A&A Focus recap: AI considerations in A&A, GASB updates, and practical lease accounting challenges

The AICPA A&A Focus webcast on Sept. 10 provided timely updates on technology, standards, and practice issues that matter to auditors and preparers. Hosted by Bob Durak, CPA, CGMA, director–A&A Technical Services for the AICPA, and Andrew Merryman, CPA, senior manager–A&A Technical Services, the program welcomed Danielle Supkis-Cheek, CPA, senior vice president at Caseware; Tony Boras, CPA, partner at Crowe LLP and chair of the AICPA State and Local Government Expert Panel; and Mike Cheng, CPA, national professional practice partner at Frazier & Deeter and a member of the Private Company Council.

News updates in the A&A space

Durak began with several timely updates affecting both auditors and preparers.

First, he highlighted that the PCAOB has proposed a postponement of the effective date of its new quality control standard, QC 1000, A Firm’s System of Quality Control, by one year to Dec. 15, 2026. The board acknowledged that many firms, especially smaller practices, faced challenges in meeting the original implementation timeline, and the proposed delay provides additional time to develop systems and procedures that align with the new framework.

Second, Durak highlighted that California is moving forward with climate-related financial risk disclosures. The California Air Resources Board (CARB) issued draft guidance that would apply to companies with more than $500 million in revenue that do business in the state. The guidance reflects a growing state-level focus on sustainability and climate reporting, even as federal initiatives such as the anticipated SEC climate rule have stalled.

Durak next pointed to updates in the AICPA’s practice aid Accounting for and Auditing of Digital Assets. A new auditing chapter addresses auditing crypto borrowing and lending arrangements, providing additional examples of substantive procedures that could address risks of material misstatements associated with these types of transactions. This additional guidance supplements the previously included guidance on accounting for digital assets. The AICPA Digital Assets Working Group continues to develop additional guidance for practitioners operating in the digital assets space and will continue to update the practice aid with new content.

Finally, Durak reminded viewers that the AICPA Peer Review team has issued draft checklists related to the Statements on Quality Management Standards (SQMSs). These checklists will be used by peer reviewers to evaluate firm implementation, and the AICPA is actively seeking member feedback to refine them before final release. Stakeholders are encouraged to review the documents and provide feedback.

Durak then introduced a pre-recorded segment provided by Halie Creps, CPA, partner at KPMG and chair of the AICPA’s Auditing Standards Board (ASB), recapping the board’s recent August meeting. Creps noted that most of the agenda focused on attestation standards and that the board is developing a new sustainability-specific section in response to the International Auditing and Assurance Standards Board’s sustainability standard and how best to align limited assurance and examination engagements. Members supported excluding detailed requirements such as testing controls from the review standard, currently addressed in AT-C 200, Review Engagements, and instead cross-referencing examination guidance. Work also advanced on the proposed section for sustainability examinations, with future attention planned for sustainability reviews.

The board also revisited going concern, agreeing to retain U.S. differences while considering certain revisions to international going concern standards.

Looking ahead, the ASB will continue its attestation project, review comments on scope limitation amendments, and deliberate on changes to the recent confirmation-related exposure draft. Creps closed by urging members to comment on the fraud ED by Oct. 3, stressing the importance of practitioner feedback.

Information on the recent August meeting, and instructions on how to attend the upcoming Sept. 25 meeting, are available on the AICPA website.

Overview of AI in A&A

Appearing in the AICPA studio with Durak, Supkis-Cheek opened a new series on artificial intelligence (AI) in audit and assurance, offering practical advice for firms looking to explore the technology without being overwhelmed. She encouraged practitioners to start small, focusing on “easy win” use cases that provide time savings and quality benefits while avoiding unnecessary complexity. Examples include summarizing board minutes, editing long-form memos, or automating routine documentation. These applications, she explained, help younger staff perform at a higher level more quickly, accelerating professional development.

While analytics and data-driven testing often capture the imagination, Supkis-Cheek cautioned that such applications are conceptually difficult to validate and should not be a practitioner’s first use case. Instead, she recommended choosing tasks that are repetitive, low-value, and time-intensive — areas where automation can deliver quick results and build confidence in the technology.

She also emphasized the importance of safeguards. Practitioners must respect firm policies and quality management requirements when adopting new tools. Data privacy and confidentiality remain paramount, and firms should evaluate whether client information is properly protected, particularly when using open or free tools. Supkis-Cheek noted that many larger firms have the leverage to negotiate vendor agreements, but smaller firms must still carefully read licensing terms to understand how their data may be used. She warned that if a tool is free, “you are the product,” underscoring the need for vigilance.

Another theme was professional responsibility. Supkis-Cheek reminded the audience that standards of due care and professional skepticism have not changed. Even if AI provides a draft or automates a task, the practitioner remains responsible for accuracy and judgment. In her words, “professional skepticism is the gold star of our profession” and will distinguish accountants from other fields grappling with the same tools.

Prompt writing has emerged as a critical skill. Supkis-Cheek explained that poor results with AI often stem from poor prompts, not from the technology itself. She shared the STAR framework — situation, task, appearance, refine — as a structured approach to crafting more effective prompts. By providing context, specifying the desired output format, and iteratively refining the request, practitioners can achieve higher-quality responses. She added that investing extra time upfront often saves time later, with better results requiring fewer revisions.

Supkis-Cheek concluded by encouraging firms to experiment deliberately: identify a workflow, involve staff in selecting tedious tasks ripe for automation, and build comfort with AI incrementally. With thoughtful safeguards and training, she believes AI will enhance efficiency and quality while reinforcing the profession’s reliance on judgment and skepticism.

Supkis-Cheek will return to the program to continue the conversation of AI during the November and January broadcasts.

State and local government A&A update

Next, Merryman invited Tony Boras on to the program for an in-depth update on the activities of the AICPA State and Local Government Expert Panel, which meets quarterly to monitor GASB’s projects and emerging issues. Recent efforts included feedback on GASB’s preliminary views regarding infrastructure assets. Because roads, bridges, and utility systems often represent a government’s largest capital assets, GASB is evaluating whether current disclosures sufficiently communicate maintenance costs and condition information to users. The panel also weighed in on guidance for subsequent events, after research showed inconsistencies in how governments footnoted such matters, and on a new approach to going concern framed as “severe financial stress and probable dissolution.”

Boras previewed the 2025 State and Local Government Audit & Accounting Guide, which will include updates tied to the AICPA’s SAS 145, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, and newly effective GASB standards. Among those:

• GASB 101, Compensated Absences,revises compensated absence liabilities, moving from vesting-based to usage-based recognition — a challenging shift requiring historical data on leave patterns.
• GASB 102, Certain Risk Disclosures, introduces risk disclosure requirements related to concentrations and constraints.
• GASB 103, Financial Reporting Model Improvements, modifies MD&A and proprietary fund presentation.
• GASB 104, Disclosure of Certain Capital Assets, updates capital asset disclosures to reflect leases, subscription-based IT, and public-private partnerships.

Boras also flagged workforce shortages and federal funding uncertainties as ongoing risks for governments and auditors.

Identifying a lease

In the last segment of the program, Mike Cheng launched a multipart series on FASB Accounting Standards Codification (ASC) Topic 842, Leases, beginning with the critical step of identifying a lease. He emphasized that a contract’s title is irrelevant; practitioners must assess the legally enforceable rights and obligations. The two key questions are: (1) Can a specific tangible asset be identified? and (2) Does the lessee control its use and obtain substantially all of the economic benefits?

Through examples — including data cables, dishwashers bundled with supply contracts, and even porta potties — Cheng demonstrated how substitution rights and economic incentives often determine whether an arrangement is a lease or merely a service contract. He also highlighted the prevalence of embedded leases, such as dumpsters in waste contracts or cranes on construction projects, and he urged practitioners to carefully separate leasing and nonleasing components.

He reminded firms to watch for embedded leases in service contracts, such as dumpsters or cranes, that meet the criteria and must be separated from nonleasing components. Ultimately, he stressed that ASC Topic 842 requires recognition of right-of-use assets and liabilities for identified leases, while service arrangements remain off balance sheet.

Cheng will return to the program to continue the discussion during the November and January broadcasts.

Looking ahead

The next A&A Focus webcast is scheduled for Oct. 8. Frequent contributor Angela Newell will return to the program to provide further discussion of revenue, this time highlighting areas of concern when auditing, and Julie Killian will continue her series on special purpose frameworks.

AICPA members are encouraged to attend these monthly events and review the accompanying newsletters for more in-depth coverage of these critical topics. Members can access archives of past sessions at the A&A Focus Series webpage.

— Dave Arman, CPA, MBA, is senior manager–Audit Quality at the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.