The American Institute of CPAs (AICPA) recently updated several Technical Question and Answers (Q&As) to reflect conforming changes required by SAS 145, Understanding the Entity and Its Environment and Assessing the Risk of Material Misstatement, and modifications to FASB Accounting Standards Codifications (ASCs). While these Q&As are not authoritative sources of accounting principles, they provide practical guidance for auditors and accounting professionals navigating complex audit scenarios. Here’s a detailed look at the updates and their implications for auditing practice.
What Are AICPA Technical Q&As?
AICPA Technical Q&As are practical resources developed from the AICPA’s technical hotline and other internal bodies. They address selected practice issues but do not establish authoritative accounting principles under the FASB ASC. Instead, Q&As provide insight into how accounting and auditing issues are approached in practice, offering examples, guidance, and clarification for everyday audit and accounting tasks.
Updates Related to SAS 145
The issuance of SAS 145 prompted substantial revisions to the Q&As to ensure alignment with current audit standards.
Key Changes in Internal Control (Section 8200)
Q&A Section 8200—Internal Control—received major updates, including:
- Understanding internal controls when a client may not have an effective system.
- Defining “Expectation That the Controls Are Operating Effectively.”
- Incorporating a substantive audit strategy.
- Evaluating the control environment and identifying ineffective controls.
- Using walkthroughs to assess processes.
- Proper documentation of control procedures.
Sampling Updates (Q&A 8220.01)
Q&A 8220.01, “Application of AU-C Section 530,” was revised to reflect SAS 145’s impact on sampling procedures, ensuring auditors consider updated guidance in evaluating risks and designing audit tests.
Revisions Conforming to FASB ASCs
In addition to SAS 145-related updates, several Q&As were revised to reflect changes in FASB ASCs:
- Q&A 2130.39 – Balance Sheet Classification of Certificate of Deposit: The reference changed from FASB ASC 305 to the FASB Master Glossary definition of Cash Equivalent.
- Q&A 6140.23 – Changing Net Asset Classifications Reported in a Prior Year: Updated to reflect the replacement of Concepts Statement No. 6 with Concept Statement No. 8, Conceptual Framework for Financial Reporting.
These revisions ensure that Q&As remain aligned with the current conceptual framework and authoritative guidance.
Practical Considerations
While AICPA Technical Q&As are not authoritative, they remain a valuable resource for accounting professionals, providing insight into common practice issues and real-world applications. Auditors can use them to:
- Understand how to address internal control deficiencies.
- Integrate substantive strategies in audit planning.
- Ensure documentation reflects current standards.
- Apply updated classifications and definitions consistent with FASB ASCs.
The recent updates to AICPA Technical Q&As provide essential guidance for auditors navigating the evolving landscape of audit and accounting standards. By reviewing revisions related to SAS 145 and FASB ASC changes, accounting professionals can better understand internal control considerations, sampling procedures, and classification changes—helping to conduct audits that meet current standards and best practices.
