There is lots of new stuff for CPAs to ponder and understand. CPE is a requirement right?Well last week I went to get educated and updated. In case you haven’t noticed a lot of things have changed. And changed a lot! There are changes ranging from peer review to compilations, reviews, and audit standards. On top of all this stuff we have accounting standards codification.
It seems a bit mind boggling and can quickly take you to overload. If this isn’t enough we need to have some sense of the impending emergence of IFRS. No you’re not going to get all this information condensed in this blog post, but we’ll give you enough information so you might want to learn more.
First, make sure you understand the contents of the AICPA’s Statement on Quality Control Standards (SQCS) No. 7 dealing with a firm’s system of quality control. It became effective on January 1, 2009 and while it didn’t issue any new objectives, it issued guidance on the new International Standards. It outlines independence, integrity, objectivity, personnel management, acceptance and continuance of clients and engagements, engagement performance, and monitoring. There is more detail and obviously the devil is in the details.
In addition to SQCS No. 7, we have new statements on auditing standards, known as SAS. The big change was SAS No.104 to No. 111 dealing with assessment of audit risk. If you haven’t brushed up on these new requirements and implemented them into your practice, add them to your to do list. In addition, you might want to add SAS No. 112 to SAS No. 120 to the list. These relate to from things like interim financial information to supplemental information and required supplementary information.
There are some things to watch under new accounting issues. Variable interest entities under FIN 46 (R) and combined financial statement are things you need to be aware of and how to deal with them. Another hot issue is FIN 48 and income basis tax reporting. You need to be aware of the issues and ramifications. The next hot potato is Statement No. 159 dealing with fair value of financial assets and financial liabilities. Another topic to consider is Statement No. 157 dealing with fair value measurements. Finally, make sure you are familiar with FASB Accounting Standards Codification which you can find at http://asc.fasb.org/home. Familiarity with these topics could make your life and peer review process a little easier. You can get an individual account to access the codification site.
Now let’s deal with compilations and reviews because the rules change after December 15, 2010. Check out SSARS (Statement on Standards for Accounting and Review Services) No. 19. For over 30 years CPAs have been required to disclose in the compilation report that they were not independent but prohibited from disclosing the reasons why. This was changed because third party users of the statements, primarily bankers, wanted to know and understand the reasons for impairment of independence. Now the CPA has the option, but is not required to disclose the reasons for impairment of independence. However, if you disclose the reason for impairment, you need to disclose all the reasons.
The new rules require documentation of the understanding with management regarding the services to be performed with respect to both compilations and reviews. You also need to indicate any findings or issues that are significant. Pay special attention to the reports because they have been changed and have new wording.
Performing review engagements now place greater emphasis on fraud and work paper documentation. Refer to SSARS No. 10 for more guidance on tailoring inquiries and performing analytical procedures based on the accountant’s knowledge of the business and industry. It is likely that more time will need to be devoted to planning. This should be taken into consideration in pricing engagements.
I have covered a bunch of stuff in a short blog post to at least alert you so you can prepare yourself for the new rules. This would be a good time to schedule some CPE so you are ready when you begin scheduling your accounting engagements in the next year. I found that two full days dealing with the new pronouncements was an eye opener and wanted to share these feelings with you. Have fun getting updated and understanding where the speed bumps are located.