Attestation Update – A&A for CPAs

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Archive for the ‘Audits’ Category

2018 nonprofit risk alert is available. New edition adds discussion on valuation of GIK as rebuttal to California AG.

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Cover of 2018 NFP risk alert, used under fair use since I’m recommending you buy the document.

The AICPA has released the 2018 edition of Not-for-Profit Entities Industry Developments.

If you are a CPA serving the not-for-profit community, you need to read this document each year. It provides a survey of the accounting and auditing issues affecting the nonprofit world.

If you are an auditor, there are several other risk alerts you ought to be reading every year.

(Cross-posted from my other blog, Nonprofit Update, since this information is useful for many CPAs.)

If you are working for a nonprofit, these alerts would give you a good survey of accounting issues in general and the audit issues your CPA will be dealing with this year.

Valuation of Gifts in Kind

Of particular interest are new comments responsive to the challenge from the California AG over valuation of GIK. The 2017 and 2016 editions had minimal comments on GIK.

The 2018 edition has a new section, Gifts-in-Kind: Reporting Contributions of Nonfinancial Assets, in paragraphs .53 through .57, which describes the AICPA’s interpretation of GAAP.

Years after the mebendazole issue has faded away, the second bullet point of paragraph .56 says that when GIK is sourced outside the U.S. and is not approved for distribution in the U.S., the meds should be valued at international prices. (If you have been following this issue for years, you realize the concession made by that comment.)

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Written by Jim Ulvog

June 11, 2018, 8:40 am at 8:40 am

Posted in Accounting, Audits

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Accounting for donated medicine drawing regulatory attention: California A.G. files 3 cease and desist orders.

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Image courtesy of Adobe Stock.

The California Attorney General has taken exception to the valuation of donated medicine by three large charities.

In March 2018 MAP International, Food for the Poor, and Catholic Medical Mission Board were served with cease and desist orders insisting the charities cease using their claims of extremely high program service percentages. The AG also seeks to revoke charitable registration status in the state for MAP and FftP. The cease and desist orders seek to impose substantial fines on the charities.

The AG also claims that FftP incorrectly applied joint cost allocation.

The filed actions alleged that financial reporting for the years 2012 through 2015 is incorrect. This would include the audited financial statements, 990s, and RRF-1s (for MAP and FftP).

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Written by Jim Ulvog

March 20, 2018, 8:33 am at 8:33 am

Posted in Accounting, Audits

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Another round of disciplinary actions from California Board of Accountancy

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The firms that make up the following list were not traveling on the above highway. Image courtesy of Adobe Stock.

Starting with the newest Update report for Fall 2017 (#85), the California Board of Accountancy has stopped listing the underlying problem leading to disciplinary action. This means it only took 16 pages to list the 44 actions reported currently. It also seems the CBA is listing actions against firms and the practitioner together.

This means the cringe inducing details are not immediately visible, even though the full disciplinary reports are public records and publicly available. I didn’t bother to take the time to research the reports.

I have tallied the current batch of discipline cases. Underlying problem is inferred by me based on the comments in the newsletter. I haven’t looked up any of the cases or looked up the reg sections cited for discipline. So, with those caveats, here are my inferences of the current disciplinary actions:

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Written by Jim Ulvog

February 7, 2018, 7:45 am at 7:45 am

Recap of indictments for KPMG inspection document fiasco

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Image courtesy of Adobe Stock

For a year we have known of a fiasco at KPMG in which the firm obtained a list of PCAOB’s plans for inspecting KPMG audit workpapers. That information was floated around at the senior levels of the firm. Multiple people were fired.

This week, the Department of Justice unsealed indictments against four former KPMG employees and one former PCAOB employee.

Let’s dive into the details.

Players

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Written by Jim Ulvog

January 25, 2018, 9:47 am at 9:47 am

Posted in Audits

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Common deficiencies in audit engagements

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Image courtesy of Adobe Stock.

Let’s look at an eight point list of common deficiencies in audits for a quick check of the quality of our engagements. Often times those lists of common deficiencies run for pages and pages, essentially covering just about every major component of an audit. Those kinds of run-on lists don’t really help.

The AICPA’s Audit Risk Alert – General Accounting and Auditing Developments – 2017/18 provides a usable list of eight most common deficiencies identified in the recent peer reviews. Pondering this list provides a good way to do a self-check of your engagements.

Here is my paraphrase of the eight points:

Incorrect dating of the auditor’s report. The report date needs to match the release date which should be after the date all the documentation has been reviewed, the financial statements been prepared, and management has taken responsibility for the financial statements. The risk alert refers to AU-C 700.41.

Inadequate documentation of sampling methodology. AU-C 530 explains how to perform a sample. The methodology must be documented or the reviewer won’t be able to understand why the audit evidence is sufficient.

Insufficient audit documentation. Read the rest of this entry »

Written by Jim Ulvog

January 23, 2018, 12:08 pm at 12:08 pm

Posted in Audits

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What can you learn from a list of common auditor mistakes?

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Image courtesy of Adobe Stock.

You might learn a few things from a list of Forty Mistakes Auditors Make. If you can identify a few ways to improve your audit approach you could save time, improve the quality of your audit, and maybe reduce your risk.

Lots of auditors are in the midst of planning their year-end audits and reviews. Now would be a really good time to think about how to do better, more efficient work.

Writing at CPA Scribo, my friend Charles Hall outlines a number of goofs made by auditors. I’ll list a few tidbits in order to encourage you to read and ponder the whole list:

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Written by Jim Ulvog

January 15, 2018, 8:18 am at 8:18 am

Exposure drafts on major revisions to auditor’s report

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In November the AICPA released three exposure drafts which, if approved, would overhaul the auditor’s report.

Here are two articles to give you an overview:

An extremely condensed summary of the changes:

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Written by Jim Ulvog

December 21, 2017, 6:00 am at 6:00 am

Posted in Audits

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