Journal of Accountancy

NEWS DIGEST

FYI

JANUARY 2009

The SEC’s Office of the Chief Accountant is seeking up to four professional accounting fellows to help develop proposed securities rules, work with standard setters in accounting and auditing, and consult with filers on reporting matters. The two-year fellowships begin this summer or fall.

Two positions are in the Accounting Group. Experience with applying U.S. GAAP or IFRS is desired for fellowship spots in that group. A third position is in the International Group, where desired experience includes IFRS or International Standards on Auditing. The fourth position is in the Professional Practice Group, where desired experience includes internal control over financial reporting under section 404 of the Sarbanes-Oxley Act.

Applications are due by Jan. 16. For information, call Evan Sussholz at 202-551-3622 or Douglas Parker at 202-551-5316.

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International

JANUARY 2009

The International Accounting Standards Board (IASB) published guidance on the application of fair value measurement when markets become inactive. The guidance includes a report by an expert advisory panel established to consider the issue, as well as a summary document highlighting important issues associated with measuring the fair value of financial instruments when markets become inactive. The summary takes into consideration and is consistent with documents issued by FASB on Oct. 10 and by the Office of the Chief Accountant of the SEC and FASB staff on Sept. 30, according to an IASB news release. The guidance can be downloaded at www.iasb.org/expert-advisory-panel. A comprehensive summary of the IASB response to the credit crisis is available at www.iasb.org/credit+crisis.

The IASB and FASB announced that they will create a global advisory group comprising regulators, preparers, auditors, investors and other users of financial statements. The advisory group will help to ensure that reporting issues arising from the global economic crisis are considered in an internationally coordinated manner. For more information, visit www.iasb.org or www.fasb.org.

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Money Laundering

JANUARY 2009

The Financial Crimes Enforcement Network (FinCEN), in an effort to make the administration of the Bank Secrecy Act (BSA) more efficient and effective, published a proposal to simplify its rules and regulations by centralizing them in its own new chapter of the Code of Federal Regulations (CFR). The proposal would streamline BSA regulations into general and industry-specific parts. FinCEN said this will allow financial institutions to identify their obligations under the BSA in a more organized and understandable manner.

FinCEN’s regulations are currently included in the CFR as Part 103 in Chapter I under “Title 31, Money and Finance: Treasury.” The FinCEN proposal would renumber its regulations into a new 10th chapter of Title 31 which would appear as “Title 31 Chapter X—Financial Crimes Enforcement Network.”

The Notice of Proposed Rulemaking as submitted to the Federal Register is available at www.fincen.gov.

FinCEN introduced enhancements to the batch validation process of the Bank Secrecy Act Electronic Filing System (BSA E-Filing) that are expected to improve BSA data quality by providing detailed error notifications to filers upon submission. This will ultimately result in more timely correction of data issues.

The process applies field and business rule validations to Currency Transaction Report, Designation of Exempt Persons, and Currency Transaction Report by Casinos records and ensures that submitted files meet the formatting requirements defined by FinCEN in the appropriate BSA E-Filing Requirements documents. In the first six months after implementation, which began on Nov. 15, FinCEN is permitting all submissions that do not correspond to formatting requirements to be accepted without warnings. After the first three months, the regulator will consider whether to extend the six-month period. After this initial grace period, the BSA E-Filing system will either accept submissions with warnings or completely reject submissions, depending on the severity of the data issue.

To allow a preview of the new functionality, FinCEN has updated the BSA EFiling User Test system, with the new batch validation enhancement, as well as provided a detailed questions-and-answers document available on the BSA EFiling Web site at http://sdtmut.fincen.treas.gov.

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Financial Reporting

JANUARY 2009

The AICPA has issued a new nonauthoritative Technical Practice Aid addressing potential accounting and auditing implications of a fund or its trustee imposing restrictions on a nongovernmental entity’s ability to withdraw its balance in a money market fund or other short-term investment vehicle. TPA 1100.15, Liquidity Restrictions, covers balance sheet classification, disclosures, debt covenants, subsequent events and going-concern considerations, among other things. The document is available at http://tinyurl.com/6hhfwc.

news digest

Small Business

JANUARY 2009

The Small Business Administration created an online course to help small businesses explore exporting opportunities in international markets. Global Enterprise: A Primer on Exporting is a free, self-paced course that provides practical guidance on exploring international markets.

The course illustrates how to identify international markets, develop an export strategy, make and receive international payments, and finance trade operations. The SBA’s partnership with the Department of Commerce and the Export-Import Bank also offers federal export programs and services through the U.S. Export Assistance Centers.

The export primer course is one of nearly 30 online tutorials offered by the SBA on its virtual campus, the Small Business Training Network, at www.sba.gov/services/training/onlinecourses.

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Auditing

JANUARY 2009

The AICPA’s Auditing Standards Board issued two final standards on internal control.

Statement on Standards for Attestation Engagements (SSAE) no. 15, An Examination of an Entity’s Internal Control Over Financial Reporting That Is Integrated With an Audit of Its Financial Statements, converges the standards practitioners use for reporting on a nonissuer’s internal control with the PCAOB’s Auditing Standard no. 5, An Audit of Internal Control That is Integrated With an Audit of Financial Statements. The SSAE supersedes AT section 501, Reporting on an Entity’s Internal Control Over Financial Reporting. It is effective for integrated audits for periods ending on or after Dec. 15, 2008. Earlier implementation is permitted. The SSAE is available at http://tinyurl.com/56jxmf.

Statement on Auditing Standards (SAS) no. 115, Communicating Internal Control Related Matters Identified in an Audit, was issued to eliminate definitional differences within the AICPA’s audit and attest standards resulting from the issuance of SSAE no. 15. The SAS supersedes AU section 325, Communicating Internal Control Related Matters Identified in an Audit.

The SAS contains revised definitions of the terms material weakness and significant deficiency; revises the list of deficiencies in internal control that are indicators of material weaknesses; removes a list of deficiencies that ordinarily would be considered at least significant deficiencies; and contains a revised illustrative written communication to management and those charged with governance of material weaknesses and significant deficiencies.

The SAS is effective for audits of financial statements for periods ending on or after Dec. 15, 2009. Earlier implementation is permitted. It is available at http://tinyurl.com/59gm78.

The ASB also issued the first clarified auditing standard resulting from its clarity project—Statement on Auditing Standards, The Auditor’s Communication With Those Charged With Governance (Redrafted), which supersedes AU section 380, The Auditor’s Communication With Those Charged With Governance.

The AICPA’s Auditing Standards Board voted in October to approve for exposure the following risk assessment standards rewritten as part of its clarity project:

Proposed SAS, Audit Evidence (Redrafted): Supersedes SAS no. 106, Audit Evidence.
Proposed SAS, Materiality in Planning and Performing an Audit (Redrafted): Supersedes SAS no. 107, Audit Risk and Materiality in Planning an Audit.
Proposed SAS, Planning an Audit (Redrafted): Supersedes SAS no. 108, Planning and Supervision.
Proposed SAS, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (Redrafted): Supersedes SAS no. 109, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement.
Proposed SAS, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained (Redrafted): Supersedes SAS no. 110, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained.

The ASB also voted to seek comments on a new proposed SAS, Evaluation of Misstatements Identified During the Audit.

The PCAOB voted to propose a slate of seven auditing standards related to risk assessment and response. The standards would supersede the board’s interim auditing standards related to audit risk and materiality, audit planning and supervision, consideration of internal control in an audit of financial statements, audit evidence, and performing tests of accounts and disclosures before year-end.

The proposed standards, which were released with related conforming amendments, would establish requirements and provide direction on audit procedures performed throughout the audit, from the initial planning stages through the evaluation of the audit results. The proposals build on the existing framework for risk assessment by, among other things, taking account of improvements in risk assessment methodologies, enhancing the integration of the risk assessment standards with the board’s standard for the audit of internal control over financial reporting, emphasizing the auditor’s responsibilities for considering the risk of fraud as being a central part of the audit process, and reducing unnecessary differences with the risk assessment standards issued by the other standard setters.

The PCAOB’s proposed risk assessment standards generally are consistent with the ASB’s risk assessment standards. Where differences exist, they are generally due to the PCAOB’s moving fraud risk procedures from SAS no. 99, Consideration of Fraud in a Financial Statement Audit, into the risk standards and addressing integrated audits, a requirement that applies only to certain public companies.

Comments are due Feb. 18. The proposing release, text of the proposed auditing standards, and related amendments to PCAOB standards are available at www.pcaobus.org under Rulemaking Docket no. 026.

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Government

JANUARY 2009

The Federal Accounting Standards Advisory Board (FASAB) issued Statement of Federal Financial Accounting Standards (SFFAS) 33, Pensions, Other Retirement Benefits, and Other Post-employment Benefits: Reporting Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates.

The standards in SFFAS 33 require (1) gains and losses from changes in long-term assumptions used to estimate liabilities for federal employee pension and other retirement benefits, and other post-employment benefits to be displayed as discrete line items on the governmentwide entity’s and the component entities’ statements of net cost; and (2) components of the expense associated with such liabilities to be disclosed in notes to the financial statements. The statement also provides standards for selecting the discount rate assumption and the valuation date for such liabilities.

“This statement will provide users discrete information about operating costs and about nonoperating costs so they can make intelligent decisions,” FASAB Chairman Tom Allen said in a press release.

SFFAS 33 is effective for periods beginning after Sept. 30, 2009. The statement is available at www.fasab.gov.

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