In December 2007, the AICPA Accounting and Review Services Committee (ARSC) issued SSARS No. 16, Defining Professional Requirements in Statements on Standards for Accounting and Review Services, which became effective upon issuance. SSARS No. 16 defines certain terms used in SSARSs to describe the professional requirements imposed on accountants performing a compilation or review of a nonissuer. It defines two categories of professional requirements. Unconditional requirements, which are indicated by the words "must" or "is required," mandate compliance in all cases that conform to the circumstances in which the unconditional requirement applies. Presumptively mandatory requirements indicated by the word "should," permit, in rare circumstances, departures from the mandatory requirements provided an accountant documents the justification for the departure and how the alternative procedures achieved the objectives of the presumptively mandatory requirement. To view SSARS No. 16, click here.
Omnibus SSARS
In February 2008, the AICPA ARSC issued SSARS No. 17, Omnibus Statement on Standards for Accounting and Review Services – 2008. SSARS No. 17 is effective for periods ending on or after December 15, 2008. Early application is permitted.
New Technical Questions and Answers Available
The Audit and Attest Standards Team has issued Technical Practice Aids (TPAs) 8200.05-.09. These TPAs are technical questions and answers developed in response to common questions received from members regarding the implementation of Statement on Auditing Standards Nos. 104-111, which are referred to as "The Risk Assessment Standards." Additionally, TPA 9120.08 has also been developed to address the implications on the principal auditor's report when part of an audit is conducted by other independent auditors in accordance with International Standards on Auditing or another country's auditing standards. TPAs are codified nonauthoritative staff answers to various technical questions received.
Revised Standards Issued for Performing, Reporting on Peer Reviews
The AICPA's Peer Review Board has issued revised Standards for Performing and Reporting on Peer Reviews (Standards) and Interpretations to the Standards, which are applicable to all AICPA members' firms subject to peer review. The revised Standards and Interpretations are effective for peer reviews commencing on or after January 1, 2009. Members' firms currently enrolled in the Center for Public Company Audit Firms Peer Review Program are covered under this measure. Since the revisions are significant, all interested parties, especially peer reviewers, peer reviewed firms (including those responsible for their firm's quality control functions) and peer review users are encouraged to consider them.
Revisions to the Standards include more principles-based standards, and changes to engagement and report reviews. Also, the reporting process has been reengineered to include a shorter and more concise peer review report, which enhances its clarity, comparability and understandability.
To ensure Program integrity and usefulness, the proposed revisions were designed to meet stakeholders' needs. The revisions recognize the public interest in the quality of the accounting, auditing and attestation services provided by members' firms. They also recognize the importance peer review plays in the state board of accountancy licensure process and for other regulators such as the Government Accountability Office. The revisions are expected to result in a more efficient and effective peer review process.
Auditing Standards Board Staff Issues Update Newsletter
The AICPA's Audit and Attest Team issues a quarterly newsletter titled, In Our Opinion. Among other things, it includes a summary of new standards and the status of various AICPA Auditing Standards Board projects. The Fall 2007 edition of the newsletter is available and can be accessed by clicking here.
Department of Education
Amendments to Audit Guides
As we notified you in GAQC Update #26 and GAQC Alert #74 the U.S. Department of Education (Education) issued interim guidance to amend two audit guides:
· January 2000 Audit Guide, Audits of Federal Student Financial Assistance Programs at Participating Institutions and Institution Servicers (SFA Guide)
· December 1996 Audit Guide, Compliance Audits (Attestation Engagements) for Lenders and Lender Servicers Participating in the FFEL Program (Lender Guide).
Both guides (SFA Guide and Lender Guide) were amended to provide procedures designed to identify prohibited inducements paid by a lender to secure applicants for loans. The guidance was issued in the form of a "Dear CPA Letter." Dear CPA Letter CPA-07-3 applies to the SFA Guide and Dear CPA Letter 08-01, which supersedes the guidance issued by Education previously in Dear CPA Letter CPA-07-2, applies to the Lender Guide.
Office of Management and Budget (OMB)
Data Collection Form Revision
As we reported in GAQC Update #26, the OMB issued a request for comments on proposed revisions to the Data Collection Form (DCF or the Form) that is intended to be used for audit periods ending in 2008, 2009, and 2010. Click here to access the proposed DCF and related instructions. Comments were due February 4, 2008. To view the GAQC comment letter, click here. The current Form is being used for audit periods ending in 2004, 2005, 2006 and 2007. Future GAQC communications will inform you when the revised DCF is issued.
United States Department of Agriculture (USDA)
Rural Housing Programs - Error in Example Engagement Letter
As we informed you in GAQC Alert #61 and GAQC Update #26, the USDA Office of Rural Development issued a letter to its state directors and borrowers informing them that the financial reporting and audit requirements for the Rural Rental Housing Program and the Rural Labor Housing Program were changing effective for projects with December 31, 2007, year-ends. We have been informed that the example engagement letter in the USDA Asset Management Handbook (HB-2-3560 Attachment 4-G) makes an erroneous reference to the expression of an opinion over compliance. The last sentence in the 2nd paragraph on page 3 of the example in Attachment 4-G needs to be deleted. USDA has informed us that this language will be struck in subsequent Handbook issuances. Please modify your engagement letters accordingly.
Department of Housing and Urban Development (HUD)
HUD Independent Public Accountant (IPA) Roster
As we informed you in GAQC Alert #68, HUD issued a proposed rule in the Federal Register (Volume 73, No. 25, page 7170) titled, Independent Public Accountant Roster which would modify HUD's existing regulations in 24 CFR Part 5 to establish a roster (that is, the IPA Roster) of approved independent public accountants that would be permitted to perform audits or related services on covered entities. Comments were due April 7, 2008. To view the comments received by HUD, including the AICPA's comment letter, click here. You can also learn the latest on HUD activities on our new HUD information page by clicking here.
HUD Audit Guide Download Precaution
As we have informed you in previous communications, HUD is revising its Consolidated Audit Guide on a chapter-by-chapter basis. You may find the updated sections by downloading the individual chapters through the HUD Web site. We wanted to make you aware that if you download the Guide in its entirety (versus clicking on individual chapters), it does not reflect the most current revisions. Further, the individual chapters and the full version of the Guide available through the HUD CLIPS portion of the HUD Web site do not reflect any of the most current revisions. Thus, we strongly encourage practitioners to download the individual chapters from the HUD Inspector General site by clicking here to be sure that the most relevant guidance is being followed. We will continue to keep you up-to-date as additional updated Chapters are issued by HUD.
Accounting Update
Federal Accounting Standards Advisory Board (FASAB)
Technical Release (TR) on Inter-Entity Costs
In February 2008, the FASAB issued Statement of Federal Financial Accounting TR 8, Clarification of Standard Relating to Inter-Entity Costs. The purpose of TR 8 is to provide guidance to federal entities on three aspects of full costing specified in Statement of Federal Financial Accounting Standards (SFFAS) 4: Managerial Cost Accounting Standards and Concepts: (1) guidance on costs that should be considered broad and general for all entities, (2) guidance on directness of relationship to the entity's operations as used in determining if a transaction should be considered material to the receiving entity, and (3) guidance on identifiability as used in determining if a transaction should be considered material to the receiving entity. To view the TR, click here.
TR on Heritage Assets and Stewardship Land
In February 2008, the FASAB issued TR 9 Implementation Guide for Statement of FASAB 29: Heritage Assets (HA) and Stewardship Land (SL). The purpose of TR 9 is to assist federal entities in reporting information on HA and SL in accordance with SFFAS 29. The technical release covers the following four areas: 1) Materiality considerations describes an approach for considering materiality that is common to entities as they apply the materiality concept to HA/SL. It includes qualitative factors to consider in making materiality judgments about HA/SL; 2) Identification, categorization and quantification discusses issues related to identifying HA/SL and describes how the standard allows entities "flexibility" in determining the format and level of detail to report relevant and reliable information in note disclosures. It also explores factors affecting the level of detail such as management's selection of categories for reporting and choice of physical units within categories, as portrayed in various examples. In addition, a discussion of supporting documentation is included; 3) Assessing and reporting condition discusses approaches for meeting condition reporting requirements for HA/SL. This section provides guidance for identifying criteria to assess condition, discusses sources of information to support reporting, and provides examples of reporting condition; and 4) Government-wide reporting discusses the balance sheet note reference and a note disclosure of HA/SL information in the U.S. government-wide financial statement. To view the TR, click here.
FASAB Issues Newsletter
The staff of the FASAB publishes FASAB News on the FASAB Web site to provide highlights of recent Board actions and issues. To view the most recent editions of FASAB News, click here.
Financial Accounting Foundation (FAF)
Changes to Oversight, Structure and Operations of FAF, FASB and GASB
In February 2008, the FAF Board of Trustees approved major changes to the FAF, FASB and GASB. The key changes are as follows:
FAF
· Expand the number and breadth of investors, accounting, business, financial and government organizations and entities invited to nominate FAF Trustees with the understanding that final authority for all appointments rests solely with the discretion of the Board of Trustees;
· Change the current term of Trustees from one three-year term with a possible second three-year term to one five-year term;
· Change the size of the Board of Trustees from a fixed sixteen Trustees to a flexible range of fourteen to eighteen Trustees, the size to be fixed by Board resolution from time to time; and
· Increase the Trustee governance activities, including its level of formal review, analysis and oversight of the data and materials regularly provided by FASB, Financial Accounting Standards Advisory Council, GASB and Governmental Accounting Standards Advisory Council.
FASB
· Reduce the size of the FASB from seven members to five, effective July 1, 2008;
· Retain the FASB simple majority voting requirement;
· Affirm the need for investor participation on the FASB by broadening the current by-law requirement that FASB members possess investment experience. The by-law will now read: "The Members of the FASB shall, in the judgment of the Trustees, have knowledge of and experience in investing, accounting, finance, business, accounting education and research and a concern for the investor and the public interest in matters of investing, financial accounting and reporting"; and
· Changed the FASB's agenda-setting process to a "leadership agenda process" whereby the FASB chair is vested with the authority, following appropriate consultation, to set the FASB project plans, agenda, and priority of projects.
GASB
· Secure a stable and permanent funding source for the GASB;
· Retain the current size, term length, and composition of the GASB; and
· Change the GASB's agenda-setting process to a "leadership agenda process" whereby the GASB chair is vested with the authority, following appropriate consultation, to set the GASB project plans, agenda, and priority of projects.
The FAF received 59 comment letters during its public due process period, one of which was from the AICPA. To read the AICPA's comment letter, click here. To read the FAF press release announcing the changes, click here.
Financial Accounting Standards Board (FASB)
Proposed FASB Staff Position (FSP) No. FAS 117-a
In February, 2008, FASB issued FSP No. FAS 117-a titled, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures. This FSP provides guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization (NPO) that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA), a model act adopted by the National Conference of Commissioners on Uniform State Laws (NCCUSL) that serves as a guideline for states to use in enacting legislation. It also improves disclosures about an organization's endowment (both donor-restricted funds and board-designated funds), whether or not the organization is subject to UPMIFA. The comment period ended April 18, 2008. To view the FSP, click here. To access a recent Center call on this proposed FSP, click here. Finally, the AICPA comment letter on the proposal is attached to this GAQC Update for your information.
Applicability of FIN 45 to Not-for-Profit Organizations
NPOs are reminded that FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, applies to loan guarantees made by NPOs, even guarantees made without receiving commensurate consideration in exchange. To view an article from the CPA Letter on this topic, click here.
Governmental Accounting Standards Board (GASB)
Exposure Draft Issued on Fund Balance Reporting
In February 2008, GASB issued an Exposure Draft (ED) of a proposed GASB Statement, Fund Balance Reporting and Governmental Fund Definitions. The proposed Statement is intended to improve the usefulness of information provided about fund balance by providing clearer, more structured fund balance classifications, and by clarifying the definitions of existing government fund types. The deadline to submit comments is June 30, 2008. To view the ED and obtain information on how to submit comments, click here.
ED Issued on Proposed Changes to Concepts Statement No. 2
In April 2008, the GASB issued an ED of a proposed Concepts Statement titled, Service Efforts and Accomplishments (SEA) Reporting. The purpose of this ED is to update Concepts Statement 2 to reflect the knowledge gathered by the GASB through research and monitoring conducted during the 14 years since the Concepts Statement was issued. The proposed amendments also would clarify the role of the GASB in SEA reporting. The deadline to submit comments is July 3, 2008. To view the ED and obtain information on how to submit comments, click here.
GASB ED on Derivatives
As we notified you in GAQC Update #23, the GASB issued an ED titled, Accounting and Financial Reporting for Derivative Instruments in June 2007. The ED addresses recognition and measurement of derivative instruments and disclosure of information about derivative instruments by state and local governments. While the deadline to submit comments has passed, you may wish to review the AICPA comment letter to the GASB, available by clicking here. To obtain a copy of the ED, click here or to access a plain language supplement to the ED, click here.
GASB Meeting Highlights Available
Attached are the minutes of the February and March 2008 GASB Board meetings. A summary of the GASB Technical Plan for the first third of 2008 can be accessed by clicking here. The minutes and Technical Plan are provided for informational purposes only. Additionally, click here to access a recent press release announcing changes to the GASB Technical Plan.
Updated Governmental Accounting Research System Available
An updated version of the GASB's Governmental Accounting Research System (GARS) became available for order the week of March 10. Installed on a personal computer in a stand-alone or network configuration, GARS provides efficient and effective access to all the necessary accounting literature in a searchable database format. For information about pricing or to place an order, call the GASB order department at (800) 748-0659. Internet orders can be placed by clicking here.
Other Matters of Interest
Government Accountability Office (GAO)
Resignation of U.S. Comptroller General
In March 2008, David Walker, Comptroller General of the United States and head of the GAO resigned his position in order to accept the position of President and Chief Executive Officer of the newly established Peter G. Peterson Foundation. Gene Dodaro, GAO's Chief Operating Officer, will serve as Acting Comptroller General.
International Federation of Accountants (IFAC)
Survey on Performance Measurement in the Public Sector
IFAC is inviting professional accountants and others who work in the public sector to complete an online survey on the ways in which public sector entities set objectives, measure performance, and report on results. Currently, there is little information available about public sector performance measurement structures around the world. This global survey is designed to identify similarities and differences in performance measurement structures and the extent to which these structures help public sector entities meet their objectives. The survey also seeks examples of strengths and weaknesses of performance measurement structures and what can be done to further improve the assessment, monitoring and reporting of financial and non-financial performance in the public sector. The survey, which takes 10-15 minutes to complete, can be accessed online by clicking here. Responses are requested by April 30, 2008.
Internal Revenue Service (IRS)
Comments Sought on Draft Instructions for 2008 Form 990
The IRS is seeking public comments on the draft instructions to the 2008 Form 990, Return of Organization Exempt from Income Tax, the annual return most tax-exempt organizations must use to report information about their operations. The instructions are for the redesigned Form 990 that organizations will file for their 2008 tax year (returns filed in 2009), which was released in final form in December 2007 (IRS news release IR-2007-204), which we informed you about in GAQC Alert #65. Comments on the draft instructions are due June 1, 2008. To view the draft instructions and to obtain information regarding comment submission, click here.
Guidance on Governance Policies and Practices for 501(c)(3) Organizations
In March 2008, the IRS published a document titled, Governance and Related Topics -501(c)(3) Organizations, describing governance policies and practices that the IRS believes charitable organizations ought to consider adopting. To view this document, click here.
Reissuance Standards for State and Local Bonds
In February 2008, the IRS published Notice 2008-27, Reissuance Standards for State and Local Bonds, to provide interim guidance related to the tax-exempt bond market. The Notice addresses potential tax issues arising from rating agency downgrades of some municipal bond insurers and failures of auctions in the auction rate bond sector. The Notice modifies certain special reissuance standards for "qua