Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Posts Tagged ‘audit methodology

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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Helpful comments from 2017 CalCPA Not-for-profit conference, part 1

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Image courtesy of Adobe Stock.

Here are a few of the comments from the May 24, 2017 Not-for-profit conference presented by California Society of CPAs that I thought would be of interest to others in the nonprofit community. Since all comments are the opinion of the speaker, neither their name nor organization will be mentioned. The ideas mentioned can stand or fall on their own.

This is the first of two posts. The next discussion will address changes in financial statement presentation outlined in ASU 2016-14. In this post: tax, revenue recognition, and single audit.

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

Tax update:

  • It might just be possible that filing a form 1023 or 1023-EZ is so easy that people can get exempt status for an organization without knowing the requirements to properly operate a charity and maintain exempt status. In examinations to follow-up on exempt status, the IRS is finding a lot of charities are out of compliance.
  • One of several focuses of the IRS is filing of FBARs, those forms used to report overseas bank accounts. One ripple effect of chasing money laundering is the impact on charities who have overseas accounts. Even though there is minimal risk of those accounts being used for tax evasion the FBAR filing requirement still apply. As a reminder, the deadline for filing FBARs is now April 15 with a six-month extension available.

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Written by Jim Ulvog

May 30, 2017, 7:46 am at 7:46 am

Posted in Accounting, Audits

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Not-for-profit risk alert for 2017 is available

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Cover of 2017 risk alert from the AICPA, used under fair use since I’m urging you to buy their product.

The 2017 risk alert for non-profits is available from the AICPA.

Highlighted updates this year include:

  • AUS 2016-14 – New financial statement presentation
  • ASU 2016-02 – Leases
  • SAS 132 – Going concern

If you don’t feel overwhelmed, you haven’t been paying close enough attention to recent pronouncements. If so, the risk alert will help you catch up.

If you are feeling overwhelmed, the risk alert is a great first step towards to getting comfortable.

Written by Jim Ulvog

May 25, 2017, 21:01 pm at 9:01 pm

Posted in Accounting, Audits

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Updates for CPAs: going concern and location of debt issue costs

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Image courtesy of DollarPhotoClub before they merged into Adobe Stock.

Image courtesy of DollarPhotoClub before they merged into Adobe Stock.

The accelerating pace of change doesn’t slow down merely because I have multiple audits in progress plus more that just started. Here are a few articles to help keep all of us up to date on two newly effective standards:

Going concern

For a long time the professional requirements for addressing going concern issues have been located in the audit literature. Yeah, the accounting requirement was in the audit standards.  There has been an effort for several years to this guidance out of the SASs and into GAAP. Two articles show the substantial progress:

11/8/16 – Charles Hall at CPA-Scribo – It’s Time to Apply FASB’s New Going Concern Standard –  ASU 2014-15 creates a requirement in GAAP for management to assess whether there are conditions or events which raise substantial doubt about ability to continue as going concern.

This is effective for financial statements ending on or after December 15, 2016. Translation: 12/31/16 financial statements. That would be the ones you’re auditing or reviewing or compiling at the moment.

If you haven’t tuned into this new requirement, check out Mr. Hall’s article before you download the ASU for study. Hint: the new requirements on management will seem remarkably familiar.

In case you hadn’t thought about it, having a GAAP-based going concern requirement placed on management means that there is now a specific need to address going concern in a review or comp.

2/22/17 – Accounting Today – AICPA changes going concern audit standard – Now that the going concern requirements are in GAAP, the ASB has modified the rules in the audit literature.

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Written by Jim Ulvog

February 23, 2017, 9:14 am at 9:14 am

Common findings on audits during peer review

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Image is from AICPA. Used under Fair Use since, after all, I am promoting three of their products.

Image is from AICPA. Used under Fair Use since, after all, I am promoting their products.

The AICPA’s annual Audit Risk Alert General Accounting and Auditing Developments—2016/17 provides a useful summary of common peer review findings on audits.

What I like about this particular list is that it is short enough to actually provide focus. Frequently such lists have the filter set so broadly that the list covers practically all the findings that have surfaced during all peer reviews. Sometimes I’m left with the feeling that a list of findings reads like a list of every single step you need to perform during an audit.

Here is the short list provided in the risk alert, along with my explanation:

Incorrect dating of audit report – The auditor’s report needs to be dated no earlier than when sufficient appropriate audit evidence has been obtained to support the opinion. This means Read the rest of this entry »

Written by Jim Ulvog

January 20, 2017, 8:09 am at 8:09 am

A few highlights from 2017 Audit Risk Alert

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Image is from AICPA. Used under Fair Use since, after all, I am promoting three of their products.

Image is from AICPA. Used under Fair Use since, after all, I am promoting their product.

The AICPA’s annual audit risk alert had been out a little while. There is a lot of good stuff covered that all auditors really ought to check out. I heartily recommend reading the annual update before you get very far into your 12/31 audits.  The document is Audit Risk Alert General Accounting and Auditing Developments—2016/17.

I will mention just a few highlights.

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Written by Jim Ulvog

January 19, 2017, 7:36 am at 7:36 am

Posted in Accounting, Audits

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2017 Risk Alerts available

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Image is from AICPA. Used under Fair Use since, after all, I am promoting three of their products.

Image of Audit Risk Alert is from AICPA. Used under Fair Use since, after all, I am promoting three of their products.

The 2017 audit season is about to begin. Planning is well underway for all those 12/31 clients.

To help you get ready, the annual updates to AICPA risk alerts are available. Consider:

I read the risk alerts every year. They are great for reminding me of what I already knew and even better for pointing out what tidbits I had missed.

You might want to check them out in the lull before the rush of field work hits.

Written by Jim Ulvog

December 19, 2016, 7:18 am at 7:18 am