AICPA Peer Review Program Compliance: Responding to Latest Developments TUES DAY, JUNE 24, 2014 1:00-2:50 pm Eastern IMPORTANT INFORMATION This program is approved for 2 CPE credit hours . To earn credit you must: • Participate in the program on your own computer connection and phone line (no sharing) – if you need to register additional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). S trafford accepts American Express, Visa, MasterCard, Discover . • Respond to verification codes presented throughout the seminar . If you have not printed out the “ Official Record of Attendance” , please print it now. (see “ Handouts” tab in “ Conference Materials” box on left -hand side of your computer screen). To earn Continuing Education credits, you must write down the verification codes in the corresponding spaces found on the Official Record of Attendance form . • Complete and submit the “ Official Record of Attendance for Continuing Education Credits,” which is available on the program page along with the presentation materials. Instructions on how to return it are included on the form. • To earn full credit, you must remain on the line for the entire program. WHOM TO CONTACT For Additional Registrations : -Call S trafford Customer S ervice 1-800-926-7926 x10 (or 404-881-1141 x10) For Assistance During the Program : - On the web, use the chat box at the bottom left of the screen - On the phone, press *0 (“ star” zero) If you get disconnected during the program, you can simply call or log in using your original instructions and PIN.
Tips for Optimal Quality FOR LIVE EVENT ONLY S ound Qualit y If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory, you may listen via the phone: dial 1-866-873-1442 and enter your PIN when prompted. Otherwise, please send us a chat or e-mail sound@ straffordpub.com immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance. Viewing Qualit y To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again.
Program Materials FOR LIVE EVENT ONLY If you have not printed the conference materials for this program, please complete the following steps: • Click on the ^ symbol next to “ Conference Materials” in the middle of t he left- hand column on your screen. • Click on the tab labeled “ Handouts” that appears, and there you will see a PDF of the slides and the Official Record of Attendance for today's program. • Double-click on the PDF and a separate page will open. • Print the slides by clicking on the printer icon.
AICPA Peer Review Program Compliance June 24, 2014 Thad E. Porch, Porch & Associates Duane Reyhl, Andrews Hooper & Pavlik porchcpa.com ahpplc.com thad.porch@ duane.reyhl@
Notice ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE S PEAKERS ’ FIRMS TO BE US ED, AND CANNOT BE US ED, BY A CLIENT OR ANY OTHER PERS ON OR ENTITY FOR THE PURPOS E OF (i) AVOIDING PENALTIES THAT MA Y BE IMPOS ED ON ANY TAXP A YER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER P ARTY ANY MATTERS ADDRES SED HEREIN. Y ou (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subj ect to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. 5
AICPA PEER REVIEW PROGRAM COMPLIANCE Thad E. Porch Porch & Associates Albuquerque, NM thad.porch@porchcpa.com
Part I, Section A: Criticisms from Annual Report on Oversight Peer Review Program Annual Report on Oversight The purpose of the Annual Report on Oversight is to provide a general overview, statistics and information, and the results of the various oversight procedures performed on the AICPA Peer Review Program and to conclude on whether the objectives of the AICPA Peer Review Board’s oversight process were met. It is a review of the peer reviewers. Porch & Associates LLC 7
Part I, Section A: Criticisms from Annual Report on Oversight, Continued Peer Review Program Annual Report on Oversight • Approximately 29,000 peer reviews are performed in a three year cycle. • For system and engagement reviews during this cycle approximately 90% were pass, 8% were pass with deficiencies, and 2% were fail. • Engagement reviews went from 1% fail to 7% fail, and 8% pass with deficiencies to 18% pass with deficiencies with the introduction of SSARS 19. Porch & Associates LLC 8
Part I, Section A: Criticisms from Annual Report on Oversight, Continued Peer Review Program Annual Report on Oversight Approximately 5% of the engagements reviewed were identified as “not being performed and/or reported in accordance with professional standards in all material respects.” The Standards state that an engagement is ordinarily considered “not being performed and /or reported in accordance with professional standards in all material respects” when deficiencies, individually or in the aggregate, exist that are material to understanding the report or the financial statements accompanying the report or represents omission of a critical accounting, auditing or attestation procedure required by professional standards. Porch & Associates LLC 9
Part I, Section A: Criticisms from Annual Report on Oversight, Continued Peer Review Program Annual Report on Oversight A General Comment on Regulatory Independence Peer review failures in must select industries have gained the attention of regulators in those industries. Their universal question: “Where was peer review?” Porch & Associates LLC 10
Part I, Section A: Criticisms from Annual Report on Oversight, Continued Peer Review Program Annual Report on Oversight – Most Common Compliance Failures Accounting and Reporting Matters • Income taxes. Disclosures relative to uncertain tax positions failed to include open tax years as required by FASB ASC 740-10-50 (FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109 ). • Fair value. Failure to disclose the fair value of investments by levels 1, 2 and 3 as required by FASB ASC 820-10-50. • Debt. Failure to disclose five years of debt maturities as required by FASB ASC 470-10-50. • Statement of cash flows. Failure to properly identify certain cash flow items as operating, investing or as financing activities as required by FASB ASC 230-10-45. Porch & Associates LLC 11
Part I, Section A: Criticisms from Annual Report on Oversight, Continued Peer Review Program Annual Report on Oversight – Most Common Compliance Failures, Continued Accounting and Reporting Matters, Continued • Risks and uncertainties. Failure to properly disclose risks and uncertainties such as nature of operations, the use of estimates and concentrations as required by FASB ASC 275-10-50. • Subsequent events. Failure to disclose date through which subsequent events have been evaluated as required by FASB ASC 855-10-50-1. Porch & Associates LLC 12
Part I, Section A: Criticisms from Annual Report on Oversight, Continued Peer Review Program Annual Report on Oversight – Most Common Compliance Failures, Continued Audit and Attest Services • Auditor’s communication with those charged with governance. Failure to document those communications in accordance with AU-C 260, The Auditor's Communication with Those Charged with Governance ( AICPA, Professional Standards ). • Planning and supervision. Incomplete or undocumented planning procedures related to risk. • Communicating internal control matters identified in an audit, including the following: • Failure to note the auditor's responsibility for communicating internal control matters identified in the audit in the engagement letter. • Failure to complete or inaccurate completion of the internal control matters section of the firm's audit work programs in accordance with quality control policies and procedures. Porch & Associates LLC 13
Part I, Section A: Criticisms from Annual Report on Oversight, Continued Peer Review Program Annual Report on Oversight – Most Common Compliance Failures, Continued Audit and Attest Services, Continued • Failure to identify internal control matters during the planning stage of the engagement. • Failure to disclose significant deficiencies identified. • Audit documentation. Failure to prepare audit documentation in accordance with AU-C 230. • Analytical procedures. General analytical procedures and specifically the failure to document expectations prior to performing analytical procedures and then failing to compare final results to expectations as well as document the procedures performed. Porch & Associates LLC 14
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