Audits

Articles for CPAs during the pandemic.

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Lots of articles are appearing that can help CPAs during the pandemic. There are new and depressingly creative ways this is going to affect financial reporting. I’ll start mentioning some of those articles that grab my attention and may be of interest to you.

3/31/20 – FEI Daily – How Lease Accounting Will Be Affected by Coronavirus – Turmoil in leasing office space will create lots of complications under ASC 842, the new lease accounting rules. Article calls attention to: rent concessions, discount rate, fair market values, impairment, partial termination, reassessment, full termination abandonment, and information delay.

3/29/20 – Forbes – For Higher Education, Nothing Matters More Than September – …

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Financial reporting issues to consider during early stages of COVID-19 pandemic

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A range of financial reporting issues need careful attention during the COVID-19 pandemic. These issues are old news in the professional literature but need to be considered more intentionally.

The AICPA published a special report on March 18, 2020. The report, Consequences of COVID-19 Financial Reporting Considerations, was drafted by the Center for Plain English Accounting and is available at no charge.

On 3/14/29, I was Pondering impact of coronavirus prevention steps on financial statements. An auditor’s perspective. The AICPA report goes into far more detail.

Here, in bullet point italics, are the items mentioned for your focus, with a few of my comments for highlight:

  • Subsequent Events

Type II subsequent events are those which take place after the financial statement date which are so significant that they warrant mention in the financial statements to keep those statements from being misleading.

  • Subsequent Events – Market-Value Declines

A technical Q&A (TQA 9070.06) indicates there are some occasions that can arise which warrant adjusting financial statements based on subsequent declines in market value.

  • Subsequent Events – COVID-19

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Pondering impact of coronavirus prevention steps on financial statements. An auditor’s perspective.

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If you are an auditor getting ready to issue opinions on client financial statements, you might want to ponder the subsequent event implications of the U.S. shutting down large portions of the economy this week. Might want to take a closer look at going concern assumptions.

If you happened to have slept well last night, you might ponder the impact on the financial statements you released a couple weeks ago.

Subsequent events

Here are some initial thoughts for consideration as disclosable material subsequent events and perhaps contingent liabilities:

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Disciplinary actions by California Board of Accountancy in first half of 2019.

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That view is enough to make you cringe. Sort of like some of the situations recently addressed by the Board of Accountancy. Image courtesy of Adobe Stock.

Update newsletter issue 89 for Fall 2019 has 33 disciplinary actions listed. Timeframe of the effective dates is the first half of 2019.  My recap of actions by the California Board of Accountancy is listed below. I counted as one action those situations involving a firm and the owner of the firm.

Revocations

audit fail other issue
1 3 felony
1 1 didn’t complete contracted service
1 audit fail
1 audit fail and no peer review
1 no peer review & expired license
2 probation violations
1 some deeper issues, not quite apparent from summary
4 8 total revocations

 

Of the CPAs with felony issues, two were for embezzlement, one also had an audit failure, and another ended up with conviction on 12 counts.

Two of the revocations were for rather extensive violations of a previous disciplinary action.

Revocations stayed

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SEC practice ban for three accountants tangled up in KPMG/PCAOB fiasco.

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Securities and Exchange Commission Building, Washington, DC.

Going Concern is doing a great job keeping us all updated on the status of the current felons / former KPMG and PCAOB staff tangled up in the inspection list theft fiasco.

Several tidbits from Jason Bramwell on 1/16/20 I just noticed:  SEC Takes Away Privileges From Another Felon In KPMG/PCAOB Scandal.

Staff who have been banned by the SEC from practicing before the Commission:

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“Resources from the AICPA’s Enhancing Audit Quality (EAQ) Initiative” – PR Prompts!, part 6

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In November 2019, the AICPA published the first of a new semi-annual newsletter, PR Prompts!, designed to help CPAs keep current on peer review news.

The AICPA gave me permission to reprint portions of the newsletter on my blog.

This is the last of six posts to help you stay up to date.

The following comment is quoted verbatim. For ease of reading it will not be set inside quotation marks:

 

Resources from the AICPA’s Enhancing Audit Quality (EAQ) Initiative

Through the EAQ, the AICPA provides resources and education to help you avoid the most common audit quality issues. Check out their latest resources:

Risk Assessment and Response

In a survey of peer reviewers, over 50% of firms reviewed failed to comply with the risk assessment standards. Access free risk assessment tools, including industry-specific resources, to help you avoid common issues.

Also, watch the EAQ’s ENGAGE conference presentation with methodology providers to learn how to properly apply their methodologies and avoid the areas creating the most challenges for practitioners.

Internal Control

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“Auditor Reporting” – PR Prompts!, part 5

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A complete overhaul of the auditor’s report for audits of 12/31/20 financial statements is going to be a very big deal. Please tune in to the new standards!

In November 2019, the AICPA published the first of a new semi-annual newsletter, PR Prompts!, designed to help CPAs keep current on peer review news.

The AICPA gave me permission to reprint portions of the newsletter on my blog.

This is the fifth of six posts to help you stay up to date.

I have looked at this page on the AICPA website. It is quite helpful. If you provide audits to your clients, it would be worth your time to find, browse, and bookmark this page.

The following comment is quoted verbatim. For ease of reading it will not be set inside quotation marks:

 

Auditor Reporting

The form and content of the auditor’s reports will change substantively which will be effective for audits of financial statements for periods ending on or after December 15, 2020. Statement on Auditing Standards (SAS) No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, was issued in May 2019. SAS No. 134 includes a new AU-C section 701, Communicating Key Audit Matters in the Independent Auditor’s Report, and replaces the following AU-C sections in AICPA Professional Standards:

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“Auditing Standards Issued in 2019: Information and Resources” – PR Prompts!, part 4

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Image courtesy of Adobe Stock.

In November 2019, the AICPA published the first of a new semi-annual newsletter, PR Prompts!, designed to help CPAs keep current on peer review news.

The AICPA gave me permission to reprint portions of the newsletter on my blog.

This is the fourth of six posts to help you stay up to date.

 

I have looked at the following page on the AICPA website. It is quite helpful. If you provide audits to your clients, it would be worth your time to find, browse, and bookmark this page.

The following comment is quoted verbatim. For ease of reading it will not be set inside quotation marks:

 

Auditing Standards Issued in 2019: Information and Resources

This is an exciting time in the auditing space. Standards are changing to keep up with today’s business environment. To set you up for success, we’ve gathered resources on auditing standards that include on changes to the auditing reporting standard, the employee benefit plan auditing standard and the other information standard. These include backgrounders, FAQs and news articles.

 

As mentioned at the top of this post, this article is reprinted with permission of the AICPA.

 

“Single Audits – 2019 Compliance Supplement” – PR Prompts!, part 3

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Image courtesy of Adobe Stock.

In November 2019, the AICPA published the first of a new semi-annual newsletter, PR Prompts!, designed to help CPAs keep current on peer review news.

The AICPA gave me permission to reprint portions of the newsletter on my blog.

This is the third of six posts to help you stay up to date.

The following comment is quoted verbatim. For ease of reading it will not be set inside quotation marks:

 

Single Audits – 2019 Compliance Supplement

The 2019 Compliance Supplement (Supplement) used for conducting single audits includes extensive changes from prior years. The most significant change relates to the Office of Management and Budget (OMB) requirement for federal agencies to limit the number of requirements identified as being subject to the compliance audit; it was decreased from a maximum of 12 to 6. …

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“FASB Defers Effective Dates for Three Major Accounting Standards” – PR Prompts, part 2

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Image courtesy of Dollar Photo Club.

In November 2019, the AICPA published the first of a new semi-annual newsletter, PR Prompts!, designed to help CPAs keep current on peer review news.

The AICPA gave me permission to reprint portions of the newsletter on my blog.

This is the second of six posts to help you stay up to date.

The following comment is quoted verbatim. For ease of reading it will not be set inside quotation marks:

 

FASB Defers Effective Dates for Three Major Accounting Standards

Effective dates will be delayed for private companies and certain other entities for the Financial Accounting Standards Board’s (FASB’s) standards on accounting for leases, credit losses (CECL) and hedging after a unanimous vote by FASB in October 2019. …

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“New Requirement to Complete Your Firm’s Peer Review Information Annually” – PR Prompts, part 1

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Image courtesy of Adobe Stock.

In November 2019, the AICPA published the first of a new semi-annual newsletter, PR Prompts!, designed to help CPAs keep current on peer review news.

The AICPA gave me permission to reprint portions of the newsletter on my blog. My thanks to the AICPA for producing this information and for giving me reprint permission.

This is the first of six posts to help you stay up to date.

The following comment is quoted verbatim. For ease of reading it will not be set inside quotation marks:

 

New Requirement to Complete Your Firm’s Peer Review Information Annually

The AICPA Peer Review Program (Program) is committed to support and enhance audit quality of firms on an ongoing basis, not just during the formal process of peer review. As such, starting in mid-2020 the AICPA Peer Review Board (PRB) will require annual submission of peer review information from all firms enrolled in the Program.

The PRB expects that annual submission of peer review information will benefit firms in the following ways:

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New SAS and SSAE modify definition of materiality

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The Auditing Standards Board has issued SAS 138 and SSAE 20 which change the definition of materiality. Under current audit standards, the materiality definition matches what is currently in use by IASB and IAASB. The revision will get the definition to match what is currently used by the American legal system, PCAOB, SEC, and FASB.

The new definition:

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Last person in KPMG inspection leak fiasco enters guilty plea

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The last person to face justice in KPMG’s fiasco of gaining illegal access to PCAOB inspection lists entered a guilty plea a few weeks before his scheduled trial.

David Britt entered a guilty plea on 10/3/19 to one count conspiracy to commit wire fraud. His trial would have otherwise started on 10/21/19.

Sentencing is scheduled for 5/8/20.

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