Title: Department for the Aging Financial Management Training Workshops
1Department for the AgingFinancial Management
Training Workshops
- Accounting and Auditing Update
- Presented by Rich Pontynen, CPA
- Goodman Company
- Richmond June 22, 2004
- Roanoke June 24, 2004
2- FASB Financial Accounting Standards Board
Statements - SAS Statements on Auditing Standards
- GAO General Accounting Office
- (Issuer of Government Auditing Standards)
- OMB Office of Management Budget
- (Established OMB Circular A-133
3Financial Accounting Standards Board Statements
- There have been 150 statements issued since
FASB-1 was released in 1973. - The most significant relating to not-for-profits
have been - FASB-116 Accounting for Contributions Received
and Contributions Made - FASB-117 Financial Statements of Not-for-Profit
Organizations - FASB-124 Accounting for Certain Investments
Held by Not-for-Profit Organizations - FASB-136 Transfer of Assets to a Not-for-Profit
Organization or Charitable Trust That Raises or
Holds Contributions for Others
4Financial Accounting Standards Board Statements
- Statements with effective dates/provisions that
might be initially applied in financial
statements issued on or after June 1, 2003 - FASB-132
- Employers Disclosures About Pensions and Other
Postretirement Benefits (revised) - Reduces the amount of disclosure previously
required regarding pension plans and other
postretirement benefits for non-public employers
5Financial Accounting Standards Board Statements
- FASB-142
- Goodwill and Other Intangible Assets
- Intangible assets are in two categories
- Those with finite lives (whose cost should be
amortized over the useful life) and, - Intangible assets with indefinite lives (whose
value is not amortized, but must be tested for
impairment annually)
6Financial Accounting Standards Board Statements
- FASB-143
- Accounting for Asset Retirement Obligations
- Requires a liability to be recognized for
disposition costs in the period in which the
liability is incurred if a reasonable estimate
can be made - The liability is initially regarded as a cost of
the asset (i.e. capitalized) at its fair
(present) value
7Financial Accounting Standards Board Statements
- FASB-146
- Accounting for Costs Associated with Exit or
Disposal Activities - Defines when an organization can recognize the
costs related to exit or disposal activities - Recognition occurs only when a present obligation
to others is incurred, which leaves the entity
little or no discretion to avoid future transfer
or use of assets to settle the liability (i.e.
costs to terminate a contract that is not a
capital lease)
8Financial Accounting Standards Board Statements
- FASB-149
- Amendment of Statement 133 on Derivative
Instruments and Hedging Activities - Updates statement 133 for technical
considerations and provides implementation
guidance
9Financial Accounting Standards Board Statements
- FASB-150
- Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and
Equity - Clarifies that certain financial instruments are
to be recorded as liabilities instead of equity
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11Statements on Auditing Standards
- Statements on Auditing Standards that will impact
your audits - SAS-99
- Consideration of Fraud in a Financial Statement
Audit - This statement broadens the work that auditors
must perform when considering fraud during a
financial statement audit. In addition to
expanded planning done by the audit staff, the
SAS requires auditors to make inquiries of
management and others within the organization to
obtain their views about the risk of fraud and
how fraud risks are assessed.
12Statements on Auditing Standards
- And others will normally include
- Employees with varying levels of authority within
the organization - Operational personnel not directly involved in
the financial reporting process - Employees involved in initiating, recording, or
processing complex or unusual transactions
13Statements on Auditing Standards
- SAS-100
- Interim Financial Statements
- Establishes standards and provides guidance on
the nature, timing and extent of procedures to be
formed when conducting a review of interim
financial statements
14Statements on Auditing Standards
- SAS-101
- Auditing Fair Value Measurements and Disclosures
- Provides that the auditor obtain an understanding
of the internal controls related to the
determination of an organizations fair value
measurement and disclosures in order to plan the
appropriate audit procedures - Application - investment portfolios
- active market values, and
- non-traded debt and equity securities
15Government Accounting Office (GAO)
- Government Auditing Standards Yellow Book
- 2003 Yellow Book revisions effective for
financial audits and attestation engagement for
periods ending on or after January 1, 2004 - Major Considerations for not-for-profit
organizations - Auditors performance of non-audit services for
clients (independence issue)
16Government Accounting Office (GAO)
17Government Accounting Office (GAO)
- Can an audit organization be involved in
preparing a trial balance and draft financial
statements and notes without impairing its
independence to audit the financial statements? - Can audit engagement team members perform these
activities?
18Government Accounting Office (GAO)
- Can an audit organization assist an audited
entitys management in preparing depreciation
schedules without impairing its independence to
perform the financial statement audit?
19Government Accounting Office (GAO)
- If the audit organization posts transactions
coded by the audited entitys management, would
the audit organizations independence be impaired
to perform the financial statement audit?
20Government Accounting Office (GAO)
- An audited entity provides its cash receipts and
disbursements journals to the audit organization,
which, as part of its financial statement audit,
proposes adjusting entries to convert from a cash
basis to an accrual basis of accounting. The
audited entitys management, which has requested
the conversion, reviews, approves, and posts the
entries and has sufficient knowledge and ability
to take responsibility for them. Would the audit
organizations independence be considered
impaired for the financial statement audit?
21Government Accounting Office (GAO)
- A small audited entitys sole accountant suddenly
leaves due to an emergency situation, and it asks
an audit organization to provide a temporary
staff person until a new accountant is hired. If
the staff person that the audit organization
assigns to provide this assistance is not part of
the audit engagement team and the audit
organization complies with all of the required
safeguards, would its independence be considered
impaired on a financial statement audit?
22Government Accounting Office (GAO)
- If an audit organization arrives at an audited
entity to perform a financial statement audit and
finds that bank account reconciliations were not
performed during the year, can the audit
organization perform this service without
impairing independence?
23Government Accounting Office (GAO)
- Is an audit organizations independence to
perform a financial statement audit impaired if
it assists a client in converting its financial
statements to address new accounting principles?
24Government Accounting Office (GAO)
- An audited entity purchases a commercial
accounting package and asks an audit organization
to provide advice on setting up the chart of
accounts and the financial statement format.
Would the audit organizations independence be
considered impaired?
25Government Accounting Office (GAO)
- Can an audit organization assist its clients in
preparing Internal Revenue Service (IRS) form
990, Return of Organization Exempt From Income
Tax, without impairing its independence to audit
the entities? - Can audit engagement team members perform this
activity?
26Office of Management and Budget (OMB)
- OMB Circular A-133
- Audits of States, Local Governments and
Non-Profit Organizations - Revised June 27, 2003 - Effective for years
ending after December 31, 2003
27Office of Management and Budget (OMB)
- Major Changes
- Federal agencies with oversight for an auditee
can reassign oversight to another federal agency
under special circumstances - Raises to 500,000 the amount expended in a year
that would require a single audit - This does not raise the dollar limitation for a
program to be a major program
28Office of Management and Budget (OMB)
- OMB Circular A-122
- Cost Principles for Non-Profit Organizations
- Revised May 10, 2004 Effective June 9, 2004
- Along with A-21 (educational institutions) and
A-87 (state, local government and Indian tribes)
29Office of Management and Budget (OMB)
- Changes
- Intended to improve consistency and clarify
language - Added to all three circulars cost items, when
appropriate, where they might have been in
only one or two before - Other amendments or revisions
- Interest, which now includes applicable dates
- Travel costs, which are now consistent in all
three circulars - Specialized service facilities, which has been
clarified to specify that periodic rate
adjustment reviews be done every two years - Major impact of changes None
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31THE END!