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This may likely entail use of valuation specialists (AU-C 620 or AS 1210). During the pandemic, accessing client records and key personnel may present formidable risks for auditors, especially in cases where records are still maintained on paper, and auditors or client employees are required to work at home . Accessibility may be particularly challenging for foreign operations, in view of travel restrictions. All such difficulties are required to be communicated to audit committees or others charged with governance. Any unaudited, quantitative, unrecognized subsequent events information disclosed in audited financial statements, such as optional pro forma presentations, must be clearly designated as unaudited. Practitioners should ensure that management understands that they are responsible for developing the plan to implement FASB ASC 606. CPA firm personnel can provide advice and recommendations for the project team to consider, but all final decisions rest with management.
Following such an event, management should consider whether the direct and indirect effects of COVID-19 require it to test and adjust the carrying value of the asset for impairment between required annual testing dates. Also, if there are any indicators that an entity has changed its classification of an intangible asset from indefinite-lived to finite-lived due to COVID-19, an accounting adjustment may be required. Substantial doubt about an entity’s ability to continue as a going concern is considerably more likely to arise for previously healthy or even marginal small to medium-sized businesses as a result of COVID-19. Unless, in the auditor’s judgment, management’s plans are likely to be successful in alleviating the doubt, these disclosures will require emphasis in audit reports; if substantial doubt is satisfactorily alleviated by management’s plans, emphasis in the audit report is permitted at the auditor’s option.
- It is likely that a business slowdown, shutdown, staff furlough, or other decline in operating activity subsequent to year-end will cause an entity to violate a debt coverage ratio or other covenant or requirement of a loan agreement, such as late issuance of audited financial statements.
- The CPEA is the AICPA’s national accounting and auditing resource center.
- Additionally, if you are not a member, you can pay a per-inquiry fee of $300.
- This includes massive technological change, globalization, standards/regulation change, political instability, and tight labor markets,” Tom added, “I look forward to continuing to assist the clients of Barnes, Dennig and CPEA member firms in navigating these challenges.
- GASB has been very busy issuing standards impacting state and local governments.
- CPA firm personnel can provide advice and recommendations for the project team to consider, but all final decisions rest with management.
Areas of focus include the updated independence requirements, form and organization of the guidance, as well as quality control. We will then switch gears and cover the Uniform Guidance to provide participants with the information they need to properly perform and document a Single Audit under the Uniform Grant Guidance. We’ll focus on considerations that will impact current audits including the most recent compliance supplement including a discussion of the impact of COVID on Single Audits. Attendees will review the new changes to the Uniform Guidance that were recently issued to help attendees be prepared for their Single Audits.
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Because an evaluation of an entity’s ability to continue as a going concern is a relatively short-term consideration, it is distinctly different from an impairment consideration, which is typically a longer-term evaluation. Because of the imminence of the planned or expected liquidation, asset values reported on the liquidation basis of accounting are typically lower than those reported on the going concern basis, even after an impairment adjustment. If an entity uses insurance or another technique to mitigate concentration risks, Topic 275 encourages, but does not require, disclosure of the risk-reduction strategy. Changes in work habits and schedules may interfere with the ability to timely obtain satisfactory audit evidence by direct confirmation and may force auditors to seek alternative, sometimes less reliable, sources of audit evidence. Here, the importance of having competent management fully engaged cannot be overstated. Capable management can act on the CPA firm’s advice, weighing alternatives and considering pros and cons so the firm is not placed in a position where it must make these decisions for the client, which impairs independence.
Therefore, it should contain much of the same COVID-19–related disclosures that an SEC issuer’s MD&A should contain. The CARES Act enables small businesses and not-for-profit entities that have experienced or are expected to experience significantly lower revenue to be eligible for certain government loans and grants. Under certain conditions, the SBA loans are eligible for forgiveness of amounts spent on stipulated benefits. Once in place, the terms of these loans and grants, if material, will have to be disclosed and compliance verified in future audits. Penalties for noncompliance with loan or grant conditions will have to be considered for accrual or disclosure when applicable. The COVID-19 pandemic has disrupted life around the world, but business, in altered fashion, goes on.
In addition, he consults with other CPA firms, assisting them with auditing and accounting issues. Therefore, extreme caution must be exercised by auditors whose clients are proposing accruing or disclosing any material expected business interruption insurance recoveries in their financial statements. Auditors must verify such coverage and its qualifying conditions and limits by reference to express policy language, by obtaining confirmation from the carrier or a professional insurance agent, or in the event of potentially disputed coverage, by obtaining a legal opinion from the client’s counsel. It’s been written about for some time, but the bell is now tolling as new revenue recognition standards for private company and nonprofit clients go into effect.
Kristy Illuzzi, CPA, CGMA, moved to North Carolina and joined the American Institute of CPAs in May 2007 as a technical manager for the Accounting and Audit Publications Team. Kristy was responsible for writing, maintaining and updating audit and accounting guides, audit risk alerts, checklists and illustrative financial statements, and financial reporting alerts. She was also a project leader on the XBRL and FASB codification projects, and has worked on several publications, training materials and speeches focused on these topics. From July 2011 through November 2013, Kristy worked for the Accounting and Auditing Technical Hotline team, where in addition to answering more than 100 member inquiries each week, she also worked on our technical practice aids publication and spoke at AICPA national conferences. She joined the center for plain english accounting in November 2013, and in this role she assists in answering member questions, prepares monthly reports on hot topics and emerging issues and speaks at quarterly webcasts and conferences on top compilation, review, audit and accounting issues. Prior to joining the AICPA, Kristy was the controller for Engender Health, an international nonprofit organization focused on women’s reproductive health.
The CPEA is the AICPA’s national accounting and auditing resource center. The CPEA’s team of experts assists member firms in understanding and implementing accounting, auditing, review, compilation, and quality control standards by sharing technical advice and guidance in a straight-forward manner. The CPEA’s team of experts assist members with accounting, auditing, attest, review, and compilation needs by sharing technical advice and guidance.
Accountancy was created as a profession distinguished by demanding educational requirements, licensing status, high professional standards, a strong code of professional ethics and a dedication to serving the public good when the AICPA was founded. Barnes Dennig is a regional CPA firm providing audit, tax and advisory services from its Ohio and Kentucky locations. The firm offers a complete array of professional services that includes financial reporting, financial analysis, tax service, international tax, 401 plan audit and business advisory services. More than ever, practitioners are trying to understand the current standard setting environment, interpret complex accounting and auditing rules, assess the potential impact of proposed standards, and trying to figure out how to implement standards. And, very often, they do not have access to a national office and have nowhere to turn for help or guidance. Through CPEA membership, practitioners gain national office resources without a national office. Accordingly, the GASB 34 version of an MD&A is intended to bring key issues to the financial report user’s attention that will likely affect a government’s future financial health and that may not otherwise be apparent.
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Keeping a watchful eye for additional guidance on common accounting issues can help financial statement preparers continue to arrive at the right answers as they strive to accurately tell their organizations’ stories during these difficult times. Financial Reporting Center offers tools and resources to help members meet the challenges of providing high quality financial reporting. Governmental Audit Quality Center is a voluntary membership center that promotes the importance of quality governmental audits and the value of such audits to purchasers of governmental audit services. CPAFMA enables accounting firm managers to communicate with one another and provide each other with the benefits of everyone’s experiences in what was a new and emerging profession through a combination of local meetings and seminars, and national conferences, publications and surveys. We pose several questions each year, and we receive timely written responses–every time.
Reporting entities may have to revise disclosures about the methods, inputs, and assumptions used. Some hold the view, however, that since the risk was initially identified in November 2019, its identification represents a “condition that existed as of the balance sheet date,” December 31, 2019. For an accounting estimate to be acceptable as reasonable by an auditor, it must be supported by sufficient objective evidence to enable a conclusion that it is based on the best information available at the time the financial statements are issued and is free from management bias. The latter entails careful risk assessment and the exercise of professional skepticism. But recognizes that some accountants may prefer to use a hybrid of the rarely used disclaimer to reference selected disclosures. Ultimately, the accountant is responsible for the accountants’ report and the client is responsible for the financial statements. Insist on some modification to your normal preparation engagement paradigm when your professional judgment suggests the lack of disclosure of the pandemic’s impact warrants disclosure.
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GASB has been very busy issuing standards impacting state and local governments. This https://xero-accounting.net/ course takes a deeper dive into GASB 84, Fiduciary Activities and GASB 87, Leases.
- Such an event will require debt reclassification or obtaining a waiver from the lender.
- CPAFMA enables accounting firm managers to communicate with one another and provide each other with the benefits of everyone’s experiences in what was a new and emerging profession through a combination of local meetings and seminars, and national conferences, publications and surveys.
- “Tom’s leadership in the CPEA will provide opportunities for training and growth within our firm and across the country,” noted Hube.
- Helpful to have experience with governmental accounting or auditing standards, but not required.
- The course will close with a review of GASB’s Technical Bulletin, Accounting and Financial Reporting Issues Related to the Coronavirus Aid, Relief, and Economic Security Act of 2020 and Coronavirus Diseases, as well as GASB’s Toolbox for entities to consider the impact of COVID on financial reporting.
Our membership in the CPEA and use of their resources has led to a direct improvement in our engagements, services and client communications. I would recommend membership in the CPEA to all Firms if they are not already participating.” Examples of triggering conditions or events applicable to goodwill and other indefinite-lived assets include adverse changes in financial performance, legal or political factors, entity- or industry-specific events, or market considerations.
Aicpa Cpexpress: Unlimited Online Access To 600+ Cpe Credit Hours
Serve as a subject matter expert on topics and issues impacting PCPS members and CPEA members and promote PCPS, TIC, and the CPEA with internal and external stakeholders. Help prepare slides and participate in CPEA webcasts, addressing the implementation of new standards and other relevant A&A topics. Address CPEA technical director review comments on all inquiries each month and follow up with members, as necessary. Combining the strengths of the American Institute of CPAs and the Chartered Institute of Management Accountants, we empower the world’s most highly-skilled accountants – CPAs and CGMA designation holders – with the knowledge, insight and foresight to meet today’s demands and tomorrow’s challenges.
- If a practitioner assumed management responsibility for an attest client, the threat to the practitioner’s independence would be so significant that no safeguards could reduce that threat to an acceptable level and independence would be impaired.
- Once in place, the terms of these loans and grants, if material, will have to be disclosed and compliance verified in future audits.
- The firm offers a complete array of professional services that includes financial reporting, financial analysis, tax service, international tax, 401 plan audit and business advisory services.
- Access to webcasts on hot A&A issues qualifying for a total of 16 NASBA-certified CPE credits annually.
7-10 years’ experience in public accounting (medium-large firm) or comparable experience, including experience with non-public entity clients . Emailed monthly technical reports covering a variety of A&A topics. The reports include advisories about new pronouncements, explanations of difficult concepts, and specific guidance on implementation issues that practitioners likely can expect to encounter when working with clients. In short, the CPEA provides information about evolving technical issues and answers to specific accounting and auditing questions. In areas of their SEC filings outside the financial statements, such as management’s discussion and analysis (MD&A), SEC issuers must consider disclosing COVID-19 risk factors and effects experienced to date and expected. Valuation techniques prescribed by the standard are beyond the scope of this discussion, but generally involve consideration of historical and estimated future performance and conditions.
Tax Effects
When applicable, estimated reimbursements for business interruption are generally considered gain contingencies subject to ASC , which requires that such contingencies be resolved before such a reimbursement can be recognized. These contingencies would be considered resolved only when the proceeds have either been received or the expected amount has been confirmed by the insurer or a duly authorized representative. In addition to impairment considerations, such changes could cause the estimated useful lives of such assets to be shortened for depreciation or amortization purposes. If a lessee has adopted ASC Topic 842, “Leases,” the impairment requirements of Topic 360 will also apply to right-of-use assets recognized on leasing arrangements recorded under Topic 842. While there is no concept of an “other-than-temporary” condition requirement for an impairment adjustment for these assets , short-term disruptions may not indicate an impairment.
We are the American Institute of CPAs, the world’s largest member association representing the accounting profession. Our history of serving the public interest stretches back to 1887. Today, you’ll find our 431,000+ members in 130 countries and territories, representing many areas of practice, including business and industry, public practice, government, education and consulting. “The Center for Plain English Accounting is our Firm’s most valuable resource provided by the AICPA. Their webcasts and reports are concise, informative and provide numerous tips, examples and best practices which we have incorporated in our practice. Their on-site training and technical inquiry support is unsurpassed.
Lease
Coming next week – our series on peer review MFCs starts up again with 2021 peer reviews and the initial wave of MFCs from #asc606 #revrec. More information is available for this topic and the next two at aicpa.org. Small Business Administration should be accounted for similarly to payments received from the borrower. When full or partial payment is received from the borrower or the SBA before the loan matures, amounts received should be accounted for as a prepayment. Thomas J. Groskopf, a nationally known authority on those topics, succeeds the late Dr. Tom Ratcliffe, founder of Plain-English Accounting, LLC, a highly regarded advisory service acquired by the AICPA last fall and expanded into the CPEA. Firms must be members of the AICPA’s Private Companies Practice Session to join the center. Firm Practice Management/Private Companies Practice Section supports CPA firms of all sizes by providing targeted and customizable resources and networking opportunities.
Firm personnel may serve in a support role but should not perform these activities on the client’s behalf as these activities will provide the foundation upon which the FASB ASC 606- related changes to the financial statements will be based. The pandemic will impact the conduct of your engagements this busy season as you and your clients continue to make health and safety accommodations. CAMICO recommends that firms communicate to clients the COVID-19 related safety protocols in place and the potential implications to the planning, timing and conduct of the services your firm will render. Such a communication can be provided in a separate client letter (“Letter – Client Letter – Pandemic Implications to Firm Services”) or embedded in the engagement letter.
