Mary Schapiro, President-elect Barack Obama’s nominee for SEC chair, testified Thursday before the Senate Banking, Housing, and Urban Affairs Committee that she would aggressively revitalize the SEC’s enforcement efforts. When asked by committee Chairman Sen. Chris Dodd, D-Conn., about whether she would support certain actions that would help detect
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Audit & assurance
Auditing
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
AICPA Issues Exposure Draft of Proposed SSARS
The AICPA’s Accounting and Review Services Committee issued an exposure draft of a proposed Statement on Standards for Accounting and Review Services (SSARS), Applicability of Statements on Standards for Accounting and Review Services. The exposure draft proposes to amend AR section 100. Under the proposal, SSARSs would not apply when
Component Materiality for Group Audits: Probabilistic Model
To determine maximum aggregate component materiality levels, we first use the cumulative binomial distribution to derive the maximum number of components that can be allowed to simultaneously contain undetected misstatements that are material at the component level. The maximum allowable number of misstated components takes into account the number of
AICPA Issues Liquidity Restrictions Practice Aid
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
SEC Sees Staff Departures Following Election
Since the Nov. 4 presidential election, the SEC has announced that four key staff members plan to step down. Last week, SEC Chief Accountant Conrad W. Hewitt was the latest to announce he is leaving. The first departure was announced two days after the election with the resignation of John
2008 In Review: Congressional Impact on CPA Profession
The AICPA enjoyed three legislative victories in Congress this year: equalizing IRS reporting standards for taxpayers and preparers, preventing the Farm Credit System from expanding its pool of borrowers, and maintaining financial and compliance audits for the government-backed Federal Housing Administration (FHA) loan program. “SUBSTANTIAL AUTHORITY” SIGNED INTO LAW OCT.
Component Materiality for Group Audits
Determining overall group materiality and materiality levels for individual components is becoming more of a hot-button issue as the number and complexity of large and international group audits increases. Auditing standards and other professional materials offer little practical guidance on the topic. Internal and peer reviews and regulatory inspections have
International
The International Public Sector Accounting Standards Board (IPSASB), an independent standard-setting board of the International Federation of Accountants (IFAC), has issued for comment the first in a series of consultation papers focused on developing an international public-sector conceptual framework. The consultation paper, Conceptual Framework for General Purpose Financial Reporting by
AICPA Issues Two Final Standards on Internal Control
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
PCAOB Proposes Seven Auditing Standards Related to Risk Assessment
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
Guidance for Dealing With Electronic Confirmations
The AICPA’s Auditing Standards Board has revised Auditing Interpretation no. 1, Use of Electronic Confirmations, of SAS no. 67, The Confirmation Process (AU section 330). The interpretation has been revised to provide guidance on the use of electronic confirmations and their reliability in the confirmation process. Auditors are likely to
Auditing
The U.S. Court of Appeals for the District of Columbia upheld a lower court decision on the constitutionality of the PCAOB and Sarbanes-Oxley Act, which spawned the regulator. The plaintiffs in Free Enterprise Fund v. PCAOB argued that SOX and the PCAOB violate the appointments clause, separation of powers and
Auditing Advisory Committee Approves Recommendations
The Department of the Treasury’s Advisory Committee on the Auditing Profession voted to approve a slate of more than 30 recommendations for enhancing the profession’s sustainability. The committee’s work marked the first major study of the public company auditing profession since the passage of the Sarbanes-Oxley Act in 2002. AICPA
Auditing Clarity Projects Advancing
The International Auditing and Assurance Standards Board released an update on its work to improve the clarity of its standards. The seven-page Clarity Project Update details the status of the 18-month program, which is slated for completion in December. The report also provides an overview of the main changes to
Court of Appeals Upholds PCAOB, SOX Constitutionality
The U.S. Court of Appeals for the District of Columbia upheld a lower court decision on the constitutionality of the PCAOB and Sarbanes-Oxley Act, which spawned the regulator. The plaintiffs in Free Enterprise Fund v. PCAOB argued that SOX and the PCAOB violate the appointments clause, separation of powers and
Refocusing on Reliability
EXECUTIVE SUMMARY Current technical literature precludes CPAs from performing review engagements when independence is impaired and requires modifying reports to disclose lack of independence in compilation engagements. The AICPA Reliability Task Force asserts that the conceptual foundation regarding the services CPAs provide to clients should be modified to refocus on
Better Brainstorming
EXECUTIVE SUMMARY The PCAOB in 2007 raised concerns about accounting firms meeting the brainstorming mandates of SAS no. 99, which requires auditors to brainstorm to determine possible fraud risks, and SAS no. 109, which requires auditors to brainstorm to identify additional causes of potential material misstatements in financial statements. Given
Auditing
The PCAOB adopted rules that will allow certain registered firms to provide audit services without a break in their PCAOB registration status when there has been some change in their legal form. Under section 102(a) of the Sarbanes- Oxley Act and PCAOB rules, a public accounting firm must be registered
Financial Reporting
The guidance applies to the calculation of earnings per share under FASB Statement no. 128, Earnings per Share, for share-based payment awards with rights to dividends or dividend equivalents. Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities, according
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