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MNCPA PERSPECTIVES

Peer review conference takeaways No. 1

August 23, 2023  |  Faye Hayhurst, CPA

Peer review conference takeaways No. 1 So much vital information was conveyed during the recent three-day 2023 AICPA Peer Review Conference, starting with the optional sessions related to engagements performed under government auditing standards and audits of employee benefit plans.
 
The critical nature of these engagements to our society and the importance of auditors being in compliance with professional and regulatory requirements cannot be overstated. Dabbling in this type of work is fine, but only if a firm is willing to put in the necessary effort to be competent.
 
Here are a few tidbits gleaned from the conference:

Audits under Government Auditing Standards

  1. Certain COVID relief programs allow an examination engagement as an alternative to a single audit. Determining that an organization is eligible for an examination engagement is a key consideration for the auditor.
  2. Know your compliance supplement! Almost every program had changes in 2023, so be sure the right supplement is used.
  3. Correctly identifying Type A and Type B programs. Knowing they have different methods of risk assessment is crucial.
  4. A common error is information not being consistent between all the reports and documents submitted as part of a single audit.
  5. Quote from a presenter: “Inquiry alone is not sufficient testing of internal control.” (Do CPAs still need to be told this?!)
  6. There needs to be a representation letter for a single-audit-related agreed-upon procedures engagement that is separate from the audit, or the engagement will be nonconforming. The AUP is a totally separate engagement and should also have a separate engagement letter.
  7. If an audit firm provides only clerical assistance in financial statement preparation, it may not be a significant threat to independence. But the thought process for arriving at that conclusion should still be documented.
  8. Not new, but still not well understood: Preparing financial statements for a client on an audit engagement under government auditing standards is always considered a significant threat to independence and requires safeguards to be applied. The allowable safeguards listed in 3.69 of the Yellow Book cannot be satisfied by a sole practitioner without going outside his or her firm.
  9. The OMB is updating uniform guidance and it should be out by the end of the calendar year. It’s not known whether they will change the audit threshold.

 Audit of employee benefit plans

  1. Cybersecurity is viewed by the U.S. Department of Labor as a big topic and plan auditors should be looking at this.
  2. Tell clients to pay attention to correspondence from the DOL. If a plan sponsor doesn’t respond to correspondence, the DOL’s position becomes final.
  3. SAS 136, which introduced Section 103(a)(3)(c) audits to replace limited scope audits, is in effect now.
    1. DOL is seeing 103(a)(3)(c) audit reports that don’t have the name of the certifying entity either in the report or the footnotes. It’s required!
    2. Only certain types of entities are allowed to provide certifications for EBP plans: banks, trust companies and insurance companies. Make sure any certification received is from a qualified entity.
    3. The transition year report for a 103(a)(3)(c) audit is messy. Be sure to look at examples in guidance.
  4. SAS 136 applies only to ERISA plans and should not be adapted to non-ERISA plans.
  5. Management is responsible for determining whether the plan meets the requirements for having a 103(a)(3)(c) audit.
  6. There’s a significant change coming in determining which ERISA plans are required to have an audit. The current general threshold is based on having 100 or more individuals eligible to participate in the plan at the beginning of the plan year. For plan years beginning on or after Jan. 1, 2023, the threshold will be based on 100 or more participants with an account balance at the beginning of the plan year. DOL estimates there will be 10,000-12,000 fewer audits required after the change.
  7. In good news, the DOL is appreciative of the work of peer review in helping to enhance audit quality.
The CPAs who perform these audits are performing an essential role that we urgently need.
 
The MNCPA is here to support them through educational opportunities. Go to www.mncpa.org/cpe/catalog and search the keywords “single audit,” “Yellow Book”, “employee benefit plan” or “401(k)” to find a variety of CPE available.
 

Topics: Peer Review, Accounting & Auditing

Faye Hayhurst, CPA

Faye Hayhurst is the MNCPA director of finance and administration. She is committed to using numbers to tell relevant stories, although she also employs words, charts and occasionally clothing to communicate a message. While some have questioned her about the pressures of being the CPA for the MNCPA, Faye considers presenting financial information to fellow CPAs a dream job. Outside of storytelling with numbers, Faye enjoys directing her church's handbell choir, visiting national parks and other scenic places, and checking out the chocolate products at Trader Joe's. Faye can be reached at 952-885-5540 or fhayhurst@mncpa.org.

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