Оглавление
Kurt Oestriecher. Annual Accounting and Auditing Workshop
Table of Contents
Guide
Pages
Chapter 1 FASB Accounting Standards Updates — Broad Issues. Learning objective
FASB ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Knowledge check
FASB ASU No. 2016-16, Income Taxes (Topic 740): Intra- Entity Transfers of Assets Other than Inventory. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
What is the effective date of this ASU?
FASB ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Knowledge check
FASB ASU No. 2017-01, Clarifying the Definition of a Business (Topic 805) Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Knowledge check
FASB ASU No. 2017-04, Intangibles— Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Knowledge check
FASB No. ASU 2017-05, Other Income–Gains and Losses from Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
FASB No. ASU 2017-07, Compensation– Retirement Benefits (Topic 715): Improving the Presentation of Net Period Pension Cost and Net Periodic Postretirement Benefit Cost. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Knowledge check
FASB ASU No. 2018-02, Income Statement— Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Comprehensive Income. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
FASB ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Knowledge check
FASB ASU No. 2018-17, Consolidation Topic 810: Targeted Improvements to Related Party Guidance for Variable Interest Entities– Decision-Making Fees. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Transition
FASB ASU No 2019-03, Not-for-Profit Entities Topic 958: Updating the Definition of Collections. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
What is the effective date of this ASU?
Knowledge check
FASB ASU No. 2019-06: Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Non-for-Profit Entities. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this standard?
What is the effective date of this ASU?
FASB ASU No 2019-12, Income Taxes Topic 740: Simplifying the Accounting for Income Taxes. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
What is the effective date of this ASU?
Summary
Chapter 2 FASB Accounting Standards Updates — Narrow Issues. Learning objective
FASB ASU No. 2017-06, Plan Accounting: Defined Benefit Plans (Topic 960), Defined Contribution Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (a consensus of the Emerging Issues Task Force) Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
FASB ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Knowledge check
FASB ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities From Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features, II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
What is the effective date of this ASU?
FASB ASU No. 2017-15, Codification Improvements to Topic 995, U.S. Steamship Entities: Elimination of Topic 995. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
What is the effective date of this ASU?
FASB ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
Measurement of market risk benefits
Amortization of deferred acquisition costs
Disclosures
When will this ASU be effective?
FASB ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU? Disclosure requirements that were added as a result of this update:
Disclosure requirements that are clarified as a result of this update:
Disclosure requirements that were removed as a result of this update:
When will this ASU be effective?
Knowledge check
FASB ASU No. 2018-15, Intangibles—Goodwill and Other—Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU? Measurement issues
Presentation issues
When will this ASU be effective?
Transition
FASB ASU No. 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
FASB ASU No 2019-08, Codification Improvements—Share-Based Consideration Payable to a Customer. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Summary
Chapter 3 Revenue Recognition, Financial Instruments, and Leases. Learning objectives
Introduction
FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU? Scope
Contract-based revenue recognition principle
Process
Step 1: Identify the contract with a customer (FASB ASC 606-10-25-1)
Collectibility criterion
Combination of contracts
Contract modifications
Step 2: Identify the separate performance obligations in the contract (FASB ASC 606-10-25-14)
Step 3: Determine the transaction price (FASB ASC 606-10-32-2)
Variable consideration
Significant financing component
Noncash consideration
Consideration payable to the customer
Presentation of sales taxes collected from customers
Step 4: Allocate the transaction price to the performance obligations in the contract (Paragraphs 28–41 of FASB ASC 606-10-32)
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation (FASB ASC 606-10-25-23)
Recognition when performance is satisfied at a point in time
Recognition when performance is satisfied over time
Input methods
Output methods
Reasonable measures of progress
Disclosure requirements
When will this ASU be effective?
Transition guidance
General rule and methodology
Transition updates
ASUs issued. FASB ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. Contract modifications at transition
Completed contracts at transition
Transition disclosures
FASB ASU No. 2016-04, Liabilities—Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products
FASB ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net)
FASB ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
FASB ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
Issue 1: Loan guarantee fees
Issue 2: Contract costs — Impairment testing
Issue 3: Contract costs — Interaction of impairment testing with guidance in other topics
Issue 4: Provisions for losses on construction-type and production-type contracts
Issue 5: Scope of FASB ASC 606
Issue 6: Disclosure of remaining performance obligations
Issue 7: Disclosure of prior-period performance obligations
Issue 8: Contract modifications example
Issue 9: Contract asset versus receivable
Issue 10: Refund liability
Issue 11: Advertising costs
Issue 12: Fixed-odds wagering contracts in the casino industry
FASB ASU No. 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services (A Consensus of the FASB Emerging Issues Task Force)
FASB ASU No. 2018-08, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made
Consideration of contributions versus exchange transactions
Consideration of donor-imposed restrictions
FASB ASU No. 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606
FASB TRG memos
Knowledge check
FASB ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU? Assets measured at amortized cost
Available-for-sale debt securities
Unit of account
Collateral-dependent financial assets
Disclosures
TRG issues
Issues considered on June 12, 2017. Memo No. 1 Discounting expected cash flows at the effective interest rate
Memo No. 2 Scope of PCD assets (purchased financial assets with credit deterioration) for beneficial interests
Memo No. 3 Transition guidance for PCD assets
Memo No. 4 Accounting for troubled debt restructuring
Memo No. 5 Determining the estimated life of a credit card receivable
Issues considered on June 11, 2018. Memo No. 8 Capitalized interest
Memo No. 9 Accrued interest
Memo No. 10 Transfer of loans from held-for-sale to held-for-investment and transfer of credit-impaired debt securities from available-for-sale to held-to-maturity
Memo No. 11 Recoveries
Memo No. 12 Refinancing and loan prepayments
When will this ASU be effective?
FASB ASU 2019-05, Financial Instruments—Credit Losses (Topic 326) Targeted Transition Relief. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of his ASU?
When will this ASU be effective?
FASB ASU NO 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
FASB ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
Risk component hedging
Accounting for the hedged item in fair value hedges of interest rate risk
Recognition and presentation of the effects of hedging instruments
Disclosures
When will this ASU be effective?
FASB ASU No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. Why was this ASU issued?
When will this ASU be effective?
FASB ASU No. 2016-02, Leases (Topic 842) Why was this ASU issued?
Who is affected by this ASU?
Election to exclude certain easements accounted for under current lease guidance
What are the main provisions of this ASU? Identifying a lease
Separating components of a lease contract
Lease classification
Lease term and measurement
Lessee accounting. Recognition and measurement
Presentation and disclosure
Lessor accounting. Recognition and measurement
Presentation and disclosure
Sale and leaseback transactions
Leveraged lease arrangements
Exhibit 3-1: Lease example—finance lease. Facts
Conclusions
Entries
Exhibit 3-2: Lease example—Operating lease. Facts
Conclusions
Entries
Calculation of annual lease expense
When will this ASU be effective?
Transition. Modified retrospective approach
Practical expedients
Lessee accounting. Leases previously accounted for as an operating lease
Leases previously accounted for as a capital lease and subsequently accounted for as a finance lease upon adoption
Leases previously accounted for as a capital lease and subsequently accounted for as an operating lease upon adoption
FASB ASU No. 2018-11, Lease Accounting, Targeted Improvements. Why was this ASU issued?
Transition – Comparative reporting at adoption
Separating components of a contract – Lessor accounting
FASB ASU No 2018-20, Leases (Topic 842) Narrow-Scope Improvements for Lessors. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU? Sales taxes and other similar taxes collected from lessees
Certain lessor costs
Recognition of variable payments for contracts with lease and non-lease components
When will this ASU be effective?
Knowledge check
Summary
Chapter 4 Private Company Financial Reporting. Learning objectives
Introduction
Private Company Council. Introduction
Predecessors to the PCC. Private Company Financial Reporting Committee
Private Company Standards Improvement Council
Formation of the PCC
Three-year review
Membership of the PCC
Implementation of PCC standards
Approval process
Private company decision-making framework
Knowledge check
FASB ASU No. 2013-12, Definition of a Public Business Entity—An Addition to the Master Glossary. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Knowledge check
FASB ASU No. 2016-03, Intangibles— Goodwill and Other (Topic 350), Business Combinations (Topic 805), Consolidation (Topic 810), Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance (a consensus of the Private Company Council) Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
FASB ASU No. 2014-02, Intangibles— Goodwill and Other (Topic 350): Accounting for Goodwill (a consensus of the Private Company Council) Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Example 4-1
Knowledge check
FASB ASU No. 2014-03, Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach (a consensus of the Private Company Council) Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Modified retrospective approach
Full retrospective approach
Knowledge check
FASB ASU No. 2014-07, Consolidation (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements (a consensus of the Private Company Council) Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
Knowledge check
FASB ASU No. 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination (a consensus of the Private Company Council) Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU?
When will this ASU be effective?
FASB ASU 2018-17, Consolidation Topic 810: Targeted Improvements to Related Party Guidance for Variable Interest Entities. Why was this ASU issued?
Who is affected by this ASU?
What are the main provisions of this ASU? Election to not recognize certain VIEs (Private Company Council Alternative)
When will this ASU be effective?
Transition
Current PCC activities. PCC Issue No. 18-01, “Practical Expedient to Measuring Grant-Date Fair Value for Equity-Classified Share-Based Payments”
International Financial Reporting Standard for Small and Medium-Sized Entities. Introduction
Comprehensive review of IFRS for SMEs
Section 1—Small and medium-sized entities
Section 2—Concepts and pervasive principles
Section 4—Statement of financial position
Section 5—Statement of comprehensive income and income statement
Section 6—Statement of changes in equity and statement of income and retained earnings
Section 9—Consolidated and separate financial statements
Section 10—Accounting policies, estimates, and errors
Section 11—Basic financial instruments
Section 12—Other financial instruments issues
Section 14—Investments in associates
Section 15—Investments in joint ventures
Section 16—Investment property
Section 17—Property, plant, and equipment
Section 18—Intangible assets other than goodwill
Section 19—Business combinations and goodwill
Section 20—Leases
Section 21—Provisions and contingencies
Section 22—Liabilities and equity
Section 26—Share based payments
Section 27—Impairment of assets
Section 28—Employee benefits
Section 29—Income tax
Section 30—Foreign currency translation
Section 33—Related party disclosures
Section 35—Transition to the IFRS for SMEs
2019 Comprehensive Review of IFRS for SMEs
Major differences between IFRS and IFRS for SMEs
Major differences between IFRS for SMEs and GAAP
Implementation of IFRS for SMEs
Implementation guidance issued by the IASB
Knowledge check
Summary
Note
Chapter 5 FASB Exposure Drafts and Projects. Learning objective
Introduction
Framework projects
Conceptual framework: Elements
Conceptual framework: Measurement
Conceptual framework: Presentation
Recognition and measurement projects. Broad topics. Distinguishing liabilities from equity (including convertible debt)
June 6, 2018
Accounting for convertible instruments
Indexation
January 30, 2019
Identifiable intangible assets and subsequent accounting for goodwill
Identifiable intangible assets and subsequent accounting for goodwill
Narrow topics
Presentation and disclosure projects
Summary
Chapter 6 The Current Environment and Implications for Audit Planning. Learning objectives
Understanding the entity and its environment
Industry, regulatory, and other external factors
Nature of the entity
Objectives, strategies, and related business risks
Knowledge check
Considering economic conditions to lower audit engagement risk
Current economic factors
Stock markets
Overall confidence in U.S. economy
Unemployment5
Interest rates7
Production10
Economic growth and inflation outlook
Consumer spending
Case study
Executive views of top risks for 2020
Exhibit 6-1 Executive perspectives of top risks for 2020
Enhancing risk assessment processes
Insufficient risk assessment procedures
Inadequate understanding of internal control
Failure to link procedures performed to risks identified
Consideration of risks deemed to be significant risks
AICPA tools for risk assessment
Knowledge check
Audit planning considerations
Consideration of common deficiencies noted in peer reviews
Knowledge check
Being alert to non-GAAP measures
Exhibit 6-2 SEC definition of non-GAAP financial measures
Special considerations for revenue recognition
Importance of maintaining and applying professional skepticism
Other issues to monitor
Knowledge check
Summary
Notes
Chapter 7 New Statements on Auditing Standards. Learning objectives
SAS No. 134: Auditor Reporting
Background regarding ASB’s project related to auditor reporting
IAASB auditor reporting project
PCAOB auditor reporting model
ASB audit reporting project
Forming an Opinion and Reporting on Financial Statements (revised AU-C section 700)
Exhibit 7-1 Illustration of the new auditor’s report on comparative financial statements prepared in accordance with accounting principles generally accepted in the United States of America
Effective date
Knowledge check
Communicating KAMs in the Independent Auditor’s Report (new AU-C section 701)
Exhibit 7-2 Report language related to communication of KAMs
Effective date
Knowledge check
Modifications to the Opinion in the Independent Auditor’s Report (revised AU-C section 705)
Effective date
Emphasis-of-matter paragraphs and other-matters paragraphs in the Independent Auditor’s Report (revised AU-C section 706)
Emphasis-of-matter paragraph
Other-matter paragraph
Effective date
Amendments to various SASs
AU-C section 570, Going concern
AU-C section 260, Communications with those charged with governance
AU-C section 210, Terms of engagement
Amendments addressing disclosures in the audit of financial statements
Exhibit 7-3 Overview of other amendments contained in SAS No. 134
Effective date
Knowledge check
SAS No. 135: Omnibus SAS-2019
Effective date
Background
Key amendments related to communications with those charged with governance (AU-C section 260)
Key amendments related to considering fraud in an audit (AU-C 240)
Key amendments related to related parties (AU-C 550)
Exhibit 7-4 Examples of others within the entity likely to be knowledgeable of related parties
Knowledge check
SAS No. 136: Reporting on Employee Benefit Plan Financial Statements
Effective date
Background
Current regulatory environment
Background regarding need for new form of auditor reporting related to EBPs
Key provisions of SAS No. 136
Engagement acceptance
Audit risk assessment and response requirements
Exhibit 7-5 Reportable findings
Communication with management or those charged with governance
Special provisions for ERISA Section 103(a)(3)(C) audits
Written representations
New reporting for situations that involve an ERISA-permitted audit scope limitation
Exhibit 7-6 Changes to auditor reporting for ERISA-permitted scope limitation
Knowledge check
SAS No. 137 — Auditor Responsibility for Other Information in Annual Reports
Effective date
Background
Key responsibilities related to other information
Exhibit 7-7 Example of other information
Exhibit 7-8 Definition of annual report in SAS No. 137. Annual report
Misstatements of other information
Auditor reporting on other information
Knowledge check
SAS No. 138 — Description of Materiality
Effective date
Background
Key provisions of SAS No. 138
Knowledge check
Summary
Chapter 8 Other Standards-Setting Activities Affecting Audit and Attestation Engagements. Learning objectives
Exposure drafts of proposed SASs
Proposed SAS on audit evidence (AU-C section 500)
Background
Emerging techniques and technologies
Professional skepticism
External information sources
Key elements of the proposed changes
Guidance to evaluate attributes and factors of information used as audit evidence
Automated tools and technologies
Professional skepticism
Definitions
Sufficiency and appropriateness
External information sources
Audit procedures
External confirmations
Management’s specialists
Effective date
Knowledge check
Proposed SAS on auditing accounting estimates and related disclosures (AU-C section 540)
Background
Convergence and the ASB estimates project
Key elements of the proposed changes
Separate assessment of inherent risk and control risk
Scalability
Enhanced risk assessment
Responses to the assessed risks of material misstatement
Reference to relevant requirement in other AU-C sections
Exercise of professional skepticism
Evaluation of the estimates
Effective date
Knowledge check
Proposed SAS on amendments to AU-C Sections 800, 805, and 810 to incorporate auditor reporting changes from SAS NO. 134
Background
Key elements of the proposed changes
Changes to AU-C section 800
Changes to AU-C section 805
Changes to AU-C section 810
Effective date
Proposed SAS on amendments to AU-C sections 725, 730, 930, 935, and 940
Background
Key elements of the proposed changes
Proposed revisions to AU-C section 930, Interim Financial Information
Proposed revisions to AU-C section 935, Compliance Audits
Proposed revisions to AU-C section 940, An Audit of Internal Control Over Financial Reporting That is Integrated with An Audit of Financial Statements
Proposed revisions to AU-C section 725, Supplementary Information in Relation to the Financial Statements as a Whole
Proposed revisions to AU-C section 730, Required Supplementary Information
Effective date
Knowledge check
Recently issued auditing interpretation
New audit interpretation on reporting on audits conducted in accordance with AICPA and PCAOB Standards
Background
New interpretative guidance
Knowledge check
Recently issued technical questions and answers (Q&As)
New Qs&A related to deferred taxes
New Qs&A related to the initial implementation of the new form of audit reporting
New Q&As related to special reports
New Q&As related to state and local governments
Recently issued attestation standards
Overview of SSAE No. 19, Agreed-Upon Procedures Engagements
Effective date
Background
Key provisions of SSAE No. 19
Items not addressed by SSAE No. 19
Knowledge check
Overview of SSAE No. 20, Amendments to the Description of Concept of Materiality
Effective date
Background
Key provisions of SSAE No. 20
Knowledge check
Outstanding exposure draft of proposed revisions to SSAEs
Proposed changes that affect all attestation engagements
Proposed changes that affect examination and review engagements
Proposed changes that affect only examination engagements
Proposed changes that affect only review engagements
Knowledge check
Attest interpretations
ASB’s standards setting agenda
Risk assessment (AU-C section 315)
Management’s specialists (AU-C section 501)
Quality management (QC section 10, AU-C section 220)
Group audits — Revision of ISA 600
Summary
Chapter 9 PCAOB Update. Learning objectives
About the PCAOB
PCAOB’s Strategic Plan 2019-2023
Background
Strategic goals
Recently issued PCAOB auditing standards
PCAOB AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion3
Effective date
Key elements of the new auditor’s report
The auditor’s unqualified report
Critical audit matters
Exhibit 9-1 Example of PCAOB’s new standard unqualified audit report
Critical Audit Matters [If applicable]
Case study
Communication of critical audit matters
Critical audit matters language in report
Critical audit matters
Documentation of critical audit matters
Initial feedback about reporting on CAMs
Disclosure about auditor tenure
Explanatory language added to the auditor’s report
Other notable changes to the auditor’s report
Changes to other standards
New PCAOB staff guidance
Knowledge check
PCAOB AS 2501 (Revised): Auditing Accounting Estimates, Including Fair Value Measurements and related amendments5
Effective date
Overview of the new standard key provisions
Background
Overview of existing standards
Areas of focus in PCAOB AS 2501 (Revised)
Enhanced emphasis on the risk assessment process
Required discussion about management bias
Greater attention to potential for management bias
Emphasis on a more uniform approach to substantive testing
Guidance specific to testing pricing data
Knowledge check
New auditing standard on the use of specialists
Effective date
Overview of the new standard key provisions
Background
Current standards
Key elements of the new standard
Guidance related to using work of a company specialist (PCAOB AS 1105)
Guidance related to using work of an auditor-employed specialist (PCAOB AS 1201)
Guidance related to using work of an auditor-engaged specialist (PCAOB AS 1210)
Knowledge check
Recently issued exposure drafts of proposed PCAOB auditing standard
Background
Current standards
Evolving practice
Areas of focus in proposed standards
Exhibit 9-2 Proposed definitions
Knowledge check
Recently issued concept release
Other ongoing, audit-related projects of the PCAOB
Going concern
Use of data and technology in the conduct of an audit
Auditor’s role regarding other information and company performance measures
Auditor consideration of noncompliance with laws and regulations
Knowledge check
Summary
Notes
Chapter 10 Preparation, Compilation, and Review Engagement Update. Learning objectives
Reminder of SSARS-related engagements
High-level differences among preparation, compilation, review, and audit engagements
Exhibit 10-1 Highlights of key differences across SSARS engagement types
Knowledge check
SSARS No. 24 — Omnibus SSARS–2018
Effective date
New AR-C section on international reporting
Financial reporting framework generally accepted in another country
Considerations when accepting engagement
Applicability of guidance in AR-C sections 80 and 90
Reporting intended for use only outside the United States
Reporting intended for use in the United States
Exhibit 10-2 Illustration of accountant’s compilation report on financial statements prepared in accordance with a financial reporting framework generally accepted in another country performed in accordance with SSARSs and another set of compilation standards and the financial statements are intended for use only outside the United States
Exhibit 10-3 Illustration of independent accountant’s review report on financial statements prepared in accordance with a financial reporting framework generally accepted in another country performed in accordance with SSARSs and another set of review standards and the financial statements are intended for use only outside the United States
New responsibilities related to going concern considerations in review engagements
Background
Written representations from management in review engagements
Requirements when financial reporting framework requires management to evaluate going concern
Requirements when financial reporting framework does not require management to evaluate going concern
Defining reasonable period of time
Emphasis-of-matter paragraph
Exhibit 10-4 Illustration of emphasis of matter regarding going concern
Amended responsibilities related to references to work of other accountants
Other accountant’s understanding of ethical requirements
Other accountant’s report restricts the use of such report
Other accountant uses standards other than SSARS or GAAS
Financial statements of other accountant based on different financial reporting framework
Amendments to general principles
Exhibit 10-5 Definition of Financial Reporting Framework
Knowledge check
SSARS No. 25, Materiality in a Review of Financial Statements and Adverse Conclusions
Background
Importance of convergence with international standards
Importance of consistency with certain concepts in the auditing standards
Key provisions of SSARS No. 25
Revisions to AR-C section 60, General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services
Revisions to AR-C section 70, Preparation of Financial Statements
Revisions to AR-C section 80, Compilation Engagements
Revisions to AR-C section 90, Review of Financial Statements
Explicit requirement for the accountant to plan and perform the review with professional skepticism
Explicit requirement related to materiality considerations
Requirement for the accountant to inquire of members of management
Requirements for the accountant, during the review, to remain alert for related party relationships or transactions
Expands requirements related to the accountant’s consideration of subsequent events and subsequently discovered facts
Provide for the ability for the accountant to express an adverse conclusion
Documentation requirements
Restatements of previously issued financial statements
Effective date
Knowledge check
Common practice issues
Preparation versus consulting services
Consideration of going concern
Restatements
Application of SSARS to engagements for estates and trusts
Knowledge check
Documenting analytical procedures performed in a review engagement
Example 10-1 Documentation of the performance of an analytical procedure
Case study
Summary
Notes
Chapter 11 Other Recently Issued Guidance. Learning objectives
Overview of COSO
COSO guidance related to enterprise risk management
Identification of core principles
Exhibit 11-1 20 principles representing fundamental enterprise risk management concepts
COSO thought paper on applying ERM to ESG risks
Exhibit 11-2 Mapping of ESG guidance to ERM framework
Knowledge check
COSO thought paper on managing cyber risks in the digital age
Background
Exhibit 11-3 Common perpetrators of cyberattacks
COSO thought paper on creating and protecting value
Exhibit 11-4 Seven themes valuable for ERM success
COSO thought paper on implementing internal control in healthcare provider organizations
Exhibit 11-5 Five Components and 17 Principles of Effective Internal Control
AICPA audit quality initiative
Enhancing audit quality initiative
Components that form the foundation of audit quality
Six-point plan to improve audit quality
New Guide to Audit Data Analytics
Continued focus for 2019-2020 audits
Auditors should visit the AICPA’s Risk Assessment Resources website.6
Knowledge check
CAQ audit quality framework
Purpose and content of framework
Staying abreast of emerging technologies
Emerging technologies to watch
Blockchain
Artificial intelligence
Robotic process automation
Cybersecurity
Digital assets
Audit data analytics
Summary of changes to the AICPA Code of Professional Conduct
Revised interpretation, leases
Threats and safeguards approach replaces GAAP categorization approach
Impact of lease on member independence
Grandfathered leases
Effective date
New interpretation, “disclosing client information in connection with a quality review”
Background
Guidance in the new interpretation
Revised interpretation, Information Systems Services
Background
Key revisions
Financial information system
Nonfinancial information system
Determination of whether information system is financial or nonfinancial
Revised interpretation, “state and local government affiliates”
Background
Financial reporting objectives differ between state or local government (SLG) and commercial sector entities
Financial statement presentation differ between SLG and commercial sector entities
Revised guidance
Knowledge check
Summary of exposure drafts of proposed changes to the AICPA Code of Professional Conduct
Exposure draft — Proposed interpretation, staff augmentation
Background. Staff augmentation arrangements
SEC Independence Provisions—Release No. 71390
IESBA
Staff augmentation arrangements interpretation. Prohibited employment versus nonattest service
Paragraph .02: Required Safeguards
Suitable skill, knowledge, and experience
Management responsibilities and nonattest services that are not prohibited
Duration of the arrangement
Evaluating the appearance of simultaneous employment
Examples of safeguards
Effective date
New FAQ on long association of senior personnel with an attest client
Background
Guidance to assess significance of threat
Evaluate safeguards
Strategy and work plan of AICPA Professional Ethics Division
Knowledge check
Summary
Notes
Accounting and Auditing Glossary
Index
ANNUAL ACCOUNTING AND AUDITING WORKSHOP. BY KURT OESTRIECHER, CPA; AND MARK BEASLEY, PH.D., CPA
Solutions. Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
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