Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Posts Tagged ‘audit methodology

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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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

A Halloween costume that would make any CPA pass out from fright – an auditor performing one pension plan audit

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Photo courtesy of DollarPhotoClub.com

Photo courtesy of DollarPhotoClub.com

Amid the cute little kids in their funny costumes, this pleasant Halloween night there was a grown man in a suit at the door asking for candy. White shirt, red tie, gray pinstripe.

Not so scary, thought I.

(Tale of this particular night was originally posted on October 31, 2013.)

“What are you dressed up as?”

“An auditor,” came the reply.

That’s not frightening, since I’ve been an auditor for a long time. But it did explain the standard issue uniform.

So, putting on my peer reviewer hat, I asked, “what audit work do you do?”

“Oh, only one pension plan….

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Written by Jim Ulvog

October 31, 2017, 8:33 am at 8:33 am

Posted in Audits

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Various thoughts from continuing education classes this year, part 3. Not so good news on audit and peer review quality.

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The road we CPAs need to be on, but not all of us are…
Image courtesy of Adobe Stock.

As I’ve mentioned here and here, I have reread my notes from several continuing education classes this year. Thought I would share a variety of stray ideas.

Probably need to note again that I have not gone back and read the original pronouncements supporting each idea and therefore I do not have a specific citation for you. (Reading three of the documents is the next step for  my writing project.)

(Cross-posted from my other blog, Nonprofit Update.)

I should probably throw in a disclaimer. All of the comments I’m mentioning were the opinion of the presenter, not the agency from whom the person was drawing a paycheck. That is why I’m not mentioning the names of the presenters, or even the CPE event. In addition, the rephrasing of their comments is my interpretation, not their words.

Here are some tidbits you might enjoy:

More interest in Financial Reporting Framework for Small- and Medium-sized Entities (FRF-SME)?

The FRF-SME framework is a non-GAAP alternative to GAAP. It is dramatically less complicated with the promise it will not be revised more often every three years.

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Written by Jim Ulvog

October 5, 2017, 9:44 am at 9:44 am

Another overview of blockchain technology; time to start figuring out this stuff.

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Sure does look like this blockchain technology is going to be a big deal. Might be time to start getting our minds wrapped around the concept.

For starters, check out this short overview:

 

 

For a bit more detail:

8/4/17 – Bill Sheridan at Business Learning Institute – Block chain might remake accounting. The opportunities are huge. – Introductory article is one of the better overviews I have read. It introduces the video shown above.

One sentence description of Block chain, quoting from the article:

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Written by Jim Ulvog

August 15, 2017, 7:31 am at 7:31 am

Brain stretching accounting articles for CPAs

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Image courtesy of Dollar Photo Club before their merger into Adobe Stock.

Here are a few articles to stretch your brain when you are ready for some mental exercise:

  • Is the double-entry accounting system broken?
  • What is the recidivism rate for white-collar criminals and how could that affect my audits?
  • What  possible changes are on the horizon for the audit opinion?

5/17/17 – Tom Selling at The Accounting Onion – Double-Entry Accounting and Modern Times – As a real brain stretcher, consider whether our double-entry accounting system is fundamentally broken.

Work with me a minute while I highlight and summarize a few ideas from the article.

A basic concept of double-entry accounting is that debits on the left side of the balance sheet represent all the assets of the entity. This includes all of the resources that are available for the entity to use in order to make money and all the assets against which creditors have a claim.

On the credit side, liabilities represent all of the claims against the organization. The equity section represents the value that belongs to the owners.

Prof. Selling points out there’s a variety of problems with using the statement of financial position as a representation of economic reality.

He points out and then moves past the idea that not all debits are assets and not all credits are liabilities. That’s easy to understand.

More significantly is that not all assets are reflected as debits and not all liabilities are reflected as credits.

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Written by Jim Ulvog

June 1, 2017, 9:43 am at 9:43 am

Posted in Accounting, Audits

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