Not much going on here SAS 122 was the Super SAS But has been followed by several additional SASs in recent years, including SASs

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2 Not much going on here SAS 122 was the Super SAS But has been followed by several additional SASs in recent years, including SASs

3 SAS 123, Omnibus Statement on Auditing Standards 2011 SAS 124, Financial Statements Prepared in Accordance With a Financial Reporting Framework Generally Accepted in Another Country SAS 125, Alert That Restricts the Use of the Auditor's Written Communication SAS 126, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern (Redrafted) SAS 127, Omnibus Statement on Auditing Standards

4 SAS 128, Using the Work of Internal Auditors SAS 129, Amendment to Statement on Auditing Standards No. 122 Section 920, Letters for Underwriters and Certain Other Requesting Parties, as Amended SAS 130, An Audit of Internal Control Over Financial Reporting That Is Integrated With an Audit of Financial Statements, effective for year ends SAS 131, Amendment to Statement on Auditing Standards No. 122 Section 700, Forming an Opinion and Reporting on Financial Statements 4

5 SAS 132, The Auditor's Consideration of an Entity s Ability to Continue as a Going Concern This SAS will be effective for audits of financial statements for periods ending on or after December 15, 2017 This is probably the only one we need to discuss a bit 5

6 Scope Addresses the auditor s responsibilities in the audit of financial statements relating to the entity s ability to continue as a going concern and the implications for the auditor s report Applies to all audits of a complete set of financial statements, regardless of whether the financial statements are prepared in accordance with a general purpose or a special purpose framework Under the going concern basis of accounting, the financial statements are prepared on the assumption that the entity is a going concern and will continue its operations for a reasonable period of time. A complete set of general purpose financial statements is prepared using the going concern basis of accounting, unless the liquidation basis of accounting is appropriate. 6

7 Scope, cont. May not be relevant to a special reporting framework set of financial statements, but Auditor will still be responsible for concluding, based on the audit evidence obtained, whether substantial doubt exists about an entity s ability to continue as a going concern for a reasonable period of time, and Evaluating the possible financial statement effects, including the adequacy of disclosure regarding the entity s ability to continue as a going concern for a reasonable period of time 7

8 Scope, cont. The auditor s responsibilities under this SAS apply even if the applicable financial reporting framework used in the preparation of the financial statements does not include an explicit requirement for management to make a specific evaluation of the entity s ability to continue as a going concern However, for most of us in this room, that s a non issue since our entities follow GASB, which does have its own explicit requirement of make that evaluation (GASB 56) 8

9 GASB Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards, requires financial statement preparers to evaluate whether there is substantial doubt about a governmental entity s ability to continue as a going concern for 12 months beyond the date of the financial statements GASB Statement No. 56 further requires that, if information is currently known to the governmental entity that may raise substantial doubt shortly thereafter (for example, within an additional three months), such information should also be considered Law or regulation may also set forth requirements regarding management s responsibility to evaluate the entity s ability to continue as a going concern for a defined period of time and related financial statement disclosures 9

10 Management s evaluation involves making a judgment at a particular point in time, and is influenced by the following: The degree of uncertainty associated with the outcome of a condition or event increases significantly the further into the future a condition or event or the outcome occurs The size and complexity of the entity, the nature and condition of its business, and the degree to which it is affected by external factors affect the judgment regarding the outcome of conditions or events Any judgment about the future is based on conditions or events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued, when applicable) 10

11 The potential effects of inherent limitations on the auditor s ability to detect material misstatements are greater for future events or conditions, considered in the aggregate, that raise substantial doubt about the entity s ability to continue as a going concern for a reasonable period of time The auditor cannot predict such future conditions or events. Accordingly, the absence of any reference to substantial doubt about the entity s ability to continue as a going concern for a reasonable period of time in an auditor s report cannot be viewed as a guarantee of the entity s ability to continue as a going concern for a reasonable period of time 11

12 Objectives To obtain sufficient appropriate audit evidence regarding, and to conclude on, the appropriateness of management s use of the going concern basis of accounting, when relevant, in the preparation of the financial statements To conclude, based on the audit evidence obtained, whether substantial doubt about an entity s ability to continue as a going concern for a reasonable period of time exists To evaluate the possible financial statement effects, including the adequacy of disclosure regarding the entity s ability to continue as a going concern for a reasonable period of time To report in accordance with this SAS 12

13 Currently, there are 8 SSAE standards applicable SSAE (SSAE 1-9 were superseded by the issuance of SSAE 10 in 2001) Effective for attestation reports dated on or after May 1, 2017, all that changes with the implementation of SSAE 18, the AICPA s clarity version of SSAEs, codified as AT-C to differentiate them from the old AT sections 13

14 The attestation standards establish requirements for performing and reporting on examination, review, and agreed-upon procedures engagements that enable practitioners to report on subject matter ordinarily other than financial statements, for example, an entity s compliance with laws or regulations, the effectiveness of an entity s controls over the security of a system, and the fairness of the presentation of a statement of greenhouse gas emissions. 14

15 Objectives for each AT-C section Definitions section Separating requirements from application and other explanatory material Numbering application and other explanatory material paragraphs using an A- prefix and presenting them in a separate section that follows the requirements section Using formatting techniques, such as bulleted lists, to enhance readability 15

16 3 types of services are addressed Examinations Reviews Agreed Upon Procedures SSAE No 18 restructures the attestation standards so that the applicability of any AT- C section of the attestation standards to a particular engagement depends on the type of service provided and the subject matter of the engagement 16

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18 Section 105, Concepts Common to all Attestation Engagements Section 205, Examination engagements Section 210, Review engagements Section 215, Agreed Upon Procedures engagements The applicable requirements and application guidance for any attestation engagement is contained in at least two AT-C sections: AT-C section 105 and either AT-C section 205, 210, or 215, depending on the type of service provided. 18

19 Incremental performance and reporting requirements and application guidance unique to four subject matters are included in the subject-matter specific AT-C sections Prospective financial information, AT-C 305 Pro forma financial information, AT-C 310 Compliance attestation, AT-C 315 Controls at a service organization relevant to user entities internal control over financial reporting, AT-C 320 The applicable requirements and application guidance for a subject matter specific engagement is contained in three AT-C sections: AT-C section 105; AT-C section 205, 210, or 215, depending on the type of service provided; and the applicable subject matter section 19

20 Although SSAE No. 18 addresses four specific subject matters, what makes the attestation standards so unique is that they enable a practitioner to report on almost any subject matter, as long as Subject matter is appropriate Criteria used for evaluating subject matter is suitable and available Practitioner believes they can get the required evidence to support the opinion, conclusion or findings Such opinion, conclusion, or findings is to be contained in a written practitioner s report 20

21 Types of engagements that may be performed are only limited by the preconditions in paragraph.25 of AT-C section 105 and the practitioner s and client s creativity 21

22 Besides restructuring Separate discussion of review engagements Required representation letters Risk assessment for examination engagements Incorporation of detailed requirements Scope limitation imposed by the engaging party or the responsible party 22

23 SSAE No 18 separates the detailed procedural and reporting requirements for review engagements from their counterparts for examination engagements. The resulting guidance more clearly differentiates the services, highlighting the similarity of a review under the SSAEs to a review under the Statements on Standards for Accounting and Review Services. 23

24 AT section 101 of the existing attestation standards discusses representation letters but does not require them. (However, certain existing subject-matter specific AT sections require the practitioner to obtain a representation letter) SSAE No. 18 requires the practitioner to request a written representation letter in all attestation engagements However, if a responsible party who is not the engaging party refuses to provide the practitioner with a representation letter, the practitioner would not necessarily be required to conclude that a scope limitation exists if the practitioner is able to obtain satisfactory oral responses from the responsible party to the matters ordinarily included in the representation letter In these circumstances, use of the examination or review report would be restricted to the engaging party. 24

25 SSAE No. 18 requires practitioners to obtain a more in-depth understanding of the development of the subject matter than currently required in order to better identify the risks of material misstatement in an examination engagement. This, in turn, should lead to an improved linkage between assessed risks and the nature, timing, and extent of attestation procedures performed in response to those risks. Does this sound familiar? 25

26 SSAE No. 18 incorporates a number of detailed requirements (such as the need for an engagement letter or equivalent and for written representations in examinations and reviews) that are similar to those contained in Statements on Auditing Standards (SASs) SSAE No. 18 adopts these requirements based on the ASB s belief that a service that results in a level of assurance similar to that obtained in an audit or review of historical financial statements should generally consist of similar requirements 26

27 Paragraph.74 of AT section 101 of the existing attestation standards indicates that when restrictions that significantly limit the scope of the engagement are imposed by the engaging party or the responsible party, the practitioner generally should disclaim an opinion or withdraw from the engagement SSAE No. 18 does not contain the same requirement Instead, it indicates that based on the practitioner s assessment of the effect of the scope limitation, the practitioner should express a qualified opinion, disclaim an opinion, or withdraw from the engagement (when withdrawal is possible under applicable laws or regulations) 27

28 The foundation for the common concepts, examination, and review AT-C sections of SSAE No. 18 is the same as the International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other than Audits and Review of Historical Financial Information 28

29 However, one major difference exists between the SSAEs and the ISAEs In the SSAEs, a practitioner is not permitted to issue an examination or review report when an assertion has not been obtained from the responsible party, except when the responsible party is not the engaging party Under the ISAEs, an assertion (or representation about the subject matter against the criteria) is not required in order for the practitioner to report 29

30 SSAE 18 supersedes all previous attestation standards EXCEPT for AT 501, An Examination of an Entity s Internal Control Over Financial Reporting That is Integrated With An Audit of Financial Statements AT 501 has been clarified and issued as SAS No. 130, An Audit of Internal Control Over Financial Reporting That is Integrated With An Audit of Financial Statements, because it addresses an examination of internal control that is integrated with an audit of financial statements. (The ASB intends to develop a generic internal control attestation standard in the future.) 30

31 AT 701 Management s Discussion and Analysis. AT 701 will not be clarified because practitioners rarely perform these engagements; it will be retained in the attestation standards in its current form 31

32 Statements on Standards for Accounting and Review Services (SSARS) have changed, with SSARS 22 and 23 issued last year Remember, the ARSC undertook a clarity-like revision of the SSARS, similar to what the ASB did with the SASs, a couple of year ago The result was SSARS 21, which effectively amended and superseded all previous SSARS sections in the codification, except for Sec 120, Compilations of Pro Forma FS, which is now addressed in SSARS 22 The following slides will update us on what has changed since SSARS 21 32

33 STATEMENTS ON STANDARDS FOR ACCOUNTING AND REVIEW SERVICES 21 General Principles Preparation of financial statements engagements Compilation engagements Review engagements Effective date would be for financial statement periods ending on or after December 15, 2015 (was effective for any financial statements) 33

34 Compilation of Pro Forma Financial Information This standard is effective for compilation reports on pro forma financial information dated on or after May 1, 2017 The clarified standard will be codified as AR- C section

35 The objective of the accountant in a compilation of pro forma financial information is to apply accounting and financial reporting expertise to assist management in the presentation of pro forma financial information and report in accordance with this section without undertaking to obtain or provide any assurance on the pro forma financial information. 35

36 OMNIBUS STATEMENT ON STANDARDS FOR ACCOUNTING AND REVIEW SERVICES 2016 The revisions to AR-C section 60 and AR-C section 90 are effective upon issuance The revisions to AR-C section 70 are effective upon issuance with the exception of the revisions to paragraphs.01 and.a1 and new paragraphs.19 and.a1.a2, which are effective for prospective financial information prepared on or after May 1, 2017 The revisions to AR-C section 80 are effective upon issuance with the exception of the revisions to paragraphs.01 and.a1 and new paragraphs.24.25,.a1.a2, and.a5 which are effective for compilation reports on prospective financial information dated on or after May 1,

37 Revises the applicability so that Statements on Standards for Accounting and Review Services (SSARSs) apply to engagements performed on subject matter other than financial statements Includes definitions of financial statements and prospective financial information, harmonizes the definitions of engagement team and professional judgment to those included in the clarified auditing standards, and clarifies the definition of other preparation, compilation, and review publications 37

38 Includes a mandatory requirement for the accountant to document the justification for a departure from a relevant presumptively mandatory requirement and how the alternative procedures performed in the circumstances were sufficient to achieve the intent of the requirement Revises the requirement for the accountant to obtain the agreement of management that it acknowledges and understands its responsibility for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error, so that the requirement does not apply if the accountant decides to accept responsibility for such internal control 38

39 Expands the subject matter to which the section should be applied to include prospective financial information and to clarify when the section applies; when the section may be applied; and when the section does not apply 39

40 Clarifies that AICPA Guide Prospective Financial Information provides comprehensive guidance regarding prospective financial information including suitable criteria for the preparation and presentation of prospective financial information and clarifies that the accountant is not prohibited from preparing prospective financial information prepared and presented in accordance with other suitable criteria 40

41 Clarifies the nature of an engagement letter and makes clear that an oral understanding of the terms of the engagement is insufficient Clarifies that when the accountant is unable to include a statement on each page of the financial statements indicating, at a minimum, that no assurance is provided on the financial statements that the accountant may withdraw from the engagement 41

42 Includes a requirement that because the summary of significant assumptions is essential to the user s understanding of prospective financial information, the accountant should not prepare prospective financial information that excludes disclosure of the summary of significant assumptions or a financial projection that excludes either an identification of the hypothetical assumptions or a description of the limitations on the usefulness of the presentation 42

43 Expands the subject matter to which the section should be applied to include prospective financial information, pro forma financial information, and other historical financial information Clarifies that AICPA Guide Prospective Financial Information provides comprehensive guidance regarding prospective financial information including suitable criteria for the preparation and presentation of prospective financial information; and clarifies that the accountant is not prohibited from performing a compilation engagement on prospective financial information prepared and presented in accordance with other suitable criteria 43

44 Clarifies the nature of an engagement letter and to make clear that an oral understanding of the terms of the engagement is insufficient Harmonizes guidance with respect to the requirement that the accountant s compilation report include the signature of the accountant or the accountant s firm with that included in AR-C section 90 for an accountant s review report Includes requirements when the accountant is issuing a compilation report on prospective financial information 44

45 Clarifies that the accountant is required to disclose known departures from the applicable financial reporting framework in the accountant s compilation report and that when the accountant becomes aware of a departure from the applicable financial reporting framework that is material to the financial statements and the financial statements are not revised, the accountant is required to consider whether modification of the standard report is adequate to disclose the departure 45

46 Clarifies that AR-C section 90 applies to reviews of all historical financial information, excluding pro forma financial information Clarifies the definition of supplementary information Clarifies the nature of an engagement letter and makes clear that an oral understanding of the terms of the engagement is insufficient 46

47 Revises the requirement that the engagement letter or other suitable form of written agreement be signed by the accountant or the accountant s firm and management or those charged with governance as appropriate to use language consistent with that used in corresponding paragraphs in AR-C section 70 and AR-C section 80 47

48 Harmonizes the requirement that the accountant s review report include the signature of the accountant or the accountant s firm with that included in AR-C section 80 for an accountant s compilation report Revises the accountant s reporting responsibilities when supplementary information accompanies reviewed financial statements and the accountant s review report thereon 48

49 Questions? 49