The Center for Audit Quality (CAQ), which is affiliated with the AICPA, issued alerts for auditors in general, and for auditors of brokers and dealers, identifying certain judgmental or complex audit areas for the 2016 audit cycle.
The member alerts are not meant to be definitive or all-inclusive and are intended to be read in conjunction with applicable rules, standards, and guidance in their entirety.
Issues highlighted for auditors in general were:
- Improving transparency through disclosure of the engagement partner and certain other participants in audits on Form AP, as required by new PCAOB rules. The PCAOB has issued relevant staff guidance.
- Improper alteration of audit documentation.
- Effective communication with audit committees, as required by PCAOB standards.
- Assessing and responding to risks of material misstatement. It's essential for auditors to perform substantive procedures for each relevant assertion of each significant account and disclosure, according to the CAQ report.
- Internal control over financial reporting, which SEC Chief Accountant James Schnurr has said will be key in successful implementation of the new revenue recognition standard.
- Segment identification and disclosure. Auditors were encouraged in a December 2015 speech by Helen Munter, director of the PCAOB's Division of Registration and Inspections, to consider how an issuer identifies the chief operating decision-maker and determines its operating segments and its reportable segments.
- Going concern. Although a new FASB standard for management's going concern disclosures has been issued, a determination by management that no disclosure is required is not conclusive as to whether an explanatory paragraph on going concern is required in the auditor's report, according to the CAQ alert.
The alert for auditors of brokers and dealers focuses on the more judgmental or complex audit areas, as these audits have been a continued subject of focus for the PCAOB.