General Industries Review Task Force
As an MNCPA member, you have a free service available to help your firm improve its quality control process. Sound intriguing?
Every year, the General Industries Review Task Force provides a free service to firms with members of the MNCPA: constructive and confidential feedback on financial statements. The task force is made up of MNCPA member volunteers and is not part of the Peer Review Committee or any other sanctioning authority.
Firms may submit up to two financial statements (and AU-C 260 and AU-C 265 letters if applicable) from audits, reviews and/or compilations. The firms are asked to indicate the industry in which the client operates, remove all references that might identify the client, its customers and vendors, and to provide the number of professional staff in their firm.
Financial statements are then distributed to task force volunteers based on their individual industry expertise. After the financial statements have been reviewed by two volunteers, the comments are combined and returned to the firms that submitted the reports.
The reviews are performed without access to the workpapers or supporting documentation. Comments are divided into two categories: technical and non-technical, which includes "for consideration" comments.
Finally, members of the task force discuss comments and observations from the reviews performed. The most common items identified during the 2015 review process are as follows:
|Most frequent comments of reviewers
|Disclosure, as of the date of the balance sheet, of gross amount of assets recorded under capital leases, presented by major classes according to nature or function, was missing.
||ASC 840-30-50-1 Leases, Capital Lease Disclosures
|Disclosures describing tax years that remain open to examination by major tax jurisdictions, and the amounts of interest and penalties recognized were missing.
||ASC 740-10-50-15 Income Taxes, Unrecognized Tax Benefit Disclosures
|Omission of disclosures related to goodwill impairment charges, specifically required disclosures related to the facts and circumstances leading to the impairment charge.
||ASC 350-20-50-2 Goodwill and Other
|Statement of cash flow presentation of long-term debt activity in net amounts when the long-term debt does not meet the criteria allowing net presentation. Borrowings and repayments on long-term debt should be reported gross.
||ASC 230-10-45-7 Statement of Cash Flows
|Fair value measurement disclosures not properly included or, if included, improperly applied including no information related to the level of the fair value hierarchy or valuation techniques and inputs.
||ASC 820-10-50 Fair Value Measurements
|Intangible assets subject to amortization were missing disclosure of the gross carrying amount and accumulated amortization, in total and by major intangible asset class.
||ASC 350-30-50-2 General Intangibles Other than Goodwill
|Multiemployer benefit plan disclosures were missing in whole or in part. Effective for years ending after Dec. 15, 2012, additional disclosures became required for employers participating in multiemployer pension plans. These disclosures are numerous and complex.
||ASC 715-80-50 Compensation – Retirement Benefits, Multiemployer Plans, Disclosure
|Related party disclosures appear to be missing or incomplete. In general, related party disclosures are required to include all of the following:
- Nature of the relationship
- Description of the transaction
- Dollar amount of the transaction
- Amounts due to or from related parties
|ASC 850-10-50 Related Party Disclosures
|Possible situations in which variable interest entities were not properly consolidated and/or related required disclosures were missing. In addition to possible consolidation of variable interest entities, certain disclosures related to those entities (nature, purpose, size and activities) are required.
||ASC 810-10-50 Consolidation, Variable Interest Entities
|Other common comments included (Generally accepted and "for consideration" comments):
- Outdated wording and format in auditor’s/accountant’s reports.
- Accounting policies not disclosed for those items that have options available or are otherwise required. The task force specifically encourages the use of a revenue recognition policy disclosure.
- Various clerical errors, including typos, grammatical, spelling and footing errors.
- Amounts and disclosures repeated within the statements not the same every time they are mentioned.
- Inconsistency in the use of verbiage throughout the financial statements, the disclosures and the report. This includes use of singular vs. plural, GAAP vs. special purpose framework, consolidated vs. combined and other items mentioned in multiple places within the financial statements.
- The report on the statements, and supplementary information if applicable, not referring to all periods presented.
- Industry-specific financial statement requirements not met (refer to the appropriate industry audit guide). This is especially true for construction contractors, HUD projects and not-for-profit entities.
- Including GAAP codification references. It is implied that it’s in the codification by reference to the reporting framework of a GAAP financial statement.
Want to submit reports?
Submit reports online by July 14, 2019.
Want to join the task force?
Volunteers are needed! Please contact Chandany McDermott at 952-831-2707 or online.