PRS-PA-0.1: LIST OF SUBSTANTIVE CHANGES AND ADDITIONS

Transcription

1 PRS (9/15) 1 Index [WPRef] : LIST OF SUBSTANTIVE CHANGES AND ADDITIONS PPC s Practice Aids for Audits of Real Estate Entities Second Edition (September 2015) Highlights of This Edition The following are some of the important new features of the 2015 Edition of PPC s Practice Aids for Audits of Real Estate Entities: Revised AICPA Code of Professional Conduct. The AICPA published a revised Code of Professional Conduct in 2014, which is primarily effective as of December 15, When applicable, your Practice Aids have been updated for the revised Code of Conduct. New Practice Aids. Your Practice Aids include o o New Confirmation and Correspondence Letters. We ve added two new letters. We added a new correspondence letter that will help component auditors communicate findings and results of their work to the group auditor. We ve also added a new representation letter to use when the current year financial statements have been audited and the prior year financial statements have been reviewed under SSARS No. 21. New Practice Aid. We ve added a new practice aid that can be used to document conclusions on compliance with independence requirements applicable to the engagement, including the identification of any threats to independence and safeguards that apply. Also, the form can be used to satisfy the documentation requirements pertaining to the understanding with the client of permissible nonattest services to be performed. Accounting Standards Update. Since the last edition of these Practice Aids, the Financial Accounting Standards Board (FASB) has issued several new Accounting Standards Updates (ASUs). When applicable, we ve included practical considerations or updated steps in your Practice Aids for those standards. Comprehensive, Up-to-date Disclosure Checklists. The most effective way to ensure you have properly disclosed all of the required information in the financial statements you prepare is to use our comprehensive disclosure checklists. The disclosure checklists have been completely updated for the ASUs issued since the last edition of your Practice Aids. General 1) Changed references throughout the Practice Aids, where applicable, due to the issuance of the AICPA revised Code of Professional Conduct. Various INTRODUCTION TO AUDITS OF REAL ESTATE ENTITIES (PRS-PA) CONFIRMATION AND CORRESPONDENCE LETTERS (PRS-CL) 2) Changed references from OCBOA to special purpose framework. 3) Where necessary, changed references to the Documentation and Analysis of Group Components at PRS-CX-3.5 that was previously numbered PRS-CX ) Updated the discussion of revenue recognition guidance due to the issuance of ASU ) Updated the discussion of lease accounting with recent developments. Various Various PRS-PA-1 PRS-PA-1

2 2 PRS (9/15) Audit Engagement Letter 1) Updated the language in the letter regarding the preparation of the tax return and financial statements. Also, updated the letter for management s responsibilities for nonattest services (along with the associated note). PRS-CL-1.1 2) Modified the language in the letter regarding fees. PRS-CL-1.1 3) For the note on the schedules and confirmations to be prepared by the client, added expanded language that can be used regarding client assistance. 4) For the note that discusses signing the engagement letter, added clarification of management s responsibilities. PRS-CL-1.1 PRS-CL-1.1 Engagement Letter 5) Modified the format of the inside address of the letter. PRS-CL-1.2 Change Order Form Legal Letters 6) Modified the note referring to the ABA s website. PRS-CL-2.1 Management Representation Letters Internal Control Communications Communication with Those Charged with Governance Cash Receivable 7) Added items to the practical consideration detailing additional representations that might be obtained. 8) For the practical consideration indicating the periods that representation letters should address, added guidance from TIS , Management Representations Regarding Prior Periods Presented That were Audited by a Predecessor Auditor (link). 9) For the practical consideration regarding substantial doubt about the entity s ability to continue as a going concern, provided guidance due to the issuance of ASU No , Presentation of Financial Statements Going Concern (Subtopic ): Disclosure of Uncertainties about an Entity s Ability to Continue as a Going Concern. 10) Amended a practical consideration to discuss the issuance of SSARS No. 21, Statements on Standards for Accounting and Review Services: Clarification and Recodification. 11) Added a letter, Management Representation Letter When the Current Year Financial Statements Have Been Audited and the Prior Year Financial Statements Have Been Reviewed (After Implementation of SSARS No. 21), due to the issuance of SSARS No. 21. PRS-CL-3.1, PRS-CL-3.1, PRS-CL-3.1, PRS-CL ) Modified the inside address format of the letters. PRS-CL-4.1, PRS-CL-4.2, PRS-CL ) Modified the inside address format of the letters. PRS-CL-5.1, PRS-CL-5.2, 14) Modified the letter to indicate the name of the engagement partner. 15) For the practical consideration on other matters required to be communicated by various auditing standards, noted the issuance of ASU No ) Modified the name of the letter to Receipt for Cash Observed by Auditor and modified the wording in the letter. PRS-CL-5.3 PRS-CL-5.1 PRS-CL-5.2, PRS-CL-5.3 PRS-CL ) Provided additional instructions for the letters. PRS-CL-7.1, PRS-CL-7.2

3 PRS (9/15) 3 18) Modified the name of the letter to Receipt for Count of Securities PRS-CL-8.1 Observed by Auditor and modified the wording in the letter. Investments and Securities Materials and Supply Inventories Benefit Plan Other Group and Other Auditor Communications CHECKLISTS AND PRACTICE AIDS (PRS-CX) Application of Practice Aids to Engagements Engagement Acceptance and Continuance Form Engagement Independence Compliance and Nonattest Services Documentation Form Financial Statement Materiality Worksheet for Planning Purposes Component Materiality Worksheet Understanding the Entity and Identifying Risks 19) Provided additional instructions for the letter. PRS-CL ) Modified the instructions for the letter. PRS-CL ) Added a practical consideration due to the issuance of ASU No , Compensation Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer s Defined Benefit Obligation and Plan Assets. 22) Added a practical consideration on adding a listing of identified related parties. 23) Add a reference to the new letter, PRS-CL-14.9, to one of the practical considerations. 24) Added a new letter, Letter from Component Auditor to Group Auditor on Results of Work and Findings When Responsibility is Assumed. 1) Updated for the new practice aid added and a checklist that was renumbered. 2) Added a factor to consider regarding various services that are now considered to be nonattest services. Made reference to a new practice aid at PRS-CX ) Modified a factor to consider regarding the requirements of AU-C and how the related procedures can be documented on PRS-CX ) Modified a factor to consider about concerns about management s integrity. 5) Added a factor to consider about situations where an auditor s going concern emphasis-of-matter paragraph has occurred or might be a possibility. 6) Added a factor to consider about whether individuals participating in the engagement are not properly licensed. 7) New form in this edition. (Replaces the previous Nonattest Services Documentation Form. ) PRS-CL-11.1, PRS-CL-11.2 PRS-CL-12.4 PRS-CL-14.4 PRS-CL-14.9 PRS-CX-0.1 PRS-CX-1.2 8) Made minor edits to terminology and wording. PRS-CX-2.1 9) Provided additional guidance in the instructions and to certain steps. PRS-CX ) Made minor edits to terminology. PRS-CX ) Modified instructions to note that additional documentation or forms may be necessary for identified components. PRS-CX-3.1

4 4 PRS (9/15) Engagement Team 12) Modified the instructions to emphasize that the discussion should PRS-CX-3.2 Discussion include an exchange of ideas or brainstorming. Fraud Risk Inquiries Form Documentation and Analysis of Group Components Understanding the Design and Implementation of Internal Control Financial Reporting System Documentation Form IT Environment and General Computer Controls Activity and Entitylevel Control Forms Entity-level Control Form for Risk Assessment Control Activities Form for Investments and Derivatives Entity Risk Factors Risk Assessment Summary Form Inherent Risk Assessment Form Test of Controls Form Checklist for Determining Whether a Contract is a Derivative Variable Interest Entity Assessment Accounting Worksheet Closing Entry and Audit Adjustment Form 13) Added an additional required discussion item. PRS-CX ) Provided additional guidance in the instructions. PRS-CX ) Provided additional guidance in the practical considerations on whom to interview. PRS-CX ) Renumbered form. Previously numbered PRS-CX PRS-CX ) Expanded a practical consideration for the control environment to discuss independent outside directors. PRS-CX ) Added additional minor clarifications. PRS-CX ) Made minor edits and revisions to clarify the form and certain control objectives and controls. PRS-CX-5 series 20) Moved certain controls between principles. PRS-CX ) Moved a control between principles. PRS-CX ) Added an additional financing risk factor to consider and modified others. 23) Combined the Accounts Payable and Other Liabilities sections to be consistent with audit programs. 24) Expanded a note to emphasize that audit programs need to be tailored to address the nature, cause, and direction of potential misstatements at the relevant assertion level. 25) Combined the Accounts Payable and Other Liabilities sections to be consistent with audit programs. 26) Modified and added practical considerations on IT-dependent controls and the use of inquiries. 27) Added a practical consideration discussing the issuance of ASU No , Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. 28) Noted the issuance of ASU No , Consolidation (Topic 810): Amendments to the Consolidation Analysis, which affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. PRS-CX-6.1 PRS-CX-7.1 PRS-CX-7.1 PRS-CX-7.2 PRS-CX-10.1 PRS-CX-11.4 PRS-CX ) Made formatting changes to the form. PRS-CX-12.1

5 PRS (9/15) 5 Audit Difference 30) Added additional qualitative factors in evaluating materiality. PRS-CX-12.2 Evaluation Form Disclosure Checklists 31) Updated the checklists for disclosure requirements of recently issued professional accounting standards. PRS-CX-13 series Going Concern Checklist Significant Estimates Identification Checklist Confirmation and Correspondence Control AUDIT PROGRAMS (PRS-AP) General Planning Procedures Other General Planning Procedures General Auditing and Completion Procedures Receivables and Tenant Revenues Receivables and Sales of Real Estate Receivables and Sales of Real Estate Property (including Real Estate Held for Use in Rental Operations) 32) Modified instructions and added practical considerations due to the issuance of ASU No ) Added an additional item for the amortization of goodwill if the accounting alternative was elected. PRS-CX-16.1 PRS-CX ) Added a new confirmation letter to the form. PRS-CX ) Modified practical consideration to note that activities such as financial statement preparation, cash to accrual conversions, and reconciliations will be considered nonattest services for periods beginning on or after December 15, ) Added a practical consideration discussing inquires that should be made. 3) Added a practical consideration discussing the use of the new confirmation letter at PRS-CL ) Added a practical consideration discussing the issuance of ASU No ) Added practical consideration to note that activities such as financial statement preparation, cash to accrual conversions, and reconciliations will be considered nonattest services for periods beginning on or after December 15, ) Added a practical consideration discussing the issuance of ASU , Revenue from Contracts with Customers (Topic 606). 7) Added a practical consideration discussing the FASB s proposed ASU, Leases (Topic 842) a revision of the 2010 proposed FASB Accounting Standards Update, Leases (Topic 842), and tentative decisions on leases. 8) Added a practical consideration discussing the issuance of ASU ) Added a practical consideration discussing PPC s Workpapers for Nonpublic Companies that includes an electronic Interim Receivables Rollforward worksheet. 10) Added a practical consideration discussing the issuance of ASU No , Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. PRS-AP-1 PRS-AP-1 PRS-AP-1A PRS-AP-2 PRS-AP-2 PRS-AP-4 PRS-AP-4 PRS-AP-5 PRS-AP-5A PRS-AP-7

6 6 PRS (9/15) 11) Added a practical consideration discussing the FASB s proposed PRS-AP-7A ASU, Leases (Topic 842) a revision of the 2010 proposed FASB Accounting Standards Update, Leases (Topic 842), and tentative decisions on leases. Property (including Real Estate Held for Use in Rental Operations) Investments and Derivatives Investments and Derivatives Accounts Payable and Other Liabilities Income Taxes Income and Expenses 12) Added a practical consideration due to the issuance of ASU ) Modified a step for investments accounted for using the cost, equity, or consolidation methods. 14) Modified a step and added a practical consideration in the Business Combinations topic due to the issuance of ASU No , Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination. 15) Added a practical consideration due to the issuance of ASU No , Business Combinations (Topic 805): Pushdown Accounting. 16) Added and modified steps in the Interests in Variable Interest Entities topic due to the issuance of ASU No ) Added a practical consideration on the issuance of ASU No ) Modified a practical consideration discussing PPC s Workpapers for Nonpublic Companies. PRS-AP-8 PRS-AP-8 PRS-AP-8A PRS-AP-8A PRS-AP-8A PRS-AP-10A PRS-AP-12 19) Modified a sub-step on the calculation of deferred taxes. PRS-AP-12 20) Added a practical consideration discussing the issuance of ASU ) Added a practical consideration discussing the issuance of ASU No , Income Statement Extraordinary and Unusual Items (Subtopic ): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. 22) Added practical considerations discussing the use of data extraction software. PRS-AP-14 PRS-AP-14 PRS-AP-14