Knowledge-Based Audits of Not-for-Profit Entities must

Transcription

1 Knwledge-Based Audits f Nt-fr-Prfit Entities is designed t help the auditr efficiently and effectively perfrm financial statement audits f nt-fr-prfit entities in accrdance with auditing standards generally accepted in the United States f America (GAAS), and, when applicable, generally accepted gvernment auditing standards (GAGAS) ( Gvernment Auditing Standards r the Yellw Bk ). The knwledge-based audit is a risk-based methdlgy that emphasizes using knwledge f the entity t make risk assessments in cnnectin with a financial statement audit. The peratins f nt-fr-prfit entities are ften unique and cmplex and require specialized accunting and auditing knwledge. This editin includes specific up-t-date guidance fr auditing nt-fr-prfit entities. The 2011 editin f Nt-fr-Prfit Entities is current thrugh Statement n Auditing Standards N. 121, Revised Applicability f Statement n Auditing Standards N. 100, Interim Financial Infrmatin. The 2011 editin f Knwledge-Based Audits f Nt-fr-Prfit Entities includes the very latest infrmatin and has been updated t take int accunt new r pending auditing standards and guidance, including the mst recent editins f the AICPA Audit Guides, Ntfr-Prfit Entities and Gvernment Auditing Standards and Circular A-133 Audits. In additin, varius practice alerts have been added t address the applicability f new r pending audit standards and guidance t audits f nt-fr-prfit entities. Als included is a general GAAP financial statement disclsures checklist (KBA-901) with an industry-specific sectin fr nt-fr-prfit entities. Tgether these prvide a centralized resurce f the required and recmmended GAAP disclsures and key presentatin items currently in effect, using the style referencing under the FASB Accunting Standards Cdificatin. The 2011 dcuments nw include Accunting Research Material links t specific guidance that prvides instant access t detailed analysis related t the steps and prcesses discussed in the wrkpapers. This is the secnd update t this Knwledge Cach title. If yu are updating frm the previus versin f this title refer t the Knwledge Cach User Guide, Chapter 12. The guide is fund n the Engagement File Rm Help menu. Yu must dwnlad and install Knwledge Cach 1.7 Update r higher befre updating t the 2011 Nt-fr- Prfit Entities cntent. The Knwledge Cach 1.7 Update will ensure that all the 2011 cntent is updated crrectly. Fr mre infrmatin n the Knwledge Cach 1.7 Update, review the Release Ntes and assciated Knwledge Base article at the fllwing link: If yu have nt installed Knwledge Cach 1.7, make sure t update all related and independent wrkpapers at the same time. Yu must be the current editr f all Knwledge Cach wrkpapers t update t the latest cntent during rll frward, and yu must be the current editr upn pening the updated wrkpaper fr the first time t ensure yu see the updated wrkpaper.

2 Updated thrughut t remve references t pre-cdificatin FAS statements; reflect changes in standards, where applicable; update r add new practice pints addressing clarified standards resulting frm the AICPA Auditing Standards Bard s Clarity Prject; and add links t the crrespnding guide, Knwledge-Based Audits f Nt-fr-Prfit Organizatins with Single Audits. New steps added fr related-party transactins and fr accunting estimates. fr disclsures. New steps added fr fair value. New step added Updated with new prcedures and new ging cncern indicatrs. Designed t help the auditr dcument the prcedures used when, after the reprt date, the auditr determines additinal prcedures needed t be cmpleted, determine the apprpriate curse f actin, and dcument the auditr's cnclusin. Updated thrughut t remve references t pre-cdificatin FAS statements; reflect changes in standards, where applicable; update r add new practice pints addressing clarified standards resulting frm the AICPA Auditing Standards Bard s Clarity Prject; and add links t the crrespnding guide, Knwledge-Based Audits f Nt-fr-Prfit Organizatins with Single Audits. specific ratis added. New industry Designed t assist in perfrming tests f the perating effectiveness f internal cntrls. Designed t aid in the dcumentatin f the auditr's plan fr testing the effectiveness f internal cntrls. Updated thrughut t remve references t pre-cdificatin FAS statements; reflect changes in standards, where applicable; update r add new practice pints addressing clarified standards resulting frm the AICPA Auditing Standards Bard s Clarity Prject; and add links t the crrespnding guide, Knwledge-Based Audits f Nt-fr-Prfit Organizatins with Single Audits. Review f significant accunting estimates has been mved t a separate wrkpaper. If yu are updating frm the 2009 Knwledge-Based Audits TM f Nt-fr-Prfit Entities, nte that the Significant Matters table in KBA-103 Significant Matters has been separated int tw tables t mre clearly dcument significant findings r issues in accrdance with Statement n Auditing Standard N. 103 (AU 339) Audit Dcumentatin. As a result f this change, infrmatin riginally entered int the 2009 Significant Matters table in previus versins will nt be included n update. If yu are updating frm the 2009 Knwledge-Based Audits TM f Nt-fr-Prfit Entities, nte that there is nt a separate table fr ther matters in KBA- 104 Evaluatin and Cmmunicatin f Internal Cntrl Deficiencies. Cntent in the descriptin clumn f the ther matters table frm previus versins will be mved t the Significant Matters table in KBA-103 n update. Other answers frm the 2009 Other Matters table will nt be included n update. is a new fundatin wrkpaper that has been designed t aid auditrs in perfrming and dcumenting the review f significant estimates. Once yur binder is rlled-frward r updated, yu will need t insert this wrkpaper int yur binder. : The Review f Significant Estimates table has mved frm KBA-103 Significant Matters t the new wrkpaper KBA-106 Review f Significant Estimates.

3 new Cntent in the Review f Significant Estimates table will mve frm previus versins t the new table in KBA-106. T ensure data updates crrectly, insert KBA-106 Review f Significant Estimates int yur updated binder after rll frward. have been cmbined t create. If yu are updating frm the 2009 Knwledge-Based Audits TM f Nt-fr-Prfit Entities, nte that KBA-202 Engagement Cntinuance Frm was replaced by KBA-201 Engagement Acceptance and Cntinuance Frm in the 2009 versin. Any risks and findings added t the KBA-202 Engagement Cntinuance Frm f the 2009 Knwledge-Based Audits f Nt-fr-Prfit Entities title will be included in the findings table f the KBA-201 Engagement Acceptance and Cntinuance Frm f 2011 Knwledge-Based Audits f Nt-fr-Prfit Entities. Other added data will n lnger be available. : T ensure data updates crrectly, insert the 2009 versin f KBA-201 Engagement Acceptance Frm is in yur 2009 binder BEFORE yu update t 2011 Knwledge-Based Audits TM f Nt-fr-Prfit Entities. If yu perfrm the update thrugh the Update all Knwledge Cach Wrkpapers menu ptin and yu want t keep this wrkpaper fr reference, ensure yu create a back-up f the binder r a cpy f the wrkpaper befre yu update. Updated with additinal factrs fr auditr cnsideratin. Includes updated instructins and tables and a new cntrl test clumn. Includes updated instructins and tables and a new cntrl test clumn. thrugh New clumn added t dcument testing f perating effectiveness f cntrls. Since n data will be kept in excel wrkpapers when replaced with latest cntent, yu may want t set the rll frward prperties t Include in rll frward fr this wrkpaper and manually add the new clumn s that yur previus wrk is kept n rll frward. Updated t reflect the change in auditing standards related t reprting n cntrls at a service rganizatin (frm SAS-70 t SSAE-16). New clumn added t dcument cntrls selected fr perating effectiveness testing; updated instructins. The disclsures checklist assists the auditr in ensuring that the client has prperly reprted, presented and disclsed its financial statement activity in accrdance with GAAP. The checklist fllws the FASB Accunting Standards Cdificatin frmat and is current thrugh March 31, An industry specific sectin fr nt-frprfit entities has been included and is designed t supplement the presentatin and disclsure requirements in the General U.S. GAAP Financial Statement Disclsures Checklist. This supplement serves as a means t dcument cnsideratin f the specialized presentatin and disclsure requirements fr nt-fr-prfit entities. : If yu are updating frm the 2009 Knwledge-Based Audits TM f Nt-fr-Prfit Entities r 2010 Knwledge-Based Audits TM f Nt-fr-Prfit Entities, nte that the frmatting f the Disclsure checklist has changed. In the 2011 versin, the check list starts as a standard nn-public cmmercial entity checklist and the Nt- Fr-Prfit specific infrmatin is included at the end f the dcument. Because f this frmat change, nt all f yu answers will be updated r rll frward. Please verify yur answers are still crrect after updating r rlling frward.

4 Updated thrughut t remve references t pre-cdificatin FAS statements; reflect changes in standards, where applicable; update r add new practice pints addressing clarified standards resulting frm the AICPA Auditing Standards Bard s Clarity Prject; and add links t the crrespnding guide, Knwledge-Based Audits f Nt-fr-Prfit Organizatins with Single Audits. Updated "material weakness" language added as well as ptinal language fr early implementers f SAS-119. Sample letter frm auditr t predecessr requesting infrmatin regarding management's integrity, prir t making the client acceptance decisin. Sample letter frm client t predecessr asking them t release infrmatin and respnd t successr auditr inquiries. Updated thrughut t remve references t pre-cdificatin FAS statements; reflect changes in standards, where applicable; update r add new practice pints addressing clarified standards resulting frm the AICPA Auditing Standards Bard s Clarity Prject; and add links t the crrespnding guide, Knwledge-Based Audits f Nt-fr-Prfit Organizatins with Single Audits. Revised supplemental paragraph fr cnslidating infrmatin. Updated where applicable t reflect changes in standards and update r add new practice pints addressing clarified standards resulting frm the AICPA Auditing Standards Bard s Clarity Prject. Updated t reflect rganizatinal and instructinal changes. Updated t reflect rganizatinal changes. been added as a reference dcument fr the wrkpaper update infrmatin, alng with list f related wrkpapers fr the title. added as a reference dcument. has been has allws the results f ne set f prcedures t becme the input fr the next. The key cmpnents f the KBA Methdlgy include: An that guides auditrs thrugh the new methdlgy. Custmizable that take auditrs thrugh related steps and prcedures. t help auditrs cmplete steps r prcesses utlined in the Knwledge-Based Audit dcuments and Audit Prgrams. that prvide a variety f sample auditr s pinins n audited financial statements. dcuments that prvide sample letters t be used in many ther cmmn situatins. dcuments, integral t the risk assessment and verall audit prcesses, which cntain steps and prcedures required by GAAS and GAGAS. The practice aids and tls in the 2011 Editin f Knwledge-Based Audits f Ntfr-Prfit Entities are designed arund the AICPA s risk assessment standards t assist auditrs f nt-fr-prfit entities by: Facilitating cmpliance with GAAS and GAGAS. Encuraging mre effective audits thrugh tailred audit prgrams and cmprehensive practice aids. Helping auditrs t fcus n and respnd t identified audit risks. Enhancing audit dcumentatin.

5 functinality allws auditrs t use the Knwledge-Based-Audit methdlgy mre efficiently by eliminating the need fr duplicate entry f the same infrmatin, tailring audit dcumentatin t each particular engagement, and dcumenting the link between risks identified and prcedures perfrmed. is a dcument in Knwledge Cach that presents engagement-level questins designed t aid in tailring the engagement dcumentatin t fit each client. Cmpleting the questins helps the auditr avid duplicatin and unnecessary wrkpapers. Befre yu begin yur audit, please review the guidance in. This wrkpaper is intended t be yur rad map thrugh a Knwledge-Based Audit methdlgy. Yu shuld start yur audit with and. can be captured via the Risk Summary task pane frm any Knwledge Cach wrkpaper by the current editr f. This allws the user t cntinuusly assess risks during the engagement. Several wrkpapers prmpt the cnsideratin f the presence f risks, but the Risk Summary task pane must be used t dcument thse risks. All dcumented risks flw t the Risk Summary. T ensure risks shw in findings tables, make sure t check the wrkpaper identified in field f the Risk pane. helps cut dwn n the time spent duplicating infrmatin acrss frms. In additin, the flw f cnsistent infrmatin ensures that infrmatin and updates t infrmatin are nt missed between wrkpapers. Drilldwn functinality helps the user navigate quickly t the surce f the infrmatin, aiding in the review f the audit file. help yu keep track f unreslved issues like unanswered questins, incmplete risks, prgram steps nt linked t risks r relevant assertins, missing wrkpaper, and mre. Diagnstics nw shw when a frm table has nt been answered (i.e. tables in that are added by the tailring questins in ). If yu subscribe t an ARM library that includes audit cntent, yu can link directly t surce material frm Resurces within Knwledge Cach dcuments. These links have been updated t reference t the standards under the FASB Accunting Standards Cdificatin TM. Als, if yu subscribe t the Knwledge-Based Audit f Nt-fr-Prfit Entities Guide n ARM, yu can take advantage f brand new links t the audit guide material frm within the Knwledge Cach dcuments. is integrated int each Knwledge Cach template thrugh the Tips view f each new task pane. Infrmatinal features include Practice Pints, Examples, Optinal Wrkpapers, and Resurces t help auditrs wrk mre effectively and efficiently. We have als added the ability t navigate frm Resurces within a dcument r the tip pane directly t CCH s Accunting Research Manager and industry audit guides by simply clicking n the Reference. Nte: If yu are updating frm the 2010 Knwledge-Based Audits TM f Nt-fr-Prfit Entities, yu must install Knwledge Cach 1.7 Update r higher t ensure that yur cntent updates crrectly. Make sure t save changes t wrkpapers befre clsing the wrkpaper r the binder t ensure data is crrectly updated. If yur Current Editr Knwledge Cach MS Wrd wrkpapers becme read-nly r crashes, please d the fllwing: Keep the binder with the affected wrkpapers pen. Cntact Custmer Service at PFX-9998, ptin 4 t btain a repair utility. Knwledge Cach cannt be used within the Shared File Rm (SFR) feature f Engagement. Hwever, Knwledge Cach wrkpapers can be shared acrss team members thrugh check in, check ut, wrkpaper assignment, synching t the central file rm and thrugh peer-t-peer synch in the same way that ther Engagement wrkpapers are shared. This title MUST be used with PrSystem fx Engagement versin 6.5 and higher. If yu are upgrading frm PrSystem fx Engagement 6.0, 6.1 r 6.1.2, please cntact Technical Supprt at PFX-9998, ptin 4 fr detailed instructins. A minimum f 2GB f RAM is required fr ptimal perfrmance when pening and navigating thrugh PrSystem fx Knwledge Cach dcuments.

6 Dwnlad the 2011 Knwledge-Based Audits TM f Nt-fr-Prfit Entities frm the PrSystem fx Knwledge Cach Updates sectin f the PrSystem fx Engagement Supprt Web site at the fllwing URL: then select the Knwledge Cach Series and Dwnlad file link next t the 2011 Knwledge-Based Audits f Nt-fr-Prfit. On sme ccasins the cntent package file (.KCP) has dwnladed with the extensin changed t.zip. If this ccurs, please change the extensin f the dwnladed file t KCP using all capital letters. Imprtant: PrSystem fx Engagement versin 6.5 r higher must be installed n the cmputer in rder t install this Knwledge Cach title. Additinal requirements include Micrsft Office 2007, Micrsft Office 2003 Primary Interp Assemblies (PIA) and Visual Studis 2005 Tls fr Office Secnd Editin Runtime (VSTOR). The fllwing 2011 Knwledge-Based Audits f Nt-fr-Prfit Entities (8/16/11).KCP dwnlad is a prprietary file that must be installed frm within Engagement. Save this KCP file t a lcatin n yur lcal drive, extract it, and fllw the Installatin Instructins included in the Release Bulletin. Once yu have dwnladed yur Knwledge Cach title, yu will need t add it t the list f titles within PrSystem fx Engagement. The nly additinal system requirement is apprximately 75MB f disk space t stre yur Knwledge Cach prgram cntent files. Please refer t the PrSystem fx Engagement with Knwledge Cach Release Ntes fr any ther system requirements. After dwnlading the 2011 Knwledge-Based Audits f Nt-fr-Prfit Entities, d the fllwing: 1. Launch the PrSystem fx Engagement Wrkpaper Management applicatin s that the Lcal File Rm is displayed. Select Tls > Knwledge Cach Titles. The Knwledge Cach Titles windw will be displayed. 2. Chse Add Title. 3. Brwse t the title package file (*.KCP) that yu previusly dwnladed and extracted frm the PrSystem fx Knwledge Cach Supprt Web site. 4. Chse Open. The system will display a prgress indicatr while the title package is added. Yu will receive a message that the title has been successfully installed nce the prcess is cmplete. Once the title is added, yu must release it, s that ther staff members in yur firm can use it. Yu may als wish t unrelease previus versins f the title. T unrelease a title: 1. Select a previus versin f the KBA Nt-fr-Prfit Entities title. 2. Chse Unrelease Title. The date will be remved frm the Date released clumn and staff that d nt have the staff grup prperty right t insert unreleased titles will nt be able t insert the unreleased titles int a binder. Nte: Yu can determine this access in the PrSystem fx Engagement Admin mdule by selecting a staff grup and chsing File > Prperties > Cntent Insert Knwledge Cach wrkpapers frm unreleased titles ptin. T release a title: 1. Select ne f the Knwledge Cach titles in the list that has been added but is nt yet released. 2. Chse Release Title. The current date and time will be displayed in the Date released clumn, and the status will change t Released. Nte: Yu must add and assign a Knwledge Cach mdule as well as the Knwledge Tls title license in the PrSystem fx Engagement Administratr befre using the wrkpapers.

7 Imprtant: Once the 2011 Knwledge-Based Audits f Nt-fr-Prfit Entities title has been added and released, it will be autmatically deplyed t ther staff members when they lgin t the Office lcatin, r when they synchrnize a binder that cntains Knwledge Cach wrkpapers frm this title. Permissin key files may be dwnladed frm ur Web site at r when adding r updating the new licenses within PrSystem fx Engagement with Knwledge Cach versin 6.5 and higher. After updating the license file in the PrSystem fx Engagement Admin mdule, licenses need t be assigned t the staff wh will use 2011 Knwledge-Based Audits TM f Ntfr-Prfit Entities. If yu have nt already established a Single Sign-n (SSO) accunt with Custmer Service, we urge yu t d s at this time. Permissin keys are n lnger generally distributed via flppy diskette. Yu can chse t cntinue receiving the diskette by ging t clicking the Firm Administratin link, and making the apprpriate selectin (SSO access is required), r by cntacting Custmer Service at PFX-9998, ptin 4. CCH s Accunting Research Manager is the mst cmprehensive, up-t-date and bjective nline database f financial reprting literature. It includes all authritative and prpsed accunting, auditing, and SEC literature, plus independent, expert-written interpretive guidance. Our Weekly Summary newsletter highlights the key develpments f the week, giving yu assurance that yu have the mst current infrmatin. It prvides links t new FASB, AICPA, SEC, EITF, and IASB authritative and prpsal-stage literature, plus guidance frm financial reprting experts. Our team f cntent experts updates the system n a daily basis, s yu can stay as current as pssible. What s mre, ur experts attend critical standard-setting meetings and summarize the results fr yu, which means yu ll learn f newly released literature and deliberatins f current financial reprting prjects as sn as they ccur! Plus, yu ll benefit frm their easy-t-understand technical translatins. Our expert s interpretatins clearly lay ut what the rules mean frm yur perspective. Newly available is the Knwledge-Based Nt-fr-Prfit Entities, an audit guide that helps yu cmply with the AICPA's risk assessment standards and has incrprated the Knwledge-Based Audit methdlgy. The primary bjective f the guide is t prvide practitiners with an effective apprach fr cnducting audits f nt-fr-prfit entities. This publicatin supplements and cmplements the KBA dcuments that are available in Knwledge Cach. With Accunting Research Manager, yu maximize the efficiency f yur research time, while enhancing yur results. Learn mre abut ur cntent, ur experts, and hw yu can request yur free trial by visiting Yu can als access the Accunting Research Manager Web site by selecting the item in PrSystem fx Engagement frm the Guidance tab n the Shrtcuts bar in the Binder windw. As indicated abve, subscribers t an Accunting Research Manager library that includes surce cntent can link directly t surce material frm references within Knwledge Cach wrkpapers. These links have been updated t reference the new Cdificatin released by the FASB and available n ARM. The Cdificatin n ARM is fully integrated with U.S. and internatinal accunting standards, ther nn-authritative materials and industry leading interpretive guidance.

8 T use yur Knwledge Cach Wrkpaper Templates, pen a binder in PrSystem fx Engagement, select the wrkpaper tab int which yu wuld like t insert the wrkpaper, and select New Knwledge Cach Wrkpaper frm the tlbar r File menu. The New Knwledge Cach Wrkpaper dialg appears (Figure 1). Select the New Knwledge Cach Title with the cntent yu wuld like t use. Yu can nly select titles yu have installed. The infrmatin displayed changes t reflect the wrkpaper rganizatin available fr the selected title. Select the Knwledge Cach Wrkpaper Templates t insert int yur binder and click OK. The Selected Wrkpaper Prperties dialg appears. Each wrkpaper name is autmatically laded int the Name field. Add a wrkpaper index in the Index field and make any Name mdificatins yu desire. Yu can als mdify the tab lcatin r the rll frward settings fr each wrkpaper. Then click OK. The integrated Knwledge Cach wrkpaper is nw inserted int yur engagement binder. Fr mre infrmatin n hw t use Knwledge Cach wrkpapers in yur binder, see the Knwledge Cach User Guide. Figure 1 New Knwledge Cach Wrkpaper Dwnlad Descriptin: 2011 Knwledge-Based Audits f Nt-fr-Prfit Entities (8/16/11) Versin: Engagement v. 6.5 with Knwledge Cach r higher Release Date: August 2011 File size: 14MB Apprx. Dwnlad Time: 45 minutes at 56 kbps License: Full Versin Platfrms: Windws XP/Vista Office: Micrsft Office 2007 required Fr a dem r t purchase additinal titles as they becme available PFX-9998, ptin 1 Technical Supprt PFX-9998, ptin 4, then ptin 1 The PrSystem fx Engagement versin f the Knwledge Cach Integrated Knwledge-Based Guides is sld and supprted by CCH, a Wlters Kluwer business. The cntact infrmatin abve can be used fr custmer service and supprt issues fr this prduct. Fr infrmatin abut ther CCH prducts, please call r visit the nline Stre at