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CAQ Alerts Auditors on Key Risk Areas in 2016 Audit Cycle

Oct 5th 2016
Staff Writer and Editor AccountingWEB
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In two new member alerts released on Oct. 4, the Center for Audit Quality (CAQ) shed some light on potential areas of risk that auditors should be aware of during the 2016 audit cycle.

“The CAQ and the public company auditing profession are deeply committed to continuously improving audit quality in order to better serve investors and capital markets,” CAQ Executive Director Cindy Fornelli said in a written statement. “As risks and regulatory priorities evolve, the CAQ will continue to issue alerts and disseminate the latest resources for the benefit of our members and others.”

The first alert, Select Auditing Considerations for the 2016 Audit Cycle, highlights some of the more judgmental or complex audit areas for the upcoming audit cycle, including some of those identified by the Public Company Accounting Oversight Board (PCAOB) through its inspection process and published in recent PCAOB staff inspection briefs.

The topics covered in the alert include:

  • Improving transparency through disclosure of engagement partner and certain other participants.
  • Improper alteration of audit documentation.
  • Effective communication with audit committees.
  • Assessing and responding to risks of material misstatement.
  • Internal control over financial reporting.
  • Segment identification and disclosure.
  • Going concern.
  • Additional considerations for the 2016 audit cycle, such as accounting estimates, including fair value measurements; cybersecurity; auditor independence; implementation of AS 2410, Related Parties; and firm software audit tools.

In the second alert, Select Auditing Considerations for the 2016 Audit Cycle for Brokers and Dealers, the CAQ provides considerations for the 2016 audit cycle that may be relevant for audit and attestation engagements of brokers and dealers registered with the US Securities and Exchange Commission, including areas that have recently been the subject of attention and focus by the PCAOB in its inspection process.

This alert covers the following topics:

  • Revenue recognition.
  • Assessing and responding to risks of material misstatement due to fraud.
  • Financial statement presentation and disclosures.
  • Auditor independence.
  • Related party transactions.
  • Supplemental information accompanying financial statements.
  • Engagement quality review.
  • Examination engagements.
  • Review engagements.
  • Securities Investor Protection Corporation (SIPC) Rule 600, Rules Relating to Supplemental Report of SIPC Membership.
  • PCAOB rules 3210 and 3211.

The CAQ member alerts highlight certain areas for consideration, but are not meant to be relied upon as definitive or all-inclusive and should be read in conjunction with the applicable rules, standards, and guidance in their entirety, according to the CAQ.


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