactions, referred to as ABS, “are structured financings in which the cash flows and related risks (for example, credit, prepayment, and liquidity risk) of a pool of financial assets are redistributed by the issuance of new securities backed by the same financial asset or pool of financial assets.”

The SEC, in 2014, issued the Release relating to AUP engagements constituting third-party due diligence services. The effective date for these AUP engagements was June 15, 2015.

SOP 21-1 applies when a practitioner accepts an engagement to perform covered services in accordance with the AICPA’s attestation standards. For purposes of SOP 21-1, “covered services” include: procedures performed by the practitioner that are considered to be third-party due diligence services in accordance with the release. For example, comparing the information on a data file with the information contained in the hard-copy documents in a loan file is an activity that falls within the definition of due diligence services in the release.”

SOP 21-1 sets forth the requirements for included AUP engagements as well as reporting considerations. It also provides sample guidance, including an Illustrative Covered Services Report and an Illustrative Form ABS Due Diligence-15E.

Effective Date
The requirements of SOP 21-1 are effective for AUP reports dated on or after July 15, 2021, the same effective date as SSAE 19. Early implementation is permitted. 

For more information, click here.

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Construction Contractors –AICPA FinREC Proposes New Construction Contractor Illustrative Financial Statements

Summary - The AICPA’s Financial Reporting Executive Committee (FinREC) has published a working draft of an Exposure Draft of new illustrative financial statements. The working draft, “Construction Contractors Revised Sample Financial Statements,” includes proposed guidance for implementing FASB ASC Topics 606, Revenue from Contracts with Customers, and 842, Leases. The deadline for providing feedback on the working draft is July 12, 2021.

The working draft provides revenue recognition guidance that will be included as Appendix H in the AICPA Audit and Accounting Guide (AAG): Construction Contractors. The sample financial statements are of a nonpublic company construction contractor. The working draft notes that the proposed sample financials in Appendix H provide nonauthoritative guidance and will be included in the AAG for illustrative and informational purposes only. The proposed guidance is not intended to establish reporting requirements.

These sample financial statements “illustrate presentation for a non-public contractor that has adopted the guidance in FASB . . . ASC 606, . . . and due to effective dates has not adopted FASB ASC 842, Leases, and 326-20, Financial Instruments – Credit Losses.” The working draft also advises “[c]ontractors that are public business entities and those nonpublic business entities who have adopted ASC Topic 842 or Subtopic 326-20 . . . [to] consider other applicable guidance” as well.

For more information, click here.

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

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Not-for-Profit Entities. This new edition 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 in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles.

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, 2021, has been considered in the development of this edition of the guide.

For more information, click here.

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Responding to Legal Non-Compliance – AICPA’s Ethics Division Proposes Interpretations on Responding to Legal Non-Compliance

Summary - The Professional Ethics Executive Committee (PEEC) of the AICPA has issued the Exposure Draft, Responding to Non-Compliance with Laws and Regulations (Exposure Draft). The comment deadline is June 30, 2021.

As with the AICPA’s ASB proposal discussed above, the PEEC’s proposed amendments are designed to converge with the IESBA’s standards on the same topic, responding to non-compliance with laws and regulations.

As explained in the Exposure Draft, the proposed amendments re-propose two new interpretations, each entitled “Responding to Noncompliance With Laws and Regulations.” If adopted as final, the new interpretations will be in ET sections 1.170.010 and 2.170.010 of the AICPA Code of Professional Conduct (Ethics Code). The PEEC originally proposed these amendments in March 2017, but the amendments in the February 2021 Exposure Draft include substantive changes from the 2017 draft.

The Ethics Code currently does not include specific guidance for members encountering legal or regulatory noncompliance or suspected noncompliance. The proposed amendments provides for members’ responsibilities when encountering a NOCLAR (or suspected NOCLAR) at a client or within the employing organization. Both actual and suspected noncompliance with law or regulations are treated the same under the proposed standard, and the same term describes both.

For more information, click here.

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AICPA Auditing Standards Board – Summary of January 11-14, 2021 Meeting Published

Summary - The ASB has published a high-level summary of its January 11-14, 2021 meeting. The ASB voted to expose proposed revisions to AU-C Section 210, Terms of Engagement, which would “require a prospective successor auditor, once management authorizes the predecessor auditor to respond to inquiries from the auditor, to inquire of the predecessor auditor regarding identified or suspected fraud or noncompliance with laws or regulation (NOCLAR).” The Professional Ethics Executive Committee (PEEC) is also considering proposed revisions to the AICPA Code of Professional Conduct regarding NOCLAR, and the ASB plans to issue its exposure draft in conjunction with an anticipated exposure draft from PEEC by the end of February, with a comment period of at least 90 days.

The ASB also voted to expose proposed standards intended to convergence with the International Auditing and Assurance Standards Board’s (IAASB) recently finalized quality management standards. The exposure draft, Proposed Quality Management Standards, includes three interrelated proposed standards:

  • Proposed Statement on Quality Management Standards (SQMS) A Firm’s System
  • Proposed SQMS Engagement Quality Reviews; and
  • Proposed Statement on Auditing Standards (SAS) Quality Management for an Engagement Conducted in Accordance with Generally Accepted Auditing Standards.

The proposed standards bring important changes to the way firms are expected to manage quality for its accounting and auditing practice. The proposed standards include a new proactive risk-based approach to effective quality management systems within firms, which improves the scalability of the standards because it promotes a system tailored to the nature and circumstances of the firm and its engagements. 

For more information, click here.

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Review Engagements – AICPA Issues SSAE 22 on Review Engagements

Summary - The AICPA’s Auditing Standards Board (ASB) has issued Statement on Standards for Attestation Engagements (SSAE) No. 22, Review Engagements. The new SSAE provides performance and reporting requirements and application guidance for review engagements performed in accordance with the attestation standards.

Objectives of a Review Engagement
The practitioner’s objectives with respect to a review engagement are to:
Offer limited assurance about whether material modifications should be made to the subject matter for it to be in accordance with or based on the criteria;
Express a conclusion in a written report about whether the practitioner is aware of any material modifications that need to be made to the subject matter for it to be in accordance with the criteria or the responsible party’s assertion so that it is fairly stated; and
Communicate further as required by relevant AT-C provisions.

For purposes of SSAE 22 and the review engagement requirements, the term “subject matter” “encompasses the terms underlying subject matter and subject matter information, as defined in AT-C section 105. If only one of these terms is applicable, that term is used.”

SSAE 22
SSAE 22 supersedes SSAE 18, Attestation Standards: Clarification and Recodification, Section 210 of the same title. The requirements and guidance in SSAE 22 supplement those of AT-C Section 105, Concepts Common to All Attestation Engagements. As noted in the ASB’s accompanying At a Glance document, Revisions to Attestation Review Standard for Clarity on Procedures That May Be Performed, Report Transparency, and Consistency with Other Professional Standards, SSAE 22 “revises AT-C section 210 for consistency with AT-C section 205, Assertion-Based Examination Engagements (pursuant to SSAE No. 21, Direct Examination Engagements)....”

SSAE 22 also:
Describes the procedures that may be performed in a review agreement;
Specifies requirements that must be met in the practitioner’s report, including an informative summary of the work performed as a basis for the conclusion; and
Permits the practitioner to express an adverse conclusion.

The ASB expects the enhancements in SSAE 22 will provide “helpful information to users of the review reports by explaining the nature of the work done in the review.” It also believes that permitting practitioners to provide the user with an adverse conclusion where necessary so that the user is aware of material misstatements as well as the effects of the misstatements is in the public interest.

Effective Dates
SSAE 22 is effective for practitioners’ review reports dated on or after June 15, 2022. Early implementation is permitted only if the practitioner also implements early the amendments to AT-C Section 105 included in SSAE 21. 

For more information,, click here.

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Employee Benefit Plans – 2020 Edition of Audit and Accounting Guide Published

Summary - The AICPA has published the 2020 edition of Audit and Accounting Guide, Employee Benefit Plans. This 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).

This edition of the guide has been modified by the 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 August 1, 2020, has been considered in the development of this edition of the guide. 

For more information, click here.

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Depository and Lending Institutions – New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Depository and Lending Institutions: Banks and Savings Institutions, Credit Unions, Finance Companies, and Mortgage Companies. This guide has been developed by the AICPA Guides Combination Task Force to assist practitioners in performing and reporting on their audit or their attestation engagements, and to assist management in the preparation of their financial statements in conforming with U.S. generally accepted accounting principles (GAAP).

This new edition of the guide has been modified by the 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 July 1, 2019, 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.

Relevant guidance that is issued and effective on or before July 1, 2019, is incorporated directly in the text of this guide. Relevant guidance issued but not yet effective as of July 1, 2019, but becoming effective on or before December 31, 2019, 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.

For more information, click here.

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Investment Companies – New Edition of AICPA Audit and Accounting Guide Published

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Investment Companies. This guide has been developed by the AICPA Guides Combination Task Force to assist practitioners in performing and reporting on their audit or their attestation engagements, and to assist management in the preparation of their financial statements in conforming with U.S. GAAP.

This new edition of the guide has been modified by the 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 July 1, 2020, 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.

Relevant guidance that is issued and effective on or before July 1, 2020, is incorporated directly in the text of this guide. Relevant guidance issued but not yet effective as of July 1, 2020, but becoming effective on or before December 31, 2020, 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.

For more information, click here.

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Use of Specialists – AICPA’s ASB Proposes New SAS on the Use of Specialists and Pricing Information Obtained from External Information Sources

Summary - The AICPA’s Auditing Standards Board (ASB) issued the exposure draft, Proposed Statement on Auditing Standards, Amendments to AU-C Sections 501, 540, and 620 Related to the Use of Specialists and the Use of Pricing Information Obtained From External Information Sources (Exposure Draft). The comment deadline is February 4, 2021.

The proposed Statement on Auditing Standard (SAS), if adopted as proposed, would amend:
SAS 122, Statements on Auditing Standards: Clarification and Recodification, as amended, sections 501, Audit Evidence — Specific Considerations for Selected Items, and 620, Using the Work of an Auditor’s Specialist; and
SAS 143, Auditing Accounting Estimates and Related Disclosures.

The ASB has issued the Exposure Draft in response to comment letters received on the exposure draft of SAS 143 requesting additional guidance relating to PCAOB Auditing Standard (AS) 2501, Auditing Accounting Estimates, Including Fair Value Measurements. As noted in the Explanatory Memorandum to the Exposure Draft, the proposed amendments would:
Provide guidance on application of SAS 143 “when management has used the work of a specialist in making accounting estimates as well as other proposed amendments to enhance guidance about evaluating the work of the management’s specialist;”
Provide that using the work of an external inventory-taking firm would not include using the work of a management’s specialist;
Add a new appendix to AU-C Section 500, Audit Evidence, to provide guidance on the use of pricing information obtained from external information sources to be used as audit evidence for estimates related to the fair value of financial instruments; and
Amend AU-C Section 620 to enhance guidance on using the work of an auditor’s specialist.

If adopted as proposed, the amendments to AU-C Sections 501, 540, and 620 will be effective for audits of financial statements for periods ending on or after December 15, 2023.

For more information, click here.

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Single Audits – GAQC Alert 416 Published

Summary - The AICPA has published GAQC Alert No. 416 which provides various information, including:
A status update on the expected addendum to the Office of Management and Budget (OMB) 2020 Compliance Supplement (Supplement addendum) and a related GAQC comment letter; A summary of topics discussed at a recent Single Audit Roundtable meeting, including significant concerns on the new Provider Relief Fund program; Updated illustrative audit reports are now available on the GAQC Web site, as well as a marked report to show changes needed for the 2018 edition of Government Auditing Standards (Yellow Book); and A hold the date reminder for upcoming GAQC Web events.

For more information, click here.

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

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Preparation, Compilation and Review Engagements. Issued by the Accounting and Review Services Committee (ARSC), this new edition contains the latest developments in performing preparation, compilation and review engagements.
 

You will find ARSC's best advice on:

  • Recently issued Statement on Standards for Accounting and Review Services (SSARS) No. 25, Materiality in a Review of Financial Statements and Adverse Conclusions;
  • SSARS No. 24, Omnibus Statement on Standards for Accounting and Review Services — 2018; SSARS No. 23, Omnibus Statement on Standards for Accounting and Review Services — 2016, and
  • SSARS No. 22, Compilation of Pro Forma Financial Information.

For more information, click here.

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Direct Examination Engagements – AICPA Issues SSAE 21 on Direct Examination Engagements

Summary - The AICPA’s Auditing Standards Board (ASB) has issued Statement on Standards for Attestation Engagements (SSAE) No. 21, Direct Examination Engagements.

SSAE 21 adds new AT-C Section 206, Direct Examination Engagements. SSAE 21 also supersedes AT-C Section 205, Examination Engagements, and changes the title to Assertion-Based Examination Engagements. It also amends SSAE No. 18, Attestation Standards: Clarification and Recodification, as Amended, and AT-C Section 105, Concepts Common to All Attestation Engagements (AICPA, Professional Standards, AT-C sec. 105).

Direct Examination Engagements
New AT-C Section 206 contains performance and reporting requirements and application guidance for direct examination engagements. As noted in the accompanying At a Glance document, AT-C Section 206 “enables practitioners to perform an examination engagement in which the practitioner obtains reasonable assurance by measuring or evaluating underlying subject matter against criteria and expressing an opinion that conveys the results of that measurement or evaluation.”

The practitioners’ objectives in conducting a direct examination agreement include:
Obtaining reasonable assurance by measuring or evaluating the underlying subject matter against the criteria and performing other procedures to obtain sufficient appropriate evidence;
Expressing an opinion in a written report that conveys the results of the measurement or evaluation; and
Communicating in accordance with the results of the practitioner's procedures as required by AT-C Section 206.

Assertion-Based Examination Engagements
New AT-C Section 205 provides performance and reporting requirements and application guidance for assertion-based examination engagements. The requirements and guidance supplement the requirements and guidance in Section 105.

The practitioners’ objectives in an assertion-based examination agreement include:

  • Obtaining reasonable assurance about whether the subject matter as measured or evaluated against the criteria is free from material misstatement;
  • Expressing an opinion in a written report about whether the subject matter is based on or in accordance with the criteria, or the responsible party’s assertion is fairly stated, in all material requests; and
  • Communicating further as required by relevant AT-C Sections.

SSAE 21 is effective for practitioners’ reports dated on or after June 15, 2022.

For more information, click here.

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Digital Assets – AICPA Updates Digital Assets Practice Aid to Include Additional Questions & Answers

Summary - The AICPA has updated its Practice Aid, Accounting for and Auditing of Digital Assets, to include new nonauthoritative guidance discussing the holding of crypto assets by broker-dealers, crypto assets and fair value measurement, and accounting for stablecoin holdings.

The Practice Aid, originally issued in December 2019, provides nonauthoritative guidance for financial statement preparers and auditors on accounting for and auditing digital assets under GAAP and GAAS. The new material is complementary to the accounting guidance previously issued in December and the additional guidance published in July 2020 on client acceptance and continuance.

For purposes of applying the guidance, digital assets are defined broadly to include digital records, made using cryptography for verification and security purposes, on a distributed ledger (i.e., blockchain). Although all industries encounter change, the digital assets ecosystem is evolving rapidly. As firms seek to provide audits to entities within the ecosystem, they must give caution and consideration to unique risks and challenges.

The updated Practice Aid includes 13 new questions and answers relating to the following subject-matter areas:

  • The definition of an investment company when engaging in digital asset activities and the effect of participation in digital asset activities;
  • Accounting by an investment company for digital assets it holds as investments;
  • Recognition, measurement and presentation of digital assets specifically to broker-dealers;
  • Crypto assets that require fair value measurement, including determining the principal (or most advantageous) market; and
  • Accounting for stablecoin holdings, including how investors that do not apply specialized industry guidance should account for holding a stablecoin.

For more information, click here.

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Material Misstatements – AICPA Proposes Standard on Assessing Risks of Material Misstatement

Summary - The Auditing Standards Board (ASB) of the AICPA has issued the exposure draft, Proposed Statement on Auditing Standards (SAS), Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement. The proposed SAS is designed to superseded SAS No. 122, Statements on Auditing Standards: Clarification and Recodification, as amended, Section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement. The comment deadline is November 25, 2020.
 
“The way business is conducted and the manner in which entities record, process and summarize financial information has evolved rapidly,” said Bob Dohrer, AICPA Chief Auditor. “This evolution affects the auditor’s assessment of the risks of material misstatement. This proposed SAS, which reflects this ongoing transformation, improves audit quality by enhancing the auditor’s process for identifying and responding to the risks of material misstatement in an entity’s financial statements.”
 
  • The ASB based the proposal on the International Standard on Auditing (ISA) 315, Identifying and Assessing the Risks of Material Misstatement. The overall objectives of this proposed SAS are to:Enhance the requirements and guidance on identifying and assessing the risks of material misstatement, particularly the guidance that addresses the entity’s system of internal control and information technology; and
  • Revise the definition of significant risks. The current definition focuses on risks that require special audit considerations, whereas the proposed revision focuses on where those risks lie on the spectrum of inherent risk and includes new guidance intended to enhance an auditor’s professional skepticism. 
For more information, click here.
 
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Single Audits – GAQC Alert 416 Published

Summary - The AICPA has published GAQC Alert No. 416 which provides various information, including:
A status update on the expected addendum to the Office of Management and Budget (OMB) 2020 Compliance Supplement (Supplement addendum) and a related GAQC comment letter; A summary of topics discussed at a recent Single Audit Roundtable meeting, including significant concerns on the new Provider Relief Fund program; Updated illustrative audit reports are now available on the GAQC Web site, as well as a marked report to show changes needed for the 2018 edition of Government Auditing Standards (Yellow Book); and A hold the date reminder for upcoming GAQC Web events.

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© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Accounting Estimates – AICPA Releases Updated Standard on Auditing Accounting Estimates

The Auditing Standards Board (ASB) of the AICPA has issued the new standard, Statement on Auditing Standards No. (SAS) 143, Auditing Accounting Estimates and Related Disclosures. SAS 143 supersedes SAS No. 122 Section 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, and amends various other AU-C Sections in AICPA Professional Standards.

“This new auditing standard provides more robust guidance for auditors who are addressing an increasingly complex financial reporting environment,” said Bob Dohrer, CPA, CGMA, AICPA Chief Auditor. “In our current period of economic uncertainty and volatility, management’s asset impairment estimates are particularly important, and this standard will aid auditors in assessing them.”

What SAS 143 Does
New SAS 143 is one piece of a larger AICPA project to enhance audit quality (see the AICPA’s Enhancing Audit Quality Initiative). It enables auditors to address today’s new accounting standards and to enhance the auditor’s focus on factors driving estimation uncertainty and potential management bias.

Among the noteworthy changes, SAS 143 requires inherent risk and control risk to be assessed separately for accounting estimates.

SAS 143 addresses the auditor’s responsibilities relating to accounting estimates in an audit of financial statements. These include fair value accounting estimates and related disclosures. In the introduction, SAS 143 notes that in auditing accounting estimates, the auditor is responsible for obtaining “sufficient appropriate audit evidence about whether the accounting estimates and related disclosures in the financial statements are reasonable, in the context of the applicable financial reporting framework.”

The ASB has issued additional documents to assist practitioners in implementing the new standard, including:

  • SAS No. 143 At a Glance, Auditing Accounting Estimates and Related Disclosures; and
  • Linkages Between SAS No. 143, Auditing Accounting Estimates and Related Disclosures (AU-C Section 540), and Other AU-C Sections.

Effective Date
SAS 143 will be effective for audits of financial statements for periods ending on or after December 15, 2023.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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

The AICPA has updated its Practice Aid, Accounting for and Auditing of Digital Assets, to include new material on how to audit digital assets, with the focus on Client Acceptance and Continuance.

The Practice Aid, originally issued in December 2019, provides nonauthoritative guidance for financial statement preparers and auditors on accounting for and auditing digital assets under GAAP and GAAS. The new material is complementary to the accounting guidance previously issued in December. The new guidance is based on professional literature and experience from members of the AICPA Digital Assets Working Group (DAWG) and AICPA staff, and is specific to GAAS.

For purposes of applying the guidance, digital assets are defined broadly to include digital records, made using cryptography for verification and security purposes, on a distributed ledger (i.e., blockchain). Although all industries encounter change, the digital assets ecosystem is evolving rapidly. As firms seek to provide audits to entities within the ecosystem, they must give caution and consideration to unique risks and challenges.

The updated Practice Aid provides auditors with detailed information to consider when accepting or continuing audit engagements that involve digital assets. CPA firms seeking to provide audits to entities involved with digital assets need to ensure that they undertake only audit engagements that are appropriate. This requires evaluation of whether the audits can be performed in accordance with professional standards and applicable legal and regulatory requirements to enable an appropriate auditor’s report. The updated Practice Aid provides guidance to enable that evaluation.

Before accepting or continuing an engagement, firms need to assess items including:

  • The auditor skill sets and competencies, including the firm’s current industry expertise and understanding of digital assets;
  • Management’s skill sets and competencies, including with respect to maintaining the entity’s books and records and securing its assets; and
  • Client management’s integrity, commitment to compliance with laws and regulations, and its overall business strategy and the role the entity serves or intends to serve within the digital assets ecosystem.
For more information, click here.
 
© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.