Who’s ready for 2019 Public Entity Audits?
It’s that time of year again. Time to check out the updates and enhancements to 2019 Knowledge-Based Audit of Public Entities. In fact, this title is available for CCH® ProSystem fx® Knowledge Coach this month (August). So, get up to speed on the changes, and get ready to increase your realizations and improve your client service!
First, based on the latest literature, standards, and guidance, what changes are coming? The 2019 Knowledge-Based Audit of Public Entities includes:
- AS 4105, Reviews of Interim Financial Information, AT No. 1: Examination Engagements Regarding Compliance Reports of Brokers and Dealers
- AT No. 2: Review Engagements Regarding Exemption Reports of Brokers and Dealers
- PCAOB Staff Audit Practice Alert No. 15, Matters Related to Auditing Revenue from Contracts with Customers
Additionally, new steps and tailoring questions include:
- AUD-807 Audit Program: Property and Equipment, and Depreciation
- AUD-811 Audit Program: Debt Obligations to document new/revised lease guidance under ASU No. 2016-02, Leases (Topic 842)
Furthermore, there are new:
- Tips included regarding Omnibus Statement on Auditing Standards for the issuance of SAS-135
- Steps and tailoring questions in AUD-803 Audit Program: Accounts Receivable and Revenue to incorporate procedures performed under ASC Topic 606
- AUD-911 Audit Program: Specific Element, Account or Item of a Financial Statement in Accordance with AU-C 805, for auditors performing engagements under AU-C 805
What else is new?
Also, along with striving for compliance, we look for ways to improve the entire audit workflow and experience. With that in mind, other changes include:
- Removing all Noncomplex forms (KBA-201N, KBA-302N, and KBA-401N) and combining them with the Complex forms
- That means the auditor has options to either memo or complete the detailed table for each section – based on tailoring
Note, when a Noncomplex document is in your prior engagement – before rolling that file forward – you must add the Complex document to your engagement binder. If, however, your binder is already finalized … or you don’t want to unfinalize the binder and insert the Complex document before you roll forward from the 2018 version … you must copy and paste your data from the Noncomplex document after you roll forward, when applicable.
What happens is the Noncomplex document rolls forward as an obsolete workpaper and needs to be removed after your binder is rolled forward. Then, you must refer to your prior year binder for data in the Noncomplex document.
Additionally, for updates on the fly, you should insert the Complex version of the workpaper prior to updating so that you retain information from what is now the obsolete noncomplex version.
- Removing AUD-910 Audit Program: Broker or Dealer Additional Procedures
- All steps in this workpaper move to AUD-802A, AUD-811, and AUD-813
Note, all steps in the prior year of this workpaper are retained in the audit programs noted here.
- Adding new KBA-413 Understanding Activity-Level Controls: Broker-Dealer Transactions
- Adding new Industry-Specific disclosures regarding Broker-Dealers in KBA-901 Financial Statement Disclosure Checklist
- Removing Section I: Entity Information from KBA-302 Understanding the Entity and Its Environment as this information is duplicated at KBA-200 Entity Information and Background
What’s new – con’t
- Adding flow of columns, “Nature of Other Services” and “Firm Personnel Overseeing the Service” from KBA-101 Overall Audit Strategy to AID-201
- Adding table “Prior Year Substantive Matters and Significant Findings” to KBA-102 Engagement Completion Document
- This table is user-entry-only, if the user wants to document prior year matters or findings
- Adding flow of question, “Describe the users or expected users of the financial statements (e.g., owners, stakeholders, lenders): from KBA-200 Entity Information and Background to KBA-301 Worksheet for Determination of Materiality, Performance Materiality, and Thresholds for Trivial Amounts where this table was added
- Adding flow of Component Units from AID-603 to KBA-301 if the user has noted the Component Unit as being “Significant” in one of the four columns in AID-603
- New column of KBA-301 in step 4: Determination of the Threshold for “Trivial Amounts” for the user to document the “Trivial Amount”
- Users need to manually key in this number based on calculation because the new column triggers flow of the “Trivial Amount” to the materiality tables located within other forms
- Adding new table to trigger flow of items identified to KBA-400 Scoping and Mapping of Significant Account Balances, Classes of Transactions, and Disclosures
- All items identified in table 2 or 3 of KBA-400 flow to this new table, then the user decides which to flow to KBA-103, which helps remove duplication in KBA-103
- Modifying headers and related instructions regarding compensating controls in KBA-401 Understanding Entity-Level Controls
- Due to modifications, there are no longer any show/hide of columns in the detailed table based on internal control tailoring questions from AUD-100
Note, column 7 in KBA-401 resets on roll forward due to the content changes.
Wait, there’s more
- Modifying headers and adding one new column (If Controls are Not Effectively Designed and Implemented or Are Not Operating Effectively, Describe the Risks of Material Misstatement) in KBA-402 Understanding General Controls for Information Technology in the “less complex” table
- This new column contains a dynamic list of risks noted in the engagement, like the functioning of KBA-400 and KBA-40X series forms
- New Potential Error Diagnostic in KBA-502 Summary of Risk Assessments when a user adds a specific risk in the risk pane but the user documents that both “Inherent Risk” and “Control Risk” are low
- New Potential Error Diagnostic in KBA-502 when a user selects “Combined” under “Planned Audit Approach” column and the user hasn’t noted they are performing an integrated audit and not testing internal controls overall or for a specific audit area in AUD-100
- Adding a table to both KBA-902 Audit Review and Approval Checklist and KBA-905 Review and Approval Checklist: Interim Review of Financial Information to document a concurring partner review, if applicable
- A tailoring question is added to AUD-100 that has show/hide functioning on this table in both forms
- New missing workpaper or unnecessary workpaper diagnostic related to AID-603 based on your response to tailoring question, “Does the entity have multiple components, multiple locations, or segments that are included in the scope of our engagement?”
- New audit area, “Business Combinations” is now throughout the title and AUD-822 Audit, along with adding Program: Business Combinations
- Audit area “Journal Entries and Financial Statement Review” is reworded to “Journal Entries”
- The Financial Statement Review steps are no longer housed in AUD-814. Instead, a new form is available: AUD-909 Audit Program: Financial Statement Review. All tailoring questions are removed from AUD-814, and none are applicable anymore for that program.
And, finally …
- Improved workflow thanks to enhanced instructions and procedures throughout the toolset
- New workpapers:
- AUD-822 Audit Program: Business Combinations
- AUD-911 Audit Program: Financial Statement Review
- KBA-413 Understanding Activity-Level Controls: Broker-Dealer Transactions
- KBA-901A Tax Basis Financial Statement Disclosure Checklist
- KBA-901B Cash Basis Financial Statement Disclosure Checklist
- AID-835 Deferred Tax Analysis
- AID-846 Journal Entry Testing Worksheet
- AID-910 Analytical Procedures: Final Account Balance Analysis
- COR-822A Confirmation of Sales Terms (ASC Topic 606)
- RES-028 Lease Checklist: Identifying a Lease (ASC 842)
Remember, most of these updates and enhancements are in this Public Entities title and the 2019 Commercial Entities title. Additionally, they will also be in the titles following this one.
Now, are you interested in increased realizations and improved client service? Then learn more about our Integrated Audit Approach today.