College and University Auditors of Virginia
Annual Conference
May 22, 2012
Financial Statement Issues
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Audit Report Changes
Group Audits and Foundations
Pension Accounting
Other Information in Documents Containing
Audited Financial Statements
• Service Organization Control Reporting
• Revised GAGAS (Yellow-book)
Auditor of Public Accounts
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Audit Report Changes
• Opinion Letter will have some changes and be
slightly reorganized
– No reference to auditor or management responsibility
in the introduction paragraph
– New Section: “Management’s Responsibility for the
Financial Statements”
– New Section: “Auditor’s Responsibility”
– Opinion Paragraph will be preceded with heading:
“Opinion”
– If it’s a modified opinion: an additional heading is
required (e.g. – “Basis for Qualified Opinion”)
Auditor of Public Accounts
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SAS 122: Group Audit Standard
Changes
• Affects our reliance on Component Unit Audits
• We must gain an understanding of component
units operations
• All misstatements discovered by the CU Auditors
must be communicated to us
• We can either include Component Unit Findings
in the Business Unit Report or reference the CU
report
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Group Audit and Foundations
Question: What is the Group?
APA Answer:
The Institution of Higher Education and all of
its Foundations, that comes to a Total Column.
Where does this Answer Come From?
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Group Audit and Foundations
Q—How would a reporting entity display the financial
statements of a component unit that uses a GAAP reporting
model other than the governmental model?
A—Component units that use other GAAP reporting models would be
incorporated into the reporting entity's financial statements generally in
the same manner as governmental component units. As described in
paragraph 43 of Statement 14 , all component units are required to apply
the definition and display provisions of Statement 14 before they are
combined with the primary government. In the reporting entity's
statement of net assets, a discretely presented component unit's financial
data may be presented in a separate discrete column or combined with the
financial data of other discretely presented component units as described
in paragraph 44 , as amended.
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Group Audit and Foundations
Similarly, in the reporting entity's statement of activities, a
nongovernmental component unit's financial data may be presented on a
separate line or combined with the financial data of other component
units. The financial data of a nongovernmental component unit would be
arrayed based on the same display considerations as those discussed for
component units engaged only in business-type activities in question 7.26.6
of Chapter 7. If the reporting entity's financial statements do not include
a statement of activities, the nongovernmental component unit's financial
statement data should be reconfigured into a display that is compatible
with the reporting entity's change statement format and be presented in a
discrete column to the right of the financial statement data of the primary
government.
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Group Audit and Foundations
However, if it is impractical to reformat the nongovernmental component
unit's change statement data, they need not be reported on the same page
as that of the primary government, but may be reported on a separate
following page.
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Exposure Draft: Financial Reporting
for Pension Plans: an amendment of
GASB Statement No. 25
Plan to issue Statement in June or July 2012
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Pension Disclosure
• Universities will need to include all disclosure
about Pension Plan in their financial
statements.
• Plan on a significant increase in both time and
cost to include this disclosure.
• Applies to all plans not just VRS.
• No decision on effective date or whether it will
be phased in.
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SAS 118: Other Information in
Documents Containing Audited
Financial Statements
Effective for Fiscal Year 2012 Audits
(Periods beginning on/after December 15, 2010)
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SAS 118: Auditor’s Responsibility
• Auditors have responsibility to read reports
containing audited financial statements for
“material inconsistencies”
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SAS 118: Discovery of “Material
Inconsistencies” (prior to release)
• Discovery prior to report release date that requires
revision which management refuses to make:
– Communicate to those charged with Governance
AND
EITHER
– Modify the opinion to include explanatory paragraph
OR
– Withhold auditor’s report
OR
– Withdraw from Engagement (not likely)
Auditor of Public Accounts
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SAS 118: Discovery of “Material
Inconsistencies” (after release)
• If Material Inconsistencies are discovered after
release of audited financial statements:
• Implore management to make necessary
revisions
• If management refuses; communicate concerns
to Governing body and take further appropriate
action which could include issuing a revised
opinion
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SAS 118: Discovery of Misstatement
of Fact
• First: Discuss with management concerns
• Second: Request management consult with a
qualified third party, such as legal counsel, and
consider advise from third party
• Third: Inform Governing body
Auditor of Public Accounts
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SSAE 16: Service Organization
Control Reporting
Replaces SAS 70 Reporting on Outsourced
Services
Two types:
Type I (SOC1)
Type II (SOC2)
Relevant to those Relying on Campus Partners or
other outsourced service providers
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SOC I vs. SOC II
Report Contents
Type I Type II
Independent service auditor’s report
(opinion)


Service organization’s description of its
system and controls


Information provided by independent service
auditor; includes description of service
auditor’s tests of operating effectiveness and
results

Other information provided by the service
organization

Auditor of Public Accounts
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Revised GAGAS (Yellow-book)
• Changes to more closely align
with AICPA Auditing
Standards
• Most changes provide for
increased auditor judgment
• Independence Determination
Auditor of Public Accounts
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Questions?
Walter J. Kucharski
walter.kucharski@apa.virginia.gov
Auditor of Public Accounts
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