professionals-training.ppt
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This document provides guidance for CPA firms on conducting annual training related to quality control policies and procedures, emphasizing the importance of tailoring the training to firm-specific practices. It outlines the objectives, responsibilities, and various elements of a quality control system while addressing the necessary training resources and trending issues in peer reviews. Key focus areas include ensuring compliance with standards, maintaining professional ethics, and evaluating client relationships and engagement performance.
professionals-training.ppt
- 1. Invigorating the Focus on Quality (Firm Name) Staff Training Date
- 2. American Institute of CPAs® Private Companies Practice Section Instructions To Firms Note: it is recommended that at least annually, firm personnel receive training on the firm’s quality control policies and procedures. Consider using this PowerPoint to facilitate that training. Below are some suggestions when using this PowerPoint • This training is specific to your firm. We’ve provided questions for you to consider in developing your training session materials. • Most of the slides have a comment note or red text for you to consider based on your current practices. Consider incorporating relevant examples to make the training even more relevant to your practice. • This PowerPoint does not address the quality control requirements of PCAOB standards that must be followed by auditors of issuers. Auditors of issuers should follow these other standards and make changes to their firm’s quality control systems as necessary. Auditors of nonissuers who are engaged to report on audit engagements in accordance with PCAOB auditing standards also must report on those engagements in accordance with generally accepted auditing standards.
- 3. American Institute of CPAs® Private Companies Practice Section Instructions To Firms Consider using the Quality Control Policies and Procedures Checklist that is part of the AICPA’s toolkit focusing on Quality as you review your procedures. The relevant sections of the checklist are included in the notes of the slides to assist you. Additionally, the AICPA has a free Practice Aid that provides hypothetical QC policies and procedures by firm size. Once you have tailored the PowerPoint to your firm’s current practices, delete these instruction slides.
- 4. American Institute of CPAs® Private Companies Practice Section Today’s Objectives Review the firm’s QC policies and procedures Reminder regarding the firm’s A&A resources Review trending issues noted in peer reviews and peer review areas of focus
- 5. American Institute of CPAs® Private Companies Practice Section Reminder Each and every CPA is responsible for • the public’s reliance on the services CPAs provide • maintaining the relevance of the profession’s work in the marketplace The highest level of performance is expected by • Financial statement users • Company management • Employee benefit plan sponsors • Governmental entities • Regulators • Other stakeholders
- 6. American Institute of CPAs® Private Companies Practice Section Our Firm's QC Policies and Procedures
- 7. American Institute of CPAs® Private Companies Practice Section Refresher regarding QC Systems SQCS No. 8, A Firm’s System of Quality Control The objectives of a QC system are to provide reasonable assurance that • the firm and its personnel comply with professional standards and applicable regulatory and legal requirements • and that the firm or engagement partners issue reports that are appropriate in the circumstances A QC system consists of • policies designed to achieve the objectives of the system • and the procedures necessary to implement and monitor compliance with those policies
- 8. American Institute of CPAs® Private Companies Practice Section Six Elements of QC System Leadership Responsibilities for Quality Within the Firm (“Tone at the Top”) Relevant Ethical Requirements Acceptance and Continuance of Client Relationships and Specific Engagements Human Resources Engagement Performance Monitoring
- 9. American Institute of CPAs® Private Companies Practice Section Our QC Policies/Procedures In the following slides, outline your firm’s QC processes. We’ve provided some questions for you to consider, but it’s important that you review SQCS No. 8, A Firm’s System of Quality Control, to determine that your polices/procedures are adequate.
- 10. American Institute of CPAs® Private Companies Practice Section Our QC Policies/Procedures - “Tone at the Top” Firm-wide commitment Discuss the firm’s commitment to quality and how each team member plays an instrumental role Firm’s Approach and WHY Discuss the firm’s approach to audit quality and why quality is essential in performing engagements Quality Control Document Discuss the firm’s QC document and the requirement to acknowledge receipt of it in writing Objective: Promote a quality-oriented culture
- 11. American Institute of CPAs® Private Companies Practice Section Quality Control Partner Organizational Structure to Support Quality Discuss the structure and specify who is charged with the responsibility and authority over the system of quality control QC Partner Name and Contact Information • Email • Phone • Location (if applicable) Governmental Quality Partner (if applicable) EBP Quality Partner (if applicable) Provide a brief overview of QC partner’s responsibilities, other QC staff (if applicable) If you have any concerns about the quality control processes of the firm, please contact XXXXX.
- 12. American Institute of CPAs® Private Companies Practice Section Our QC Policies/Procedures - Relevant Ethical Requirements Firm-wide commitment Discuss the firm’s commitment to independence, integrity and objectivity and each professional’s role Firm’s Approach and WHY Discuss the firm’s approach to ensuring compliance with relevant ethical requirements and why it’s important Monitoring Polices/Procedures Discuss the firm’s Independence policies document and the requirement to acknowledge receipt of it in writing Organizational Structure re: Ethical Requirements Who is responsible for providing guidance, answering questions, monitoring, and resolving matters? Objective: Protect independence, integrity, and objectivity
- 13. American Institute of CPAs® Private Companies Practice Section Our QC Policies/Procedures - Acceptance and Continuance of Client Relationships and Specific Engagements Firm-wide commitment Discuss the firm’s commitment to the risk-management process of evaluating its ability to perform an engagement before deciding to accept a new client or continue an existing relationship Firm’s Approach and WHY Discuss the firm’s approach to ensuring that the firm • Is competent to perform the engagement • Has the capabilities – including time and resources • Can comply with legal and ethical requirements • Has considered the integrity of the client • Has reached an understanding with the client re: services to be performed Objective: Ensure that client relationships are begun or continued only when appropriate
- 14. American Institute of CPAs® Private Companies Practice Section Our QC Policies/Procedures - Acceptance and Continuance of Client Relationships and Specific Engagements - continued Evaluation Polices/Procedures Discuss the firm’s Client Acceptance and Client Continuance policies and procedures. Include policies regarding engagement letters, which can minimize the risk of misunderstandings regarding nature, scope and limitations of services to be performed. Organizational Structure Discuss who within the firm is designated to evaluate and make recommendations regarding client acceptance/continuation.
- 15. American Institute of CPAs® Private Companies Practice Section Our QC Policies/Procedures - Human Resources Firm-wide commitment Discuss the firm’s commitment to ensuring that the right personnel are assigned to engagements so they are performed in accordance with professional standards and the firm issue reports that are appropriate in the circumstances Firm’s Approach and WHY Discuss the firm’s approach to providing relevant training, assigning staff to engagements, assessing competence, etc. Objective: Ensure the firm has sufficient personnel with the necessary capabilities, competence and commitment to ethical principles
- 16. American Institute of CPAs® Private Companies Practice Section Our QC Policies/Procedures - Human Resources - continued Human Resource Polices/Procedures Discuss the firm’s policies that support the objectives of ensuring the firm has sufficient personnel with the necessary capabilities, competence, and commitment to ethical principles Organizational Structure of Human Resources Discuss who is responsible for managing the HR function
- 17. American Institute of CPAs® Private Companies Practice Section Our QC Policies/Procedures - Engagement Performance Firm-wide commitment Discuss the firm’s commitment to meeting professional standards and all applicable requirements at all phases of the design and execution of the engagement Objective: (1) Ensure engagements are consistently performed in accordance with professional standards and applicable legal and regulatory requirements and (2) that the firm issues reports that are appropriate in the circumstances
- 18. American Institute of CPAs® Private Companies Practice Section Our QC Policies/Procedures - Engagement Performance - continued Firm’s Approach and WHY Discuss the firm’s approach to • Complying with professional standards and all applicable requirements • Ensuring that consultation takes place when appropriate • Determining when an engagement quality control review should be performed Engagement Performance Polices/Procedures Discuss the firm’s policies relating to engagement planning, performance, supervision, documentation, and reporting along with document retention
- 19. American Institute of CPAs® Private Companies Practice Section Our QC Policies/Procedures - Monitoring Firm-wide commitment Discuss the firm’s commitment to monitoring engagement performance Firm’s Approach and WHY Discuss the firm’s approach to engagement monitoring and the reasoning behind the approach Objective: Evaluating the firm’s • Adherence to professional standards and regulatory and legal requirements • QC system design and implementation • QC policies and procedures for effectiveness
- 20. American Institute of CPAs® Private Companies Practice Section Our QC Policies/Procedures - Monitoring - continued Monitoring Polices/Procedures Discuss the firm’s approach to communicating its monitoring polices/procedures, its ongoing consideration and evaluation of the QC system and other monitoring processes Organizational Structure re: Monitoring Discuss who is responsible for inspecting engagements and other monitoring procedures
- 21. American Institute of CPAs® Private Companies Practice Section A&A Resources Available to You
- 22. American Institute of CPAs® Private Companies Practice Section Our AICPA Quality Centers Participation Governmental Audit Quality Center Employee Benefit Plan Audit Quality Center Center for Audit Quality Membership in the Centers requires us to comply with the applicable professional standards Firm to complete this slide with a listing of quality centers in which the firm is a member. This slide includes examples only. Tailor to your firm.
- 23. American Institute of CPAs® Private Companies Practice Section A&A Resources AICPA Professional standards FASB pronouncements A&A manual (PPC, etc.) A&A industry guides GASB pronouncements, GAS, Yellow Book, etc. SEC guidance materials AICPA Center for Plain English Accounting (CPEA) Firm association or network resources Internally developed auditing materials • i.e., Specialized industries in which you have developed your own resources Firm to complete this slide with a listing of A&A resources available. This slide includes examples only. Tailor to your firm. These resources are available…(online, on the intranet, etc.)
- 24. American Institute of CPAs® Private Companies Practice Section
- 25. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews and Peer Review Areas of Focus Note to firm: You may want to edit this section to remove topics/industry areas that aren’t relevant to your firm. For example, if your firm doesn’t perform EBP audits, you may want to remove that topic.
- 26. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews and Peer Review Areas of Focus AICPA identified common trouble spots in peer reviews Also identified areas of focus for firms and peer reviewers • new industries • industries with new or rising risks • audit areas of increased risk • areas that have shown to have increased inspection matters
- 27. American Institute of CPAs® Private Companies Practice Section By Topic: Reports Representation Letters Documentation Engagement letters Disclosures Quality Control Code of Professional Conduct Independence Trending Issues Noted in Peer Reviews and Peer Review Areas of Focus
- 28. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews - Reports Audits • Report date significantly earlier than the date of the review of the workpapers and the release date Reviews • Not updated for SSARS 19 • Contained inappropriate titles Compilations • Not updated for SSARS 19 • No headings on the report • Contained inappropriate titles • Contained no explanation of the degree of responsibility the accountant is taking with respect to supplementary information. • Failed to mention that substantially all disclosures are omitted
- 29. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews - Reports Agreed upon procedures • Reports failed to include - The word “independent” in the report title (most frequent) - A title - Reference to the AICPA attestation standards - A statement that - the sufficiency of the procedures is solely the responsibility of the specified parties - disclaims responsibility for the sufficiency of those procedures - Identification of the - subject matter or the engagement or - written assertion or the character of the engagement
- 30. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Representation Letters Audits • Representation letters that - were dated incorrectly - did not cover the appropriate periods - were missing required representations Reviews • Representation letters that - were dated incorrectly - did not cover the appropriate periods • Failure to - obtain an engagement letter - revise the letter for SSARS 19
- 31. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Documentation and Performance Audits • Failure to appropriately document planning procedures • Audit documentation did not contain sufficient competent evidence to support the firm's opinion on the financial statements • Insufficient procedures and documentation regarding the procedures to obtain assurance of the fair value measurements
- 32. American Institute of CPAs® Private Companies Practice Section Peer Review Areas of Focus - Documentation and Performance Sufficiency of Audit Evidence • Risk assessment and internal controls • Quality and quantity of audit evidence when sampling Documentation should enable an experienced auditor, having no previous connection with the audit, to understand the nature, timing, extent, and results of procedures, including significant findings or issues.
- 33. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Engagement Letters Reviews • Failure to - obtain an engagement letter - revise the letter for SSARS 19 Compilations • Failure to - obtain an engagement letter - revise the letter for SSARS 19. - note a lack of independence • Letter referred to GAAP on an OCBOA engagement Agreed upon procedures • Failure to include all elements required by attestation standards
- 34. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Disclosures FASB Accounting Standards Codification Issues • Missing or insufficient fair value disclosures • No disclosure of - tax years that remain subject to examination by major tax jurisdictions - uncertain tax positions • Incorrect classifications, net amounts instead of gross and non- cash transactions on the cash flow statement • Long-term debt not segregated into current and long-term portions • Missing or insufficient notes payable disclosures • No disclosure of the date through which subsequent events were evaluated
- 35. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Quality Control Leadership Responsibilities for Quality Within the Firm • Failure to have a written quality control document in accordance with SQCS 8 Human Resources • Policies not sufficient to ensure partners and staff obtain appropriate CPE • Policies not set to require relevant CPE for levels of service and industries of engagements performed
- 36. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Quality Control - continued Engagement Performance • Criteria for Engagement Quality Control Review (EQCR) not established • EQCR not performed on engagements that meet the firm’s criteria Monitoring • QC document did not include monitoring procedures • Monitoring procedures did not include review of all elements of quality control • Results of monitoring and inspections were not documented Failure to • Establish and document in writing the firm’s understanding with the client with regard to non-attest services provided • Communicate and/or document required communications with those charged with governance
- 37. American Institute of CPAs® Private Companies Practice Section Peer Review Areas of Focus – Independence Nonattest services provided to audit clients, particularly with respect to evaluation of sufficiency of the client’s skills, knowledge and experience (SKE) to oversee the services • Practitioners must be independent and comply with the requirements of ET sec. 1.295 when providing nonattest services to their attest clients. Key safeguard - client designates an individual with suitable SKE
- 38. American Institute of CPAs® Private Companies Practice Section Peer Review Areas of Focus – Independence - continued Notable changes for engagements beginning on or after December 15, 2014: • preparing financial statements, among other commonly performed functions, will constitute nonattest services • multiple nonattest services provided to a client can increase the significance of threats to independence
- 39. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews and Peer Review Areas of Focus For Specific Practice Areas: Not for profits Service Organization Control (SOC) Reports Governmental, A-133, and HUD Employee Benefit Plans Broker-Dealers Issuers of Municipal Securities Banking Crowdfunding
- 40. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Not for profits Report • Auditors’ report did not refer to the Statement of Functional Expenses Financial statements • Net assets not properly classified • Improper expense classifications on the Statement of Functional Expenses Disclosures • Open tax years not disclosed because the firm believed the disclosure was not required for tax exempt entities • Inadequate disclosure of the nature, amounts and types of net asset restrictions • Policies regarding donated goods and services not disclosed
- 41. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Service Organization Control Reports Qualifications • (SOC 1) Lack of experience and training required to properly complete a SOC Report Report • (SOC 1) Incorrect references or incorrect language • (SOC 2) Non-standard wording regarding complementary user entity controls Documentation • (SOC 1) Information included in the report did not have sufficient support in the workpapers • (SOC 1) The client acceptance, the description of controls and the audit documentation omitted references
- 42. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Governmental, A-133, and HUD Reporting • Failure to include all of the required elements of professional standards in the Independent Auditor’s Report • Failure to include all of the required elements of professional standards in Auditor’s Report on • Internal Control over Financial Reporting • Compliance and Other Matters Disclosure and Presentation • Failure to present the financial statements in accordance with professional standards
- 43. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews– Governmental, A-133, and HUD - continued Documentation and Performance • Failure to properly document - independence considerations required by Yellow Book - audit planning and procedures - required communications with those charged with governance • Failure to ensure that the written representations from the audited entity contained all applicable elements • Failure to meet the Yellow Book CPE requirements
- 44. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Governmental, A-133, and HUD - continued Documentation and Performance – Single Audit Issues • Failure to identify and test sufficient and appropriate major programs • Failure to document an understanding of internal control over compliance of federal awards sufficient to plan the audit to support low assessed level of control risk for major programs
- 45. American Institute of CPAs® Private Companies Practice Section Peer Review Areas of Focus – Governmental, A-133, and HUD Significant changes will be required by the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards at 2 CFR 200 (Uniform Guidance for Federal Awards) New Uniform Guidance for Federal Awards will affect current and future single audit engagements
- 46. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Employee Benefit Plan Audits Reporting • Supplemental schedules required by ERISA and DOL regulations not presented in the prescribed format Documentation and Performance • Missing or insufficient documentation of allocation of investment income to participant accounts • Insufficient participant testing related to demographic data and payroll • Insufficient procedures and documentation for reliance on SOC 1 reports
- 47. American Institute of CPAs® Private Companies Practice Section Peer Review Areas of Focus – Employee Benefit Plan Audits Increased focus by peer reviewers due to the significant public interest in, and a higher risk associated with, audits of employee benefit plans Recent standards promulgated by GASB are extremely complex and will present challenges for auditors
- 48. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Broker-Dealers Reporting • Audit reports inappropriately referenced use of the PCAOB standards to perform the audits (when SAS were followed) Documentation and Performance • Failure to comply with SEC Independence Rules, including not preparing financial statements for clients • Failure to use a broker-dealer specific financial statement checklist thus missing required disclosures
- 49. American Institute of CPAs® Private Companies Practice Section Peer Review Areas of Focus – Issuers of Municipal Securities SEC has brought numerous charges related to municipal securities issuers misleading investors and defrauding investors in the bond market • materially misleading statements • improper accounting and/or disclosure for transactions Peer reviewers will be focusing on the financial statement audits of municipal issuers, including • State governments • Local governments • Certain not-for-profit and for-profit conduit borrowers
- 50. American Institute of CPAs® Private Companies Practice Section Trending Issues Noted in Peer Reviews – Banking, including FDICIA Reporting • Failure to include all elements required by professional standards in the accountant’s report on internal controls Disclosures and presentation • Failure to properly disclose specific information Management Representation Letter • Failure to include representations specific to financial institutions Documentation and Performance • Failure to understand and comply with the independence rules • Insufficient audit testing of - real estate lending - loan loss allowance
- 51. American Institute of CPAs® Private Companies Practice Section Peer Review Areas of Focus – Crowdfunding Proposed SEC rule regarding crowdfunding • requires Internet-based fundraising entities to register as an “intermediary” • limits transactions to $1,000,000 annually • imposes limitations at the individual investment level Additional focus warranted due to • Risks associated with the business segment • Potential increased regulatory scrutiny
- 52. American Institute of CPAs® Private Companies Practice Section Questions?
- 53. Copyright © 2015 American Institute of CPAs. All rights reserved. Thank You for Your Commitment to Quality