This blog is about the 2020 Commercial Entities title, and it is important for two reasons. First, this new title includes updates and enhancements that will improve client service and increase your realization. Second, changes to standards and effective dates – caused by covid-19 delays – are addressed in the new title. And, while you can choose to upgrade now or not, for current CCH® ProSystem fx® Knowledge Coach and CCH Axcess™ Knowledge Coach firms, the deciding factor is:
- If your firm is early-implementing the standards noted in the ‘caution section’ further down in this blog, then you must update to the 2020 Commercial Entities title now vs. later.
2020 Commercial Entities Title – Updates
Based on the latest literature, standards, and guidance, the 2020 Knowledge-Based Audit of Commercial Entities now includes:
- One, AICPA Statement on Auditing Standards (SAS) No. 135, Omnibus Statement on Auditing Standards – 2019;
- Two, SAS No. 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports;
- Three, SAS No. 138, Amendments to the Description of the Concept of Materiality;
- Four, SAS No. 139, Amendments to AU-C Sections 800, 805, and 810 to Incorporate Auditor Reporting Changes from SAS No. 134;
- Five, SAS No. 140, Amendments to AU-C Sections 725, 730, 930, 935, and 940 to Incorporate Auditor Reporting Changes from SAS Nos. 134 and 137
Especially important is this note.
- Caution: This title should only be used by auditors who are implementing the requirements of SAS No. 134 – 140. For engagements where those standards will not yet be implemented, the auditor should continue to use the 2019 title, released on 8/1/2019.
To continue, this Commercial Entitles title incorporates new/updated steps and practice points related to ‘Statement on Auditing Standards’ noted above. Additionally, new functioning of KBA-901 is now updated for a new, streamlined approach to tailoring.
Financial Statement Disclosure Checklist
With that said, to obtain the updated KBA-901 Financial Statement Disclosure Checklist, you must install this new title. That holds true, regardless of whether you are ‘early-implementing’ the standards noted above or not. You see, the disclosure checklist is an independent workpaper. Therefore, it can be added to a binder without updating the other content for the new standards.
After installing the 2020 Commercial Entities title, there are two options for inserting the updated disclosure checklist into a binder:
- Option 1 – install the title, but do not release it. Do this by leveraging the user rights in the ADMIN module, i.e. “Insert Workpapers from Unreleased Titles”. Then, simply give select groups of staff the ability to install the updated disclosure checklist.
- Option 2 – create a binder template with just the updated disclosure checklist. Then, copy and paste the disclosure checklist from the template into the engagement binder. After creating the template, the 2020 Commercial title is ready for release.
Note that, no matter which option you choose, the tailoring in the table of contents will be lost from the prior year.
Also added to KBA-503 are new columns and additional flow, which will better assist users documenting inherent risk.
Knowledge Coach Software Enhancements
In addition to striving for compliance, we also look for ways to improve the audit workflow and user experience within the Knowledge Coach software solution. For example, beginning with this 2020 Commercial Entities title, we’ve also added:
- To AUD-100, a new tailoring question, i.e. “Is the auditor engaged to report on Key Audit Matters?”. The answer flows to multiple forms and then shows or hides additional applicable steps.
- In KBA-102, new columns document “Key Audit Matters”. These new columns show or hide additional applicable steps, based on the new tailoring question in AUD-100.
- For KBA-103:
- New default answers in columns 13, 14, and 15, based on answers in column 12.
- Sorting is added to the “Communication of Internal Control Deficiencies” table. The ‘flow of deficiencies’ now automatically sorts based on the text in the Deficiency No. column in the first table.
- In KBA 303, the answer floatie in the conclusion section is modified from “No” to “No Inconsistencies Noted”.
- In KBA-502, if the user is not testing controls,
there is a new default answer. It works as follows:
- When you select “Yes” to either of these:
- Has the auditor been engaged to perform an integrated audit (i.e., an audit of internal control over financial reporting that is integrated with the audit of financial statements)?
- Does the auditor intend to test the operating effectiveness of internal controls over financial reporting?
- And, in column 5, you select no to:
- Controls Selected for Testing of Operating Effectiveness
- Then, in column 7, “CR” will default to “Max”.
- When you select “Yes” to either of these:
And There’s More
- The header in the second column of, “Section I: Risk Assessment Procedures and Related Activities” is modified. It now reads, “Does the Factor Exist Yes/No”. This change was made to avoid confusion on how this column should be documented.
- Colons were removed from workpaper names. Now a user may publish or save forms outside of CCH® ProSystem fx® Engagement without receiving an ‘invalid character’ error message.
- To improve the workflow, instructions and procedures throughout the toolset are enhanced.
- To streamline data input and improve workflow, the flow within and between documents is updated.
- New workpapers include:
- AID-847 Analysis of Service Auditor Report
- COR-823 Request for Confirmation of Multiemployer Defined Benefit Plan Information
- COR-907 Communication to Entity with Significant Deficiencies and/or Material Weaknesses: Review of Interim Financial Information
- RPT-0904A Unmodified Opinion: Emphasis-of-Matter Paragraph Related to Going Concern: Substantial Doubt has Been Alleviated
- RPT-0959 Unmodified Opinion: Includes Key Audit Matters, Emphasis-of-Matter and Other-Matter Paragraphs
- RES-029 Implementing New Accounting Principles
- RES-030 Determining and Communicating Key Audit Matters (KAMs) Decision Tree
Note that titles released after this 2020 Commercial Entities title will also include most of these updates/enhancements.
Installing the 2020 Commercial Entities Titles
To conclude, this title can be installed on Engagement v2019.2.6 update. Simply download the latest update via CCH Software Delivery Manager. After updating the title, you can use the 2020 content without installing Engagement v2020. That way your firm plan your Engagement v2020 update.
To learn more about the Knowledge-Based titles and methodology, visit us online.