A&A Focus recap: Top A&A and employee benefit plan issues

The AICPA recently hosted another installment of its popular A&A Focus Series, a monthly webcast designed to keep members up-to-date on the latest developments in accounting, auditing, and assurance. Hosted by Carl Mayes, CPA, vice president–Audit & Accounting Quality at the AICPA, and Bob Durak, director–Audit & Accounting Technical Services at the AICPA, the event featured a panel of experts who shared insights on a wide range of topics, from the recent AICPA & CIMA ENGAGE 24 conference to software tools being used to increase the efficiency and effectiveness of audits. The series is free for AICPA members, is simple to register for, and offers one CPE hour each month.

AICPA members can watch an on-demand recording of the broadcast on the series’ webpage and find additional, valuable member-only resources.

Top A&A takeaways from ENGAGE 24

Mike Brand, CPA, a partner with BMSS Advisors and Co. in Huntsville, Ala., and chair of the A&A track for AICPA & CIMA ENGAGE 24, kicked off the discussion by sharing his impressions of the conference. With nearly 500 attendees, the A&A track was once again the largest at ENGAGE, underscoring the profession’s keen interest in these topics. Brand highlighted several key areas of focus:

1. Quality management (QM) standards: Despite the looming Dec. 15, 2025, deadline, many firms have not yet begun implementing the new standards. Brand emphasized the urgency for practitioners to start the process, leveraging available resources such as the AICPA’s implementation guide.
2. Risk assessment: This was the first year of implementing Statement on Auditing Standards No. 145, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, the new risk assessment standard. While practitioners seem to be adapting well, ongoing education remains crucial.
3. Scaling audit standards: Sessions on how to appropriately scale audit standards for less complex entities were well received, addressing concerns about the intimidating nature of accounting standards.
4. Technology: The use of artificial intelligence (AI), data analytics, and tools like ChatGPT in auditing practices generated significant interest.
5. Current expected credit losses (CECL): The application of CECL to nonfinancial institutions, particularly regarding trade receivables and contract assets, was a hot topic.

Technology we are using

Sara Watson, CPA, director – assurance quality leader, Forvis Mazars, shared insights on Kira Systems, a machine learning-powered contract analysis software. Watson explained how Kira can streamline the audit process by automatically extracting key information from various documents such as lease agreements, purchase agreements, and employment contracts.

Particularly useful in areas such as revenue recognition (FASB ASC Topic 606, Revenue From Contracts With Customers), lease accounting (FASB ASC Topic 842, Leases), and analyzing agreements regarding mergers and acquisitions, Kira helps identify critical contract terms that might be overlooked in manual review. However, Watson emphasized that while tools like Kira enhance efficiency, they do not replace the need for professional judgment. Auditors must still ensure the completeness and accuracy of the data input and understand the tool’s limitations.

Watson also stressed the importance of documenting the use of AI tools, such as Kira, in audits, both at the firm level and the individual engagement level (e.g., data completeness and accuracy testing). She reiterated that technology should serve to elevate auditors’ work, allowing them to focus on more complex tasks.

Recap of the AICPA Employee Benefit Plans Conference and audit season tips

Debbie Smith, CPA, the national industry professional practice director, employee benefit plans, at Grant Thornton LLP and chair of the AICPA’s Employee Benefit Plan (EBP) Audit Quality Center Executive Committee, shared insights from the recent Employee Benefit Plans Conference. Key takeaways included:

1. SAS No. 145 implementation: Practitioners are grappling with translating this risk assessment standard to EBP audits, particularly in areas like identifying controls, IT systems, and related parties.
2. Form 5500 filing: The U.S. Department of Labor strongly advises filing on time, even if the audit is incomplete. It’s better to be a “deficient filer” than a “delinquent filer.”
3. Forfeitures: Recent litigation has spotlighted the importance of following plan terms regarding forfeitures.
4. SECURE 2.0 Act: As regulations stemming from this legislation emerge, understanding which provisions are mandatory versus optional is crucial.
5. Pooled employer plans (PEPs) and multiple employer plans (MEPs): These newer plan types present unique auditing considerations.
6. Participant count changes: The shift from counting eligible participants to only those actively participating will affect which plans require an audit.
7. Nontimely contributions: This perennial issue requires vigilant reporting until fully corrected.
8. Initial audits: Whether due to changes in auditors or newly qualified plans, these audits often present quality challenges.

Auditing Standards Board update

Finally, Jennifer Burns, CPA, the AICPA’s chief auditor, joined the broadcast and provided an update on the Auditing Standards Board’s (ASB’s) May meeting, which included discussion and decisions on several items.

First, Statement on Standards for Attestation Engagements (SSAE) No. 23, Amendments to the Attestation Standards for Consistency With the Issuance of AICPA Standards on Quality Management, was unanimously approved, aligning attestation standards with quality management standards. SSAE No. 23 deletes the defined term “other practitioner” and replaces it with two new terms — “participating practitioner” and “referred-to practitioner.” The amendments differentiate the requirements related to other practitioners who are part of the engagement team (participating practitioners) and those who are not part of the engagement team (referred-to practitioners). The standard is effective for engagements beginning on or after Dec. 15, 2025.

Burns noted that an exposure draft proposing changes to AU-C Section 240, Consideration of Fraud in a Financial Statement Audit, is underway and is expected to be released in the fourth quarter of 2024. The revisions aim to better align with SAS No. 145 and incorporate insights from academic research and forensic experts.

Next, Burns covered the ASB’s discussion of using technology in the audit and the work the board is undertaking. She noted that the ASB has published a series of articles on using technology to enhance audit quality, covering topics such as AI, data analytics, and managing technological change.

Finally, Burns reiterated the importance of early implementation of the quality management standards, as mentioned in Michael Brand’s recap of top A&A issues, previously, directing members to the AICPA’s dedicated webpage (aicpa-cima.com/auditqm) for free resources.

In other matters

In addition to the featured topical segments, the A&A Focus Series webcast provided updates across several timely emerging issues:

• CPA decision-makers in business and industry have lower optimism about the U.S. economy, but they remain relatively neutral about their own organizations, according to the AICPA & CIMA 2Q 2024 Business and Industry Economic Outlook Survey. The quarterly survey gathered responses from 315 CFOs, CEOs, and controllers between May 7 and May 28. The JofA has a summary of the survey.
• The AICPA’s Financial Reporting Executive Committee has issued a working draft of Chapter 8, “Programmatic Investments,” of the Audit & Accounting Guide: Not-for-Profit Entities, for application of FASB ASC Topic 326, Financial Instruments — Credit Losses (CECL). If you would like to provide comments, please email them to Stephanie Otero at Stephanie.Otero@aicpa-cima.com by July 12, 2024.
• The 2024 Compliance Supplement has been released. The Governmental Audit Quality Center (GAQC) has a detailed look at the contents and is providing several CPE opportunities — one for GAQC members and one for nonmembers.
• The PCAOB adopted a pair of foundational auditing standards with ties to AICPA standards. AS 1000, General Responsibilities of the Auditor in Conducting an Audit, aims to enhance and consolidate a group of standards provided by the AICPA for interim use when the PCAOB formed more than two decades ago. QC 1000, A Firm’s System of Quality Control, aims to create a new, risk-based system of quality management that in many ways aligns with International Auditing and Assurance Standards Board (IAASB) standards that became effective in December 2022 and related AICPA standards effective Dec. 15, 2025 — the same date that QC 1000 takes effect. The JofA has more information.
• In light of heightened risk in the commercial real estate (CRE) space, a new PCAOB staff report highlights considerations for auditors. In Auditing Considerations Related to Commercial Real Estate, the PCAOB staff poses 22 questions for auditors to ask related to CRE audits, starting with a reminder to exercise professional skepticism with potential problem areas such as how higher interest rates and lower occupancy rates can affect a borrower’s ability to make repayments. Visit the JofA for more information.
• GASB released GASB Statement No. 103, Financial Reporting Model Improvements, which provides targeted improvements to its financial reporting model. The JofA has information on the changes.
• The AICPA updated its practice aid Accounting for and Auditing of Digital Assets, on the accounting for and auditing of digital assets, with new guidance on auditing their valuation and auditing procedures regarding their existence, rights, and obligations.

Looking ahead

The webcast concluded with a preview of next month’s A&A Focus, live on July 10, 2024, which will feature discussions on AI in auditing, revenue recognition challenges, fraud considerations, and auditing digital assets. Throughout 2024, the AICPA plans to leverage the A&A Focus Series as a vital channel to keep members apprised of new accounting, auditing, and reporting developments impacting their work across all industries and domains of practice. AICPA members can access archives of past sessions at aicpa-cima.com/resources/landing/aafocus.