Texas - 2009 CPE Family Conference
6/4/2009
ANNUAL ACCOUNTING and AUDITING UPDATE
2009
A RealisticApproach Seminar Presentation
Topics For Today
A. Accounting Topics
a.
b.
c
c.
d.
New and Recently Issued FASB Statements.
FASB Staff Positions
EITF Abstracts
EITF Abstracts
Certain Matters in Exposure
B. Auditing Topics
a. New and “Recently” Issued SASs
b. Matters in Exposure
Accounting Topics
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Texas - 2009 CPE Family Conference
6/4/2009
SFAS # 163
Accounting for Financial Guarantee Insurance Contracts
• More than meets the eye ‐‐ Inferential Guidance
• Balance ‐‐ FASB concern for Symmetry in y
y
Approach
• Pay‐as‐you‐Go concern ‐‐ Application of SFAS No. 5 • Enhanced Disclosure concern
SFAS #162
GAAP Hierarchy
• Level 1
– AICPA
• ARBs
• Opinions
– FASB
•
•
•
•
SFAS
Interpretations
Statement 133 Implementation Issues
FSPs
SFAS #162
GAAP Hierarchy ‐ 2
• Level 2
– AICPA
• Audit and Accounting Guides
• SOPs
– FASB
• Technical Bulletins
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Texas - 2009 CPE Family Conference
6/4/2009
SFAS #162
GAAP Hierarchy ‐3
• Level 3
– AICPA AcSEC Practice Bulletins
– FASB Consensus Abstracts of the EITF
– FASB Staff Announcements
FASB Staff Announcements
SFAS #162
GAAP Hierarchy ‐ 4
• Level 4
– AICPA
• Accounting Interpretations
• Accounting and Audit Guides (not cleared)
Accounting and Audit Guides (not cleared)
• SOPs (not cleared)
– FASB Implementation Guides
– Widely Accepted Industry Practice
SFAS #162
GAAP Hierarchy ‐ 5
• Level 5
– AICPA
• Issues Papers
• TPAs
• Technical Information Service
Technical Information Service
–
–
–
–
–
FASB Conceptual Concepts
Inferential Application
International
Other Professional Associations
Texts and Articles
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Texas - 2009 CPE Family Conference
6/4/2009
SFAS # 161
Disclosures About Derivatives and Hedges
• Derivatives and Hedges
– Difference
– Potential for Abusive accounting
• Enhanced Disclosure
SFAS # 160
Non‐Controlling Interests •
•
•
•
Balance Sheet ‐ Equity presentation
Income Statement matters
Parent/Subsidiary transactions
Parent/Subsidiary transactions
Enhanced Disclosures
SFAS # 141(R)
Business Combinations
• A Re‐Write of recently issued SFAS No. 141
• Splitting hairs
– Business
– Combination
• Terminology
– Purchase Method vs.
– Acquisition Method • Curtain call for ‐‐ Goodwill
• Enhanced Disclosure
• Effective Date
4
Texas - 2009 CPE Family Conference
6/4/2009
SFAS # 159
Fair Value Option for Financial Assets and Liabilities
•
•
•
•
Broad‐based Applicability
Irrevocable election
Enhanced Disclosures
Significant Exceptions
FASB Staff Positions
1. FSP FAS 107‐1 and APB28‐1 ‐‐ Interim Disclosures about Fair Value of Financial Instruments 2 FSP FAS 115‐2 and FAS 124‐2 –
2.
FSP FAS 115 2 and FAS 124 2 Recognition Recognition
and Presentation of Other‐Than‐Temporary Impairments 3. FSP FAS 132(R)‐1 – Employers’ Disclosures about Postretirement Benefit Plan Assets
FASB Staff Positions
4. FSP FAS 141(R)‐1 – Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies Contingencies
5. FSP FAS 157‐4 – Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly
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Texas - 2009 CPE Family Conference
6/4/2009
FASB Staff Positions
6. FSP FAS 140‐4 and FIN 46(R‐)8 – Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities
Interest Entities
7. FSP EITF 99‐20‐1 – Amendments to the Impairment Guidance of EITF Issue No. 99‐20
Selected Abstracts of the Emerging Issues Task Force
1. EITF 8‐6 – Equity Method Investment Accounting Considerations 2. EITF 08‐7 – Accounting for Defensive Intangible Assets Assets
3. EITF 08‐9 – Milestone Method of Revenue Recognition 4. EITF 08‐10 – Selected Statement 160 (Non‐
controlling‐Interests in Consolidated Financial Statements) Implementation Questions
Accounting Matters Currently in Exposure
1. Subsequent Events
2. Going Concern 3. The Hierarchy of Generally Accepted Accounting Principles
i
i i l
4. Amendments to FASB Interpretation No. 46(R) 5. Disclosure of Certain Loss Contingencies 6. Accounting for Hedging Activities
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Texas - 2009 CPE Family Conference
6/4/2009
Accounting Matters Currently in Exposure
7. Not‐for‐Profit Organizations: Mergers and Acquisitions 8. Not‐for‐Profit Organizations: Goodwill and Other Intangible Assets Acquired in a
Other Intangible Assets Acquired in a Merger or Acquisition 9. Accounting for Transfers of Financial Assets 10.Consolidated Financial Statements: Purpose and Policy
Auditing Topics
New and “Recently” Issued Statement s on Auditing Standards
1. SAS No. 116, Interim Financial Information 2. SAS No. 115, Communicating Internal Control Related Matters Identified in an Audit 3. SAS No. 114, The Auditor’s Communication With Those Charged With Governance 4. SAS No. 113, Omnibus 2006 5. SAS No. 112, Communicating Internal Control Related Matters Identified in an Audit
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Texas - 2009 CPE Family Conference
6/4/2009
New and “Recently” Issued Statement s on Auditing Standards
6. SAS No. 111, Amendment to Statement on Auditing Standards No. 39, Audit Sampling 7. SAS No. 110, Performing Audit Procedures in Response to Assessed Risks and Evaluating
Response to Assessed Risks and Evaluating the Audit Evidence Obtained 8. SAS No. 109, Understanding the Entity and Its
9. Environment and Assessing the Risks of Material Misstatement New and “Recently” Issued Statement s on Auditing Standards
10. SAS No. 108, Planning and Supervision 11. SAS No. 107, Audit Risk and Materiality in Conducting an Audit 12. SAS No. 106, Audit Evidence SAS No. 106, Audit Evidence
13. SAS No. 105, Amendment to Statement on Auditing Standards No. 95, Generally Accepted Auditing Standards 14. SAS No. 104, Amendment to Statement on Auditing Standards No. 1, Codification of Auditing Standards and Procedures (“Due Professional Care in the Performance of Work”)
SAS No. 116, Interim Financial Information
A. Applicable to Non‐Issuer Audit Clients
a. Current and or Engaged for next audit
b. Interim financial statements on same basis as audited financial statements.
B. Non‐Issuer that does not qualify for this SAS can have review conducted under SSARS.
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Texas - 2009 CPE Family Conference
6/4/2009
SAS No. 115, Communicating Internal Control Related
Matters Identified in an Audit
A. Replaces SAS 112
B. Revises Definitions
a. Material Weakness
b Significant Deficiency
b.
Si ifi
fi i
C. Revises Definitional List of Material Weaknesses
D. Eliminates Definitional List of Significant Deficiencies
SAS No. 114 – The Auditor’s Communication With Those Charged With Governance
• Relates to SAS No. 61, Communication With Audit Committees
• Requirement to communicate with a specific individual
• Required elements
• Adequacy requirement
• Documentation Requirement
SAS No. 113 – Omnibus 2006
• Levels of Authority
– Mandatory
– Presumptive Mandatory
• Id
Identified Fraud Risk Factors must directly link tifi d F d Ri k F t
t di tl li k
to
– Assessed Risk and
– Procedures Performed
• Terminology
• Dating of Management Representation Letter
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Texas - 2009 CPE Family Conference
6/4/2009
SAS No. 112 – Communicating Internal Control Related Matters Identified in an Audit
• Control Deficiency
– Design
– Operation (Implementation, or Effectiveness)
Operation (Implementation, or Effectiveness)
•
•
•
•
Significant Deficiency
Material Weakness
Compensating Controls
Definitional Deficiencies
SAS No. 111 – Amendment to SAS No. 39, Audit Sampling
• Factors Affecting Sample Size
– Tolerable Misstatement. (Upper Error Limit)
– Expected Misstatement.
E
t d Mi t t
t
– Audit Risk.
• Missing sample items.
• Dual‐Purpose Testing.
SAS No. 110 – Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained
• Risk Assessment Considerations.
• Internal Control matters.
• Substantive Procedures.
– Interim work – no reliance on internal control.
– Substantive analytical procedures.
• Assessing Sufficiency of Evidence.
• Documentation re: Risk‐Based approach.
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Texas - 2009 CPE Family Conference
6/4/2009
SAS No. 109 – Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement
• Client’s Environment (to include internal control matters).
• Risk Assessment Procedures Defined
• Elements of the Understanding of the Entity and its Environment.
• The System of Internal Control
• Assessment of the Risk of Material Misstatement.
• Documentation Requirements.
SAS No. 108 – Planning & Supervision
• Planning Requirements
– Understanding with the Client
– Overall audit strategy
– Initial Engagements
Initial Engagements
• Supervision ‐ Lead Auditor
– Assistants
– Review of work
– Disagreements
SAS 107 – Audit Risk and Materiality in Conducting an Audit
• Materiality
• Risk
• Risk and Materiality
– Financial Statement Level
Financial Statement Level
– Transaction, Balance, Disclosure Level
• Tolerable Misstatement
• Required Communications With Client
• Documentation Requirements
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Texas - 2009 CPE Family Conference
6/4/2009
SAS No. 106 – Audit Evidence
Major Areas
• Redefinition of Audit Evidence.
• Sufficiency and Appropriateness.
• Assertions – Changes to activity‐based assertions
– Transactions & Events
– Account Balances
Account Balances
– Presentation & Disclosure
• Types of Audit Procedures – Risk Assessment Procedures
– Tests of Controls
– Substantive Procedures
Assertions – By Activity
•
Classes of Transactions and Events –
–
–
–
–
•
Ending Account balances –
–
–
–
•
• Occurrence • Completeness • Accuracy* • Cutoff* • Classification* • Existence • Completeness • Rights and Obligations • Valuation and Allocation Presentation and Disclosure –
–
–
–
• Occurrence (plus) and Rights and Obligations • Completeness • Classification and Understandability* • Accuracy and Valuation* Selected Auditing Matters Currently in Exposure Stage
1. Audit Sampling 2. Consideration of Fraud in a Financial Statement Audit 3 Initial Audit Engagements, Including Re‐
3.
i i l di
l di
audits – Opening Balances 4. Consideration of Laws and Regulations in an Audit of Financial Statements 12
Texas - 2009 CPE Family Conference
6/4/2009
Selected Auditing Matters Currently in Exposure Stage
5. Required Supplementary Information, Other Information in Documents Containing Audited Financial Statements, and Other Information in Relation to the Financial Statements as a Whole
Relation to the Financial Statements as a Whole 6. Risk Assessment 7. Audit Considerations Relating to an Entity Using a Service Organization 8. Subsequent Events and Subsequently Discovered Facts
Thank You For Attending Today’s Session!
I you have
If
h questions and/or
/
comments
realisticapproach@hotmail.com
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