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Exposure Drafts, Comment Letters, and Statements of Position

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Proposed statement on standards for attestation engagements : reporting on an entity's internal control structure over financial reporting : supersedes SAS No. 30, Reporting on internal accounting control;Reporting on an entity's internal control structure over financial reporting : supersedes SAS No. 30, Reporting on internal accounting control; Exposure draft (American Institute of Certified Public Accountants), 1992, Apr. 20

American Institute of Certified Public Accountants. Auditing Standards Board

The Auditing Standards Board is considering the issuance of this proposed statement on standards for attestation engagements to provide guidance to practitioners who are engaged to examine and report on management's written assertion about the effectiveness of an entity's internal control structure over financial reporting. This proposed Statement provides guidance to assist the practitioner in: 1. Accepting an engagement. 3. Obtaining an understanding of the internal control structure. 4. Testing and evaluating the design effectiveness and the operating effectiveness of internal control structure policies and procedures. 5. Forming an opinion on management's assertion, using material weakness as the basis for determining whether the 6. Communicating reportable conditions. This proposed guidance would apply to auditors of insured depository institutions who examine management's assertions about the effectiveness of the internal control structure over financial reporting, as required by the Federal Deposit Insurance Corporation Improvement Act of 1991. This proposed Statement would supersede Statement on Auditing Standards (SAS) No. 30, Reporting on Internal Accounting Control (AICPA, Professional Standards, vol. 1, AU sec. 642). It differs from SAS No. 30 in that the proposed Statement: 1. Requires practitioners to consider whether management's assertion is based on reasonable criteria against which it can be evaluated, and whether the assertion is capable of reasonably consistent estimates or measurement using those criteria. (Unlike SAS No. 30, this proposed Statement does not define the specific criteria.) 2. Precludes the practitioner from reporting directly on the company's internal control structure. (Unlike SAS No. 30, this proposed Statement does not allow the practitioner to report directly on the company's internal control structure. Instead, the practitioner reports on management's assertion only.) 3. Precludes the practitioner from issuing a public report unless management's assertion is included in a separate written report that accompanies the practitioner's report. 4. Requires the practitioner to limit his or her report on management's assertion about the company's internal control structure when management elects to present its assertion only in a representation letter and not in a separate written report. 5. Updates the definition of internal control, including terminology and concepts that are consistent with SAS No. 55, Consideration of the Internal Control Structure in a Financial Statement Audit.
Questions and answers on the term reasonably objective basis and other issues affecting prospective financial statements : February 10, 1992, amendment to AICPA Guide for prospective financial statements; Statement of position 92-2;

American Institute of Certified Public Accountants. Auditing Standards Division
Information for CPA Candidates, Eleventh Edition, Effective May 1994; Exposure draft (American Institute of Certified Public Accountants), 1992, Dec. 21

American Institute of Certified Public Accountants. Board of Examiners
Proposed audit and accounting guide : audits of credit unions ;Audits of credit unions; Exposure draft (American Institute of Certified Public Accountants), 1992, March 20

American Institute of Certified Public Accountants. Credit Unions Committee

This proposed audit and accounting guide has been prepared to assist the independent auditor in auditing and reporting on the financial statements of credit unions. It describes relevant matters or procedures unique to these entities and focuses on specific problems of accounting, auditing, and reporting on their financial statements. This proposed guide would supersede the AICPA Audit and Accounting Guide Audits of Credit Unions issued in 1986. One objective of this proposed guide is to heighten auditors' awareness of the complex issues encountered in audits of credit unions' financial statements. Interest-rate risk, liquidity, asset quality, and internal control structure are among the most important concerns in the credit union industry. These areas should also be essential considerations in the auditor's assessment of risk at the financial statement level. A credit union's management must exercise considerable skill and judgment to manage interest-rate risk and maintain liquidity, asset quality, and an effective internal control structure. Similarly, the auditor of a credit union's financial statements should exercise considerable skill and judgment when considering these matters in planning and performing an audit. Interest-rate risk, liquidity, asset quality, internal control structure, and their effect on the auditor's consideration of risk at the account-balance or class-of-transactions level are each discussed in this proposed guide. This proposed guide also describes relevant specific internal control structure policies and procedures and auditing procedures. Further, it stresses the need for industry knowledge and training in auditing certain areas, including the allowance for loan losses. Significant accounting matters addressed in this proposed guide include establishing an adequate allowance for loan losses, valuing real estate acquired, accounting for mortgage-banking activities, accounting for business combinations, and accounting for investment securities held by a credit union. This proposed guide includes illustrations of the form and content of financial statements for credit unions and the auditor's report thereon.
Accounting and reporting by health and welfare benefit plans, August 3, 1992 : amendment to AICPA audit and accounting guide, Audit of employee benefit plans; Statement of position 92-6;

American Institute of Certified Public Accountants. Employee Benefit Plans Committee
Audits of state and local governmental entities receiving federal financial assistance : supplement to AICPA Audit and accounting guide, Audits of state and local governmental units; Statement of position 92-7;

American Institute of Certified Public Accountants. Government Accounting and Auditing Committee
Auditing property/casualty insurance entities' statutory financial statements : applying certain requirements of the NAIC annual statement instructions; Statement of position 92-8;

American Institute of Certified Public Accountants. Insurance Companies Committee
Auditing insurance entities' loss reserves : May 29, 1992 supplement to AICPA Audit and accounting guide, Audits of property and liability insurance companies; Statement of position 92-4;

American Institute of Certified Public Accountants. Insurance Companies Committee. Auditing Insurance Entities' Loss Reserves Task Force
Accounting for foreign property and liability reinsurance : June 1, 1992 supplement to AICPA Audit and accounting guide : Audits of property and liability insurance companies; Statement of position 92-5;

American Institute of Certified Public Accountants. Insurance Companies Committee. Reinsurance Auditing and Accounting Task Force
Proposed statement of position : financial accounting and reporting for high-yield debt securities by investment companies : proposed amendment to AICPA Audit and accounting guide, Audits of investment companies ;Financial accounting and reporting for high-yield debt securities by investment companies : proposed amendment to AICPA Audit and accounting guide, Audits of investment companies; Exposure draft (American Institute of Certified Public Accountants), 1992, March 4

American Institute of Certified Public Accountants. Investment Companies Committee

This proposed statement of position (SOP) provides guidance on financial reporting by investment companies for high-yield debt securities held as investments. Although the focus of this proposed SOP is on high-yield debt securities, certain guidance is also applicable to other debt securities held as investments by investment companies. It recommends the following: 1. Using the effective-interest method to report interest income on payment-in-kind (PIK) bonds and step bonds; 2. Writing off interest receivable on defaulted high-yield debt securities in accordance with Financial Accounting Standards Board Statement No. 5, Accounting for Contingencies, and allocating the write-off between income, for the portion that had been recognized as income, and the cost of the related investment for the portion purchased; 3. Reporting capital infusions in support of high-yield debt securities as additions to cost; reporting other expenditures, excluding workout expenditures, as additions to cost only to the extent that they increase legally enforceable claims against the issuer of the securities; and reporting workout expenditures as operating expenses; 4. Procedures to be considered by auditors for reviewing the valuations of high-yield debt securities to be reported in financial statements.
Proposed statement of position : foreign currency accounting and financial statement presentation for investment companies : proposed amendment to AICPA audit and accounting guide, Audits of investment companies ;Foreign currency accounting and financial statement presentation for investment companies : proposed amendment to AICPA audit and accounting guide, Audits of investment companies; Exposure draft (American Institute of Certified Public Accountants), 1992, Jun. 5

American Institute of Certified Public Accountants. Investment Companies Committee

This proposed statement of position (SOP) amends the third edition, revised, of the AICPA Audit and Accounting Guide Audits of Investment Companies (the guide) to require reporting of all foreign currency gains and losses.* This proposed SOP recommends that realized and unrealized foreign currency gains and losses be reported separately. However, the guide does not indicate a preference for reporting separately the portion of the change in market value stated in the reporting currency that results from changes in foreign currency rates (see paragraph 2.86). It also states that foreign currency transaction gains or losses may be either accounted for separately or combined for reporting purposes with the kind of transaction that results in the gain or the loss (see paragraph 2.89).
Audits of not-for-profit organizations receiving federal awards, with conforming changes as of December 18, 1995, resulting from the issuance of Government auditing standards: 1994 revision, and Statement on auditing standards no. 74, Compliance auditing considerations in audits of governmental entities and recipients of governmental financial assistance; Statement of position 92-9;

American Institute of Certified Public Accountants. Not-for-Profit Organizations Committee
Omnibus proposal of Professional Ethics Division interpretations and rulings; Exposure draft (American Institute of Certified Public Accountants), 1992, Sept. 25

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

1. PROPOSED ETHICS RULING UNDER RULE 101: Partially Secured Loans; 2. PROPOSED ETHICS RULING UNDER RULE 101: Loan Commitment or Line of Credit; 3. PROPOSED ETHICS RULING UNDER RULE 101: Loans to Partnership in Which Members Are Limited Partners; 4. PROPOSED ETHICS RULING UNDER RULE 101: Loans to Partnership in Which Members Are General Partners; 5. PROPOSED ETHICS RULING UNDER RULE 101: Credit Card Balances and Cash Advances; 6. PROPOSED ETHICS RULING UNDER RULE 101: Member Leasing Property From a Client; 7. PROPOSED ETHICS RULING UNDER RULE 101: Joint Interest in Vacation Home; 8. PROPOSED ETHICS RULING UNDER RULE 102: Service on Board of Directors of Federated Fund-raising Organization; 9. PROPOSED ETHICS RULING UNDER RULE 501: Requests for Client Records and Other Information; 10. PROPOSED ETHICS RULING UNDER RULE 503: Commission Payments for Services for an Officer, Director, or Principal Shareholder of a Client
Accounting for real estate syndication income; Statement of position 92-1;

American Institute of Certified Public Accountants. Real Estate Committee
Proposed statement on responsibilities in personal financial planning practice : basic PFP engagement functions and responsibilities;Basic PFP engagement functions and responsibilities; Exposure draft (American Institute of Certified Public Accountants), 1992, March 31

American Institute of Certified Public Accountants. Statements on Responsibilities in PFP Practice Subcommittee

Although CPAs have provided personal financial planning services to clients for a long time, they now provide such services in a more structured way. Consequently, significant practice issues in personal financial planning are not covered by existing professional standards. In 1989, the Personal Financial Planning (PFP) Division undertook a project to provide guidance on the CPA's responsibilities in personal financial planning engagements. Its purpose was to promote consistency and quality in the performance of personal financial planning services. This proposed statement on responsibilities in personal financial planning practice (SRPFPP) is not intended to establish a separate code of conduct in personal financial planning practice, yet it provides useful guidance to CPAs performing such services. The proposed Statement is advisory, that is, it does not constitute an enforceable technical standard and is educational in nature. The proposed Statement also protects the public by ensuring the competency of personal financial planning services provided by CPAs. The AICPA's Personal Financial Planning Executive Committee is the senior technical committee of the AICPA designated to issue advisory statements on personal financial planning practice. However, the PFP Executive Committee, concerned about preventing standards overload, expects to limit SRPFPPs to substantive issues of general usefulness not covered by existing standards. This proposed Statement does not supersede the Statements on Standards for Accounting and Review Services, the Statements on Responsibilities in Tax Practice, the Personal Financial Statements Guide, the Guide for Prospective Financial Statements, and the Code of Professional Conduct. This proposed Statement defines and provides guidance for financial planning engagements. It defines a personal financial planning engagement as developing strategies and making recommendations that will assist clients in achieving their personal financial goals. The proposed SRPFPP provides guidance on defining engagement objectives, planning specific procedures appropriate for the engagement, developing a basis for recommendations, communicating those recommendations, assisting the client to act on planning decisions, monitoring the client's progress in achieving established goals, updating recommendations, and helping the client to revise planning decisions. Furthermore, the proposed SRPFPP recommends that the CPA disclose the fact that recommendations are based only on selected goals. A sample disclosure to be made when recommendations are made only on selected goals is contained in the proposed SRPFPP. This proposed SRPFPP was approved by the Statements on Responsibilities in PFP Practice Subcommittee and the PFP Executive Committee. In addition, the Tax Executive Committee has approved the issuance of this exposure draft. After the conclusion of the comment period, the Statements on Responsibilities in PFP Practice Subcommittee will consider all comments received and make any necessary changes to the proposed Statement. The revision will then be voted on by the Statements on Responsibilities in PFP Practice Subcommittee and the PFP Executive Committee. A two-thirds vote for approval by each committee is required for this proposed Statement to become effective.
Proposed statement of position : compliance and internal control auditing for student financial assistance programs using service organizations : proposed amendment to AICPA audit and accounting guide, Audits of colleges and universities;Compliance and internal control auditing for student financial assistance programs using service organizations : proposed amendment to AICPA audit and accounting guide, Audits of colleges and universities; Exposure draft (American Institute of Certified Public Accountants), 1992, Apr. 29

American Institute of Certified Public Accountants. Student Financial Assistance Program Audit Task Force

The U.S. Department of Education (ED) Audit Guide Audits of Student Financial Assistance Programs (ED Audit Guide) requires institutions that participate in its student financial assistance (SFA) programs to engage independent auditors to audit certain aspects of their participation in those programs. Among other reports, auditors who perform such audits are required to issue reports on (1) the participating institutions' compliance with laws and regulations specified in the ED Audit Guide, and (2) the internal control structure used by participating institutions in administering the student financial assistance programs. The ED Audit Guide requires an institution's auditor's reports on compliance and the internal control structure to encompass any functions performed by service organizations, as defined in this proposed statement of position. This proposed statement of position would amend the Audit and Accounting Guide Audits of Co/leges and Universities to: 1. Provide guidance on an institution's auditor's responsibilities when auditing compliance with the requirements applicable to SFA programs and the internal control structure over compliance at an institution that engages a service organization to perform certain functions related to the administration of its SFA program. 2. Provide guidance on a service organization's auditor's responsibilities when auditing compliance with the requirements applicable to SFA programs and the internal control structure over compliance at a service organization that performs certain functions related to the administration of an SFA program.
Proposed statement of tax policy 10 : integration of the corporate and shareholder tax systems ;Integration of the corporate and shareholder tax systems; Exposure draft (American Institute of Certified Public Accountants), 1992, Dec. 7

American Institute of Certified Public Accountants. Tax Division

This proposed statement of tax policy (STP) presents recommendations for improving the system of taxing corporate-source earnings. Statements of Tax Policy of the Tax Division are issued for the general information of those interested in the subject. They are intended to aid in the development of federal tax legislation in directions that the division believes are in the public interest.
Proposed statement of position : auditing insurance entities' loss reserves : proposed supplement to AICPA Audit and accounting guide, Audits of property and liability insurance companies;Auditing insurance entities' loss reserves : proposed supplement to AICPA Audit and accounting guide, Audits of property and liability insurance companies; Exposure draft (American Institute of Certified Public Accountants), 1991, Sept. 16

American Institute of Certified Public Accountants. Auditing Insurance Entities' Loss Reserves Task Force

This proposed statement of position (SOP) is designed to provide guidance to auditors when auditing management's estimate of the liability for loss reserves of property and liability insurance entities. Following is a summary of some of the more significant matters discussed in the proposed SOP: 1. Methods available for estimating the liability for loss reserves and the types of data that may be used in developing such estimates, including an example of the application of a commonly used estimating method illustrating how the method may be used with two different types of data and a discussion of the difference in the resulting projections; 2. Changes in the environment and other variables, both internal and external to the entity being audited, that the auditor should consider in evaluating the reasonableness of the loss reserve estimate; 3. The need for the use of a loss reserve specialist in management's determination of the loss reserve estimate and how the absence of a loss reserve specialist in this process may affect the auditor's consideration of an entity's internal control structure; 4. The qualifications of a loss reserve specialist; 5. The requirement that an outside loss reserve specialist, that is, a specialist who is not an employee or officer of the entity, be used by the auditor in the evaluation of the reasonableness of management's loss reserve estimate (SAS No. 11, Using the Work of a Specialist, does not preclude the auditor from using the work of a specialist who is related to the client. However, because of the significance of loss reserves to the financial statements of insurance companies and the complexity and subjectivity involved in making loss reserve estimates, the proposed SOP requires that an outside loss reserve specialist be used by the auditor in the evaluation of the estimate.); 6. The variability inherent in loss reserve estimates, the need for the auditor to evaluate this variability, how variability is evaluated, and reporting implications when variability is considered to be significant.
Comment letters on on the exposure draft of the proposed statement on auditing standards, Reports on the Processing of Transactions by Service Organizations

American Institute of Certified Public Accountants. Auditing Standards Board
Proposed statement on auditing standards : compliance auditing applicable to governmental entities and other recipients of governmental financial assistance;Compliance auditing applicable to governmental entities and other recipients of governmental financial assistance; Exposure draft (American Institute of Certified Public Accountants), 1991, Apr. 9

American Institute of Certified Public Accountants. Auditing Standards Board

Since the issuance of Statement on Auditing Standards (SAS) No. 63, Compliance Auditing Applicable to Governmental Entities and Other Recipients of Governmental Financial Assistance, certain developments have occurred that affect the guidance provided by that Statement. These developments include the issuance by the Office of Management and Budget (OMB) of Circular A-133, Audits of Institutions of Higher Education and Other Nonprofit Institutions, and the revision of the OMB Compliance Supplement for Single Audits of State and Local Governments. In addition, the Auditing Standards Board became aware of certain issues related to the implementation of SAS No. 63 that required clarification. To address these matters, the Auditing Standards Board is considering the issuance of this proposed Statement to revise the guidance provided in SAS No. 63. This proposed Statement would amend SAS No. 63 to: 1. Provide guidance on the auditor's responsibility when, during an audit in accordance with generally accepted auditing standards, the auditor becomes aware that the entity is subject to an audit requirement that is not encompassed in the terms of the engagement. 2. Require the issuance of a report on the general requirements in an audit conducted in accordance with the Single Audit Act of 1984 and OMB Circular A-128, Audits of State and Local Governments, whether or not the entity has major programs. (SAS No. 63 requires this report only when the entity has major programs.) 3. Provide guidance on the auditor's compliance auditing responsibilities under OMB Circular A-133. 4. Provide guidance on the auditor's responsibilities when the auditor is engaged to conduct a program-specific audit. 5. Eliminate from the appendixes of SAS No. 63 certain excerpts of the Compliance Supplement for Single Audits of State and Local Governments that have been superseded. (To ensure that they are using up-to-date guidance, practitioners should refer to the appropriate federal sources to obtain the applicable federal requirements.) 6. Make certain conforming and editorial changes. This proposed Statement would supersede SAS No. 63. For purposes of this exposure draft, the language to be revised is shown with a line drawn through it and the new language is presented in boldface italics.
Proposed statement on auditing standards : letters to underwriters in conjunction with filings under the securities act of 1933 and letters issued to a requesting party in conjunction with other financing transactions;Letters to underwriters in conjunction with filings under the securities act of 1933 and letters issued to a requesting party in conjunction with other financing transactions; Exposure draft (American Institute of Certified Public Accountants), 1991, May 10

American Institute of Certified Public Accountants. Auditing Standards Board

The service of accountants providing letters to underwriters developed following enactment of the Securities Act of 1933 (the "Act"). Section 11 of the Act provides that underwriters, among others, could be liable if any part of a registration statement contains material omissions or misstatements. The Act also provides for an affirmative defense for underwriters if it can be demonstrated that, after a reasonable investigation, the underwriter had reasonable grounds to believe that there were no material omissions or misstatements. Consequently, underwriters request accountants to assist them in developing a record of reasonable investigation, called "due diligence," to help establish their affirmative defense under section 11 of the Act. The accountants' letters to underwriters, also known as "comfort letters," are one of a number of elements developed to establish that an underwriter has conducted this reasonable investigation. Other elements, not necessarily involving accountants, include (1) the due diligence meetings, which afford members of the underwriting group an opportunity to hear management's presentation about an offering and to question management, (2) various meetings held by the managing underwriter and its representatives with management to develop the disclosure document, (3) field inspections, and (4) inspection of the issuer's books and records. Thus, obtaining the accountants' letter is but one of an array of activities that underwriters undertake to respond to the liability imposed on them under section 11 of the Act. The guidance in paragraphs 2-48 provides for this traditional service. Included is the present practice of providing negative assurance about the presentation of unaudited financial data in accordance with generally accepted accounting principles. The accountant provides that negative assurance as long as the underwriter specifies the procedures the accountant is to perform for the underwriter's purposes. Furthermore, the guidance in Statement on Auditing Standards (SAS) No. 49, Letters for Underwriters, concerning an accountant's comments in a comfort letter on a financial forecast, pro forma financial information, and other assertions has been revised to be consistent with related guidance (that is, Statements on Standards for Attestation Engagements Attestation Standards, Financial Forecasts and Projections, and Reporting on Pro Forma Financial Information) issued subsequent to SAS No. 49. Since SAS No. 49 was issued, accountants have been requested to issue comfort letters to parties other than underwriters and in connection with securities offerings other than those registered under the Act. This proposed Statement provides guidance on those parties to whom accountants may provide comfort letters. It also provides guidance on the type of letters the accountant may provide for parties who do not have liability under section 11 of the Act. Under this service, the accountant may perform requested procedures and report on the findings obtained but would not provide negative assurance based on such procedures. This proposed Statement (Letters to Underwriters): 1. States that the accountant may provide comfort letters only to those parties with a due diligence defense under section 11 of the Act. 2. Prohibits the accountant from providing any additional letters to the underwriter or others in connection with the same transaction in which the accountant comments on items for which comment is otherwise precluded by this document. 3. Provides guidance on the effect on the comfort letter of an accountant's report on the audited financial statements included in the registration statement that contains an explanatory 4. Revises the guidance and related example letters to conform with the Statements on Standards for Attestation Engagements Attestation Standards, Financial Forecasts and Projections, and Reporting on Pro Forma Financial Information, which were issued subsequent to SAS No. 49. Two of the most significant changes are the following: a. This Statement removes the prohibition against commenting in a comfort letter on a financial forecast and provides guidance on how the accountant may comment in a comfort letter on a financial forecast. b. This Statement permits the accountant to give negative assurance on compliance as to form with certain specified disclosure requirements of Regulation S-K as long as specific criteria are met. This proposed Statement (Letters to a Requesting Party in Conjunction With Financing Transaction): 1. Limits statements by an accountant to procedures performed and findings obtained about (1) unaudited condensed interim financial information, (2) capsule financial information, (3) pro forma financial information, (4) financial forecasts, and (5) subsequent changes or decreases. 2. Prohibits the accountant from providing negative assurance based on agreed-upon procedures applied to the foregoing items. 3. In these situations, the accountant may perform a SAS No. 36 review on interim financial information and provide negative assurance thereon, if the client so requests. This proposed Statement (Letters in Connection With Matters Relating c76 to Solvency): 1.Incorporates the guidance from the February 1988 interpretation of Statement on Standards for Attestation Engagements Attestation Standards on responding to requests for reports on matters relating to solvency. 2. Revises the example letter to conform with the guidance in "Letters to a Requesting Party in Conjunction With Financing Transactions." The differences between SAS No. 49 and the proposed revision are discussed in greater detail in the appendix. This proposed Statement: 1. Will supersede SAS No. 49. 2. Amends SAS No. 35, Special Reportsâ€”Applying Agreed-Upon Procedures to Specified Elements, Accounts, or Items of a Financial Statement, to note that if the accountant is requested to perform an agreed-upon procedures engagement in connection with a financing transaction, as defined, he or she must follow the guidance in the SAS No. 49 revision. 3. Amends the Statements on Standards for Attestation Engagements Attestation Standards and Financial Forecasts and Projections to note that the practitioner must follow the guidance in the SAS No. 49 revision when requested to perform agreed-upon procedures on an assertion or on a forecast and report on such procedures in (1) a letter to an underwriter in connection with a filing under the Act, and (2) a letter to a party who does not have liability under section 11 of the Act in connection with a financing transaction. 4. Deletes paragraph 20 of AICPA Professional Standards, AU section 504, "Association With Financial Statements," because the guidance in paragraphs 49 through 61 of this proposed Statement would cover requests from those parties previously covered by AU section 504, paragraph 20.
Proposed statement on auditing standards : reports on the processing of transactions by service organizations;Reports on the processing of transactions by service organizations; Exposure draft (American Institute of Certified Public Accountants), 1991, Feb. 27

American Institute of Certified Public Accountants. Auditing Standards Board

The Auditing Standards Board is issuing this proposed statement on auditing standards (SAS) to provide guidance to practitioners engaged to audit the financial statements of an entity that uses a service organization in connection with the processing of transactions. This proposed Statement also provides guidance to auditors who issue reports for use by other auditors on procedures performed at service organizations. Examples of such service organizations include bank trust departments that invest and hold assets for employee benefit plans and electronic data processing service centers that process transactions and related data for user organizations. This proposed Statement provides guidance to assist the auditor in: 1. Considering the effect of a service organization on the internal control structure of a user organization. 2. Evaluating whether the available audit evidence is sufficient to obtain an understanding of the internal control structure, assess control risk, and perform substantive procedures. 3. Using a service auditor's report. 4. Fulfilling the responsibilities of a service auditor. This proposed Statement would supersede SAS No. 44, Special-Purpose Reports on Internal Accounting Control at Service Organizations. It differs from SAS No. 44 in that the proposed Statement: 1. Incorporates the audit risk concept presented in SAS No. 47, Audit Risk and Materiality in Conducting an Audit, as well as the terminology and concepts of SAS No. 55, Consideration of the 2. Requires a minimum six-month period of coverage for reports expressing an Opinion on a description of policies and procedures placed in operation at a service organization and tests of operating effectiveness. 3. No longer includes reports expressing an opinion on the system of internal accounting control of a segment of a service organization in the classification "service auditors' reports." Such reports commonly have been issued by auditors of bank trust departments and used by auditors of employee benefit plans to fulfill their responsibility regarding internal control; however, these reports generally do not provide the auditor with the means to obtain an understanding of the aspects of the internal control structure at a service organization that may be relevant to a user organization. The appendix of the proposed Statement illustrates the application of the proposed Statement to fiduciaries of employee benefit plans subject to the requirements of the Employee Retirement Income Security Act (ERISA).
Proposed statement on auditing standards : review of or performing procedures on interim financial information;Review of or performing procedures on interim financial information; Exposure draft (American Institute of Certified Public Accountants), 1991, July 31

American Institute of Certified Public Accountants. Auditing Standards Board

The Auditing Standards Board is issuing this proposed statement on auditing standards (SAS) to provide expanded guidance to accountants in performing reviews of, or procedures on, interim financial information. This proposed Statement: 1. Clarifies the knowledge of the entity's internal control structure that the accountant needs to obtain when the accountant is engaged to review interim financial information but has not audited the most recent annual financial statements. 2. Incorporates additional guidance on accounting estimates and performing analytical procedures in connection with a review of interim financial information. 3. Requires the accountant, in performing a review of interim financial information, to assure himself or herself that the audit committee, or those with equivalent authority and responsibility, is adequately informed of: a. Any irregularities or illegal acts of which the accountant becomes aware during the review, unless those irregularities or illegal acts are clearly inconsequential. b. Reportable conditions of which the accountant becomes aware during the review. c. Matters identified in SAS No. 61, Communications With Audit Committees, that have a significant effect on interim financial information. 4. Incorporates the communication requirements contained in SAS No. 66, Communication of Matters About Interim Financial Information Filed or to Be Filed With Specified Regulatory Agenciesâ€”An Amendment to SAS No. 36, Review of Interim Financial Information. 5. Revises the accountant's review report to include a statement of management's responsibility for the interim financial information. 6. Notes that an entity may publish various documents that contain information in addition to interim financial information and the independent accountant's review report on that information. In those circumstances, the accountant may wish to refer to the guidance in SAS No. 8, Other Information in Documents Containing Audited Financial Statements (AICPA, Professional Standards, vol. 1, AU sec. 550). 7. Adds a footnote to the applicability paragraph noting that when a public entity does not have its annual financial statements audited, an accountant may be requested to review its annual or interim financial statements. In those circumstances, an accountant may make a review and look to the guidance in Statements on Standards for Accounting and Review Services for the standards and procedures and form of report applicable to such an engagement. This proposed Statement would supersede SAS Nos. 36 and 66. It differs from SAS No. 36 in that the proposed Statement incorporates the communications required by SAS No. 66, which amended SAS No. 36 to add guidance on required communication of matters relating to interim financial information.
Proposed statement on auditing standards : the meaning of "Present fairly in conformity with generally accepted accounting principles" in the independent auditor's report;Meaning of "Present fairly in conformity with generally accepted accounting principles" in the independent auditor's report; Exposure draft (American Institute of Certified Public Accountants), 1991, May 31

American Institute of Certified Public Accountants. Auditing Standards Board

The Financial Accounting Foundation (FAF) has oversight responsibilities for the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). In late 1989, the FAF determined that "an entity subject to the jurisdiction of one board should not be required to change its reporting principles as a result of a standard issued by the other board." In making this determination, the FAF recognized that the existing hierarchy of generally accepted accounting principles (GAAP) contained in AICPA Professional Standards, volume 1, AU section 411, "The Meaning of 'Present Fairly in Conformity With Generally Accepted Accounting Principles' in the Independent Auditor's Report," would need to be revised. The Auditing Standards Board (ASB) formed a task force to reconsider the existing GAAP hierarchy. That task force included representatives of the Accounting Standards Executive Committee (AcSEC, the AlCPA's senior technical committee on financial accounting and reporting standards), the FASB, the GASB, and the ASB. In addition to revising the hierarchy so that the FASB and the GASB would each have primary responsibility for setting standards for those reporting entities subject to the jurisdiction of that board, the task force evaluated whether certain sources of GAAP were classified in the appropriate category and whether each category should have a separate level of authority. The task force developed the guidance described in this exposure draft, which would revise the existing hierarchy described in AU section 411, the sources for which are Statement on Auditing Standards (SAS) Nos. 5, 43, and 52. This proposed Statement would: 1. Establish two separate but parallel hierarchies: one for state and local governmental entities and one for nongovernmental entities (see the summary chart immediately following this summary). 2. Distinguish between AcSEC documents that have been cleared by either the FASB or the GASB and those documents that have not been cleared. AcSEC's operating policies permit the committee to issue accounting guidance over the objection of the FASB or GASB. The proposed Statement notes that the word cleared means that the rule 203 bodyâ€” the FASB or the GASBâ€”has not objected to the issuance of a proposed pronouncement. 3. Establish a separate category for cleared AICPA AcSEC Practice Bulletins and Emerging Issues Task Force consensus positions (category (c) of the proposed hierarchy). 4. Make each successive category in the hierarchy a different level of authority. (Categories (b) and (c) of the existing hierarchy, both sources of established accounting principles, are considered to be equal in authority.) As shown in the summary chart, this change would elevate the authority of certain accounting pronouncements, such as AICPA AcSEC Statements of Position, Audit and Accounting Guides, and Practice Bulletins that have been cleared, as well as Emerging Issues Task Force consensuses, that are effective after the effective date of this proposed Statement above the authority of widely recognized and prevalent industry accounting practices. The intent of this proposed Statement is for the revised levels of authority of the respective categories to apply prospectively. Thus, although the issuance of this proposed Statement would not in itself trigger accounting changes, accounting pronouncements in categories (b) and (c) of paragraphs .08 and .10 that are effective after the effective date of this proposed Statement might require accounting changes since they would be of greater authority than widely recognized and prevalent industry accounting practices. Thus, for example, a non-state-and-local-govemmental entity that follows a widely recognized and prevalent industry practice would need to change to an accounting treatment specified by a cleared AICPA Statement of Position, a cleared AICPA Industry Audit and Accounting Guide, a cleared AcSEC Practice Bulletin, or a consensus position of the FASB Emerging Issues Task Force whose effective dates are after the effective date of the proposed Statement. This proposed Statement would replace paragraphs .05 through .11 of AU section 411 (AICPA, Professional Standards, vol. 1). Those paragraphs set forth the existing hierarchy, which is presented in the summary chart immediately following this summary.
Proposed statement of position : accounting and reporting by health and welfare benefit plans : proposed amendment to AICPA audit and accounting guide, Audit of employee benefit plans;Proposed statement of position : accounting and reporting by health and welfare benefit plans : proposed amendment to AICPA audit and accounting guide, Audit of employee benefit plans; Exposure draft (American Institute of Certified Public Accountants), 1991, Sept. 5

American Institute of Certified Public Accountants. Employee Benefit Plans Committee

This proposed statement of position (SOP) would amend chapter 4 of the AICPA Audit and Accounting Guide Audits of Employee Benefit Plans, as of March 31, 1991 (hereafter referred to as the guide). This proposed SOP updates the guide to conform to the following accounting standards: 1. Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 105, Disclosure of Information About Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk 2. FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions, as applicable This proposed SOP also makes the following changes or clarifications in accounting and reporting requirements set forth in the guide: 1. The objective of financial reporting by a defined-benefit health and welfare plan has been clarified (see paragraph 19). 2. Defined-benefit health and welfare plans, both single and multiemployer, should account for and separately report benefit obligations, including postretirement benefit obligations (see paragraphs 36 through 49). 3. The requirement to recognize claims incurred but not reported has been clarified (see paragraph 39). 4. Benefit obligations should not include death benefits actuarially expected to be paid during the active service period of participants (see paragraph 36). 5. Defined-contribution health and welfare plans are distinguished from defined-benefit health and welfare plans (see paragraphs 3 and 23). 6. The requirements for determining the obligation for accumulated eligibility credits have been clarified (see paragraph 43). The recommendations in this proposed SOP are effective for audits of financial statements for plan years beginning after December 15, 1992; the application of this proposed SOP to plans with no more than 500 participants in the aggregate shall be effective for plan years beginning after December 15, 1994. Earlier application is encouraged. Accounting changes adopted to conform to the provisions of this proposed SOP shall be made retroactively. Financial statements of prior plan years are required to be restated to comply with the provisions of this proposed SOP only if presented together with financial statements for plan years beginning after December 15,1992. If accounting changes were necessary to conform to the provisions of this proposed SOP, that fact shall be disclosed when financial statements for the year in which this proposed SOP is first applied are presented either alone or with financial statements of prior years.
Proposed statement of position : audits of state and local governmental entities receiving federal financial assistance ;Audits of state and local governmental entities receiving federal financial assistance; Exposure draft (American Institute of Certified Public Accountants), 1991, July 31

American Institute of Certified Public Accountants. Government Accounting and Auditing Committee

This proposed statement of position (SOP) supersedes chapter 3, paragraphs 3.1-3.4, and chapters 21-23 of the AICPA Audit and Accounting Guide Audits of State and Local Governmental Units and example 23 of SOP 89-6, Auditors' Reports in Audits of State and Local Governmental Units, and provides additional guidance on compliance auditing and single audits. The SOP updates the guide to reflect the following standards affecting the audits of federal financial assistance programs under the Single Audit Act: 1. Statement on Auditing Standards (SAS) No. 55, Consideration of the Internal Control Structure in a Financial Statement Audit; 2. SAS No. 60, Communication of Internal Control Structure Related Matters Noted in an Audit; 3. SAS No. 63, Compliance Auditing Applicable to Governmental Entities and Other Recipients of Governmental Financial Assistance; 4. The 1988 revision of Government Auditing Standards, issued by the Comptroller General of the United States. The recommendations in this SOP are effective for audits done in accordance with the Single Audit Act for fiscal years beginning on or after January 1, 1991. Earlier application is permissible.
Comment letters on Proposed Industry Accounting Guide for Insurance Agents and Brokers dated August 15, 1991

American Institute of Certified Public Accountants. Insurance Agents and Brokers Task Force
Proposed industry accounting guide : insurance agents and brokers ;Insurance agents and brokers; Exposure draft (American Institute of Certified Public Accountants), 1991, Aug. 15

American Institute of Certified Public Accountants. Insurance Agents and Brokers Task Force

This proposed industry accounting guide (guide) provides guidance on applying generally accepted accounting principles in financial statements of insurance agents and brokers (brokers). Briefly, the proposed guide recommends the following: 1. For services involving the placement of insurance coverage, brokers should recognize revenue from regular commissions, negotiated commissions, and shared or split commissions on the revenue recognition date, which is the date when all of the following criteria are met: a. Protection is afforded under the insurance policy (that is, coverage is effective). b. The premium due under the policy is known or can be reasonably estimated. c. Substantially all required services related to placing the insurance have been rendered. That date generally is the date on which the premium is billable to the client. d. No significant obligation exists to perform services after the insurance has become effective. The proposed guide also provides guidance for the recognition of revenues related to contingent commissions, commission adjustments, installment billing arrangements, multiyear policies, direct billing arrangements, fees in lieu of commissions, and fee-for-service arrangements. 2. A broker's costs associated with the placement of insurance coverage and costs of subsequent servicing of such coverage should be expensed as incurred. If a broker specifically obligates itself by agreement with the client to provide services after placing the coverage, and the subsequent costs can be associated directly with the coverage placed by the broker, a portion of the broker's related revenue should be deferred and recognized as the services are performed. 3. Fiduciary funds and premiums receivable should be included as assets, and premiums payable to underwriters should be included as liabilities in brokers' balance sheets. The amounts of fiduciary funds, premiums due from clients, advances to underwriters and clients, and premiums payable to underwriters should be disclosed in brokers' financial statements. The proposed guide provides additional guidance on revenue and expense recognition practices by reinsurance intermediaries, managing general agents, and life insurance agents and brokers. The proposed guide also discusses expense recognition by brokers affiliated with insurance underwriters and intangible assets acquired in a business combination.
Proposed statement of position : determination, disclosure, and financial statement presentation of income, capital gain, and return of capital distributions by investment companies : proposed amendment to AICPA audit and accounting guide, Audits of investment companies;Determination, disclosure, and financial statement presentation of income, capital gain, and return of capital distributions by investment companies : proposed amendment to AICPA audit and accounting guide, Audits of investment companies; Exposure draft (American Institute of Certified Public Accountants), 1992, Feb. 10

American Institute of Certified Public Accountants. Investment Companies Committee

This proposed statement of position (SOP) provides guidance on financial reporting, by investment companies, for distributions to shareholders, including returns of capital. Although the proposed SOP recognizes that financial statements of investment companies are prepared on the basis of generally accepted accounting principles (GAAP), it recommends that, to avoid shareholder confusion, the term tax return of capital be used to report portions of shareholders' distributions that are in excess of tax-basis current and accumulated earnings and profits.
Proposed statement on standards for consulting services : definitions and standards;Definitions and standards; Exposure draft (American Institute of Certified Public Accountants), 1991, Apr. 1

American Institute of Certified Public Accountants. Management Advisory Services Executive Committee

Consulting Services provided by CPAs in public practice have not been clearly defined in the existing Statements on Standards for Management Advisory Services. This proposed Statement on Standards for Consulting Services describes six categories of CPA consulting services, distinguishes them from attest services, reaffirms the basic standards in rule 201 of the AICPA Code of Conduct as applying to such services, and establishes three general consulting services standards that are client-oriented. The proposed Statement on Standards for Consulting Services in this exposure draft is intended to supersede the three current Statements on Standards for Management Advisory Services. The proposed Statement specifies that it does not apply to audits, reviews, other attest services, compilations, personal financial planning, tax preparation, and tax planning services. It affirms the requirement for independence when performing consulting services for attest clients
Proposed statement of position : audits of not-for-profit organizations receiving federal awards;Audits of not-for-profit organizations receiving federal awards; Exposure draft (American Institute of Certified Public Accountants), 1991, Aug. 30

American Institute of Certified Public Accountants. Not-for-Profit Organizations Committee

This proposed statement of position (SOP) provides guidance on the auditor's responsibilities when conducting an audit in accordance with Office of Management and Budget (OMB) Circular A-133, Audits of Institutions of Higher Education and Other Non-profit Institutions. This proposed SOP would amend the following AICPA audit and accounting guides: 1. Audits of Voluntary Health and Welfare Organizations; 2. Audits of Colleges and Universities; 3. Audits of Certain Nonprofit Organizations. In addition to providing an overview of the auditor's responsibilities in an audit of federal awards, this proposed SOP: 1. Describes the applicability of OMB Circular A-133. 2. Summarizes the differences between Circular A-133 and OMB Circular A-128, Audits of State and Local Governments. 3. Describes the auditor's responsibility for considering the internal control structure and performing tests of compliance with certain laws and regulations. 4. Describes the auditor's responsibility for reporting and provides examples of the reports required by Circular A-133.
Omnibus proposal of Professional Ethics Division interpretations and rulings; Exposure draft (American Institute of Certified Public Accountants), 1991, Nov. 8

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

1. PROPOSED REVISION OF INTERPRETATION 101-9 UNDER RULE 101: The Meaning of Certain Independence Terminology and the Effect of Family Relationships on Independence 2. PROPOSED ETHICS RULING UNDER RULE 101: Campaign Treasurer 3. PROPOSED ETHICS RULING UNDER RULE 101: Member on Board of Component Unit and Auditor of Oversight Entity 4. PROPOSED ETHICS RULING UNDER RULE 101: Member on Board of Material Component Unit and Auditor of Another Material Component Unit 5. PROPOSED ETHICS RULING UNDER RULE 301: Disclosure of Confidential Client Information 6. PROPOSED ETHICS RULING UNDER RULES 302 AND 503: Receipt of Contingent Fees or Commissions by Member's Spouse 7. PROPOSED ETHICS RULING UNDER RULES 302 AND 503: Definition of the Receipt of a Contingent Fee or a Commission 8. PROPOSED ETHICS RULING UNDER RULE 503: Sale of Products to Clients 9. PROPOSED ETHICS RULING UNDER RULE 503: Billing for Subcontractor's Services 10. PROPOSED ETHICS RULING UNDER RULE 503: Referral of Products of Others 11. PROPOSED REVISION OF ETHICS RULING NO. 175: Bank Director 12. PROPOSED DELETION OF ETHICS RULING NO. 63 UNDER RULE 101: Review of Prospective Financial Information â€” Member's Independence of Promoters
Proposed revision of ethics interpretations 101-1.A.4 and 101-5 : regarding loans to and from clients for whom services are performed requiring independence;Regarding loans to and from clients for whom services are performed requiring independence; Exposure draft (American Institute of Certified Public Accountants), 1991, July 9

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

The Professional Ethics Executive Committee recently considered existing pronouncements on independence in the AlCPA's Code of Conduct regarding loans to members from clients. The ethics committee concluded that in the circumstances of today's practice environment these pronouncements permitted financial relationships between the member and the client that could impair the appearance of independence. Accordingly, the ethics committee proposes a revision of the existing pronouncements that, in effect, will prohibit a member or a member's firm from having a loan to or from a client. However, the following loans will be grandfathered under the proposed revision: fully secured mortgage loans (including a home equity loan) on a primary residence obtained under normal lending procedures, terms, and requirements prior to (a) the effective date of this proposed revision, or (b) the date on which the borrower is subject to the independence rules with respect to the holder of the loan. All other loans must be disposed of within twelve months of the later of (a) the effective date of this proposed revision, (b) the date on which the borrower is subject to the independence rules with respect to the holder of the loan, or (c) the date on which a member becomes aware that a client acquired all or part of the loan. If this proposed revision is adopted, the ethics committee intends to issue ethics rulings on two related issues. The rulings will permit (a) the use of a credit card from a financial institution client (including a retailer that extends credit to the general public) as long as the balance is paid in full upon receipt of a statement, and (b) a borrowing of cash value under terms of an insurance policy. Such activities are not considered to be loans as defined in Interpretation 101-5, "The Meaning of Certain Terminology Used in Interpretation 101-1.A.4" (AICPA, Professional Standards, vol. 2, ET sec. 101.07).
Proposed statement of position : accounting for foreign property and liability reinsurance;Accounting for foreign property and liability reinsurance; Exposure draft (American Institute of Certified Public Accountants), 1991, Aug. 22

American Institute of Certified Public Accountants. Reinsurance Auditing and Accounting Task Force

This proposed statement of position (SOP) provides guidance on how U.S. companies should account for property and liability reinsurance assumed from foreign insurance companies (foreign reinsurance). The periodic method should be used to account for foreign reinsurance premiums except when, because of local revenue recognition policies, the foreign ceding company cannot provide the information required by the assuming company to estimate both the ultimate premiums and the appropriate periods of recognition in accordance with U.S. generally accepted accounting principles. In such circumstances, the open year method should be used. The periodic and open year methods are not interchangeable in the same circumstances. The zero balance method should not be used. The provisions of this proposed Statement would be effective for contracts entered into in fiscal years beginning on or after December 15, 199X.
Proposed statement of position : guidance for assessing risk transfer in property and liability reinsurance contracts;Guidance for assessing risk transfer in property and liability reinsurance contracts; Exposure draft (American Institute of Certified Public Accountants), 1991, Sept. 10

American Institute of Certified Public Accountants. Reinsurance Auditing and Accounting Task Force

Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 60, Accounting and Reporting by Insurance Enterprises, provides guidance to insurance enterprises on how to determine whether reinsurance contracts provide for indemnification against loss or liability and on how to account for such contracts. In applying this guidance, each insurance enterprise has to interpret the expression "indemnification . . . against loss or liability," which could be interpreted differently for similar contracts. This proposed statement of position (SOP) provides guidance for assessing risk transfer in property and liability reinsurance contracts. It discusses the various kinds of risks involved, such as insurance risk (which has two componentsâ€”uncertainties about the ultimate amount of any claim payments [underwriting risk] and uncertainties about the timing of those payments [timing risk]), investment-yield risk, credit risk, and expense risk. The proposed SOP concludes that a contract should be accounted for as providing reinsurance if the ceding company's insurance risk (both underwriting and timing) has been transferred to the assuming company. A ceding company's insurance risk has been transferred when all the following conditions have been satisfied: 1. The terms of the contract, for a fixed or reasonably determinable cost, provide for the reinsurer to assume a specified level or percentage of the ceding company's claims incurred or exposure to claim occurrences. 2. The terms of the contract, including any adjustable features, do not allow the ultimate underwriting margin or deficit under the contract to be determinable in advance. Therefore, after application of any adjustable features contained in the contract, there should still be a reasonable degree of potential variability in the ultimate underwriting results under the contract in relation to the total consideration paid. (For purposes of applying this condition to contracts that provide for adjustments based on actual or imputed investment earnings, such adjustments should be considered, as appropriate, in determining whether the underwriting margin or deficit under the contract is determinable in advance.) 3. The terms of the contract provide for the timely reimbursement of covered losses by the reinsurer. Provisions that delay reimbursement to the ceding company, such as predetermined payment schedules, do not provide for the timely reimbursement of covered losses. Reinsurance contracts that do not transfer both components of insurance risk must be accounted for as deposits under the provisions of paragraph 40 of FASB Statement No. 60. The proposed SOP provides guidance on accounting for reinsurance contracts and the disclosures that should be made.
Proposed statement of position : software revenue recognition;Software revenue recognition; Exposure draft (American Institute of Certified Public Accountants), 1991, Jan. 16

American Institute of Certified Public Accountants. Task Force on Accounting for the Development and Sale of Computer Software

This proposed statement of position (SOP) provides guidance on applying generally accepted accounting principles in recognizing revenue on software transactions. The basic principle is that revenue is recognized on delivery of software; some exceptions are discussed. The proposed SOP also discusses accounting for related services, accounting for transactions involving software that are primarily service transactions, the application of contract accounting to software transactions, and accounting for postcontract customer support. Briefly, the proposed SOP recommends the following: 1. Software licenses with no other vendor obligationsâ€”If collectibility is probable and the vendor has no obligations remaining under the sales or licensing agreement after delivering the software, revenue from the software licensing fees should be recognized on delivery of the software. 2. Software licenses with other insignificant vendor obiigationsâ€”If the vendor has insignificant obligations remaining under the sales or licensing agreement after delivering the software, revenue from the software licensing fees should be recognized on delivery of the software if collectibility is probable, and the remaining costs should be accrued or a pro rata portion of revenue should be deferred until completion of performance. 3. Software licenses with other significant vendor obligationsâ€”If, in addition to the obligation to deliver the software, the sales or licensing agreement includes other significant vendor obligations, the agreement should first be examined to determine whether it should be accounted for using contract accounting or as a service transaction. For agreements with significant vendor obligations beyond delivery of the software that are not accounted for using contract accounting or as service transactions, revenue should be deferred until all of the following conditions are met: a. Delivery has occurred. b. Other vendor obligations remaining are no longer significant. c. Collectibility is probable. 4. Significant uncertainties about customer acceptanceâ€”If, after delivery, there is significant uncertainty about customer acceptance of the software, license revenue should not be recognized until the uncertainty is removed. 5. Absence of a reasonable basis for estimating the degree of collectibility of receivablesâ€”Receivables associated with software transactions for which there is no reasonable basis of estimating the degree of collectibility should be accounted for using either the installment method or the cost recovery method of accounting. 6. Contract accountingâ€”If a contract to deliver software or a software system, either alone or together with other products, requires significant production, modification, or customization of software, a system, or the other products, that contract should be accounted for in conformity with ARB 45, Long-Term Construction-Type Contracts, using the relevant guidance in SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. However, transactions that are normally accounted for as product sales should not be accounted for as long-term contracts merely to avoid the delivery requirements for revenue recognition normally 7. Service transactionsâ€”If, in addition to the obligation to deliver the software, the sales or licensing agreement includes obligations to perform services that (a) are not interdependent with the providing of a software product and (b) are separately stated and priced such that the total price of the agreement would be expected to vary as a result of the inclusion or exclusion of the services, the sales or licensing component and the services should be accounted for separately. If collectibility is probable, revenue from software services should generally be recognized as the services are performed or, if no pattern of performance is discernible, ratably over the period during which the services are performed. If significant uncertainty about customer acceptance of the services exists, revenue should not be recognized until the uncertainty is removed. 8. Postcontract customer support. If collectibility is probable, revenue from postcontract customer support (PCS), including revenue that is contractually bundled with initial licensing fees, should be recognized ratably over the term of the contract.
Software revenue recognition; Statement of position 91-1;

American Institute of Certified Public Accountants. Task Force on Accounting for the Development and Sale of Computer Software
Comment letters on the exposure draft, "Internal Control — Integrated Approach," Volume 1

Committee of Sponsoring Organizations of the Treadway Commission
Comment letters on the exposure draft, "Internal Control — Integrated Approach," Volume 2

Committee of Sponsoring Organizations of the Treadway Commission
Comment letters to COSO exposure draft, "Internal Control - Integrated Framework," March 12 - June 14, 1991 Vol. 1;

Committee of Sponsoring Organizations of the Treadway Commission
Comment letters to COSO exposure draft, "Internal Control - Integrated Framework," March 12 - June 14, 1991 Vol. 2;

Committee of Sponsoring Organizations of the Treadway Commission
Definition of the term substantially the same for holders of debt instruments, as used in certain audit guides and a statement of position : February 13, 1990 amendment to AICPA industry audit guide, Audits of banks and AICPA audit and accounting guides Audits of brokers and dealers in securities and Savings and loan associations; Statement of position 90-03;

American Institute of Certified Public Accountants. Accounting Standards Division
Financial accounting and reporting by continuing care retirement communities : November 28, 1990 : amendment to AICPA audit and accounting guide Audits of providers of health care services; Statement of position 90-08;

American Institute of Certified Public Accountants. Accounting Standards Division
Proposed statement of position : Accounting for foreclosed assets;Accounting for foreclosed assets; Exposure draft (American Institute of Certified Public Accountants), 1990, Dec. 11

American Institute of Certified Public Accountants. Accounting Standards Division. Accounting Standards Executive Committee

This proposed statement of position (SOP) provides guidance for financial reporting of foreclosed assets after foreclosure. Briefly, the proposed SOP recommends the following: 1. There is a presumption that foreclosed assets will be sold. 2. Foreclosed assets that will be sold should be carried at the lower of cost or fair value. 3. Periodic net cash payments related to foreclosed assets held for sale should be charged to income; periodic net cash receipts related to foreclosed assets held for sale should be credited to the assets' carrying amount; no depreciation or amortization expense should be recognized. 4. The carrying amount of foreclosed assets held for the production of income instead of sale should not exceed net realizable value; revenue and expense cash flows are recognized in income; depreciation or amortization expense is recognized.
Disclosure of certain information by financial institutions about debt securities held as assets : November 30, 1990 : amendment to AICPA audit and accounting guides Audits of banks, Audits of credit unions, Audits of finance companies (including independent and captive financing activities of other companies), Audits of property and liability insurance companies, Savings and loan associations, and Audits of stock life insurance companies; Statement of position 90-11;

American Institute of Certified Public Accountants. Accounting Standards Executive Committee
Proposed statement of position : reporting by financial institutions of debt securities held as assets;Reporting by financial institutions of debt securities held as assets; Exposure draft (American Institute of Certified Public Accountants), 1990, May 25

American Institute of Certified Public Accountants. Accounting Standards Executive Committee

This proposed statement of position (SOP) provides guidance on applying generally accepted accounting principles in reporting by financial institutions of debt securities held as assets. Briefly, the proposed SOP recommends the following: 1. A financial institution should designate debt securities held as assets as investments, assets held for sale, or trading assets at acquisition and at each subsequent balance sheet date. 2. A financial institution should designate debt securities as investments and report them at amortized cost only if it currently has the ability to hold the securities to maturity and it intends to hold them for the foreseeable future, as defined in this exposure draft. 3. Debt securities that do not meet the criteria for classification as investments and that are not trading assets should be reported in a separate asset category as assets held for sale at the lower of their amortized cost or market value. 4. A decline in value of debt securities that is other than temporary should be reported as a realized loss and should result in reducing the reported amount of the debt securities to a new historical cost basis. The provisions of this proposed Statement would be effective for financial statements for periods ending on or after December 15, 1990.
Proposed statement on auditing standards : communication of matters about interim financial information filed or to be filed with specified regulatory agencies;Communication of matters about interim financial information filed or to be filed with specified regulatory agencies; Exposure draft (American Institute of Certified Public Accountants), 1990, June 15

American Institute of Certified Public Accountants. Auditing Standards Board

Pursuant to the Securities Exchange Act of 1934, certain entities are required to file periodic interim financial information with the Securities and Exchange Commission or another specified regulatory agency. This interim financial information, which is available to the public, is not required to be timely reviewed by an independent auditor. These entities are also required to notify the appropriate regulatory agency about a change of auditor, which provides public information about the identity of the auditors of these entities' annual financial statements. In recognition of these unique filing requirements, this proposed Statement establishes requirements for communications to management and, in certain situations, to audit committees concerning certain matters involving interim financial information filed or to be filed with specified regulatory agencies. This proposed Statement: 1. Applies only to auditors of entities that file interim financial information with the Securities and Exchange Commission or another specified regulatory agency pursuant to the Securities Exchange Act of 1934. 2. Requires the auditor to communicate with management as soon as practicable when he or she has given substantive attention to the accounting for, or financial reporting of, specific events or transactions of the entity and, as a result of that attention, becomes aware of information that causes him or her to believe that interim financial information is probably materially misstated. 3. Requires the auditor to communicate the above matter to the audit committee if management does not respond appropriately within a reasonable period of time. 4. Requires the auditor to consider whether to serve, or continue to serve, as the entity's auditor if the audit committee does not respond appropriately within a reasonable period of time. This proposed Statement does not amend or supersede an existing statement on auditing standards.
Proposed statement on auditing standards : omnibus statement on auditing standards, 1990;Omnibus statement on auditing standards, 1990; Exposure draft (American Institute of Certified Public Accountants), 1990, July 17

American Institute of Certified Public Accountants. Auditing Standards Board

This proposed statement on auditing standards contains three amendments to existing statements. These amendments: 1. Make explicit the required language that the auditor should include in an explanatory paragraph of the report when he or she concludes that there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time not to exceed one year from the balance-sheet date. 2. Clarify language in the auditor's report to describe the level of service the successor auditor performs on adjustments made to restate prior-year financial statements audited by a predecessor auditor whose report is not presented. 3. Clarify language in the auditor's report to describe the level of service the auditor performs on the combination of financial statements following a pooling-of-interests transaction when the auditor is asked to report on restated financial statements of one or more prior years when other auditors have audited one or more of the entities included in such financial statements. This proposed Statement consists solely of amendments to existing statements. For each statement affected, the paragraph being amended is shown with a line drawn through the amended language and the new wording is presented in boldface italics. The proposed amendments are outlined as follows: I. Paragraph 12 of SAS No. 59, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern (AICPA, Professional Standards, vol. 1, AU sec. 341.12) This proposed amendment: A. Makes explicit the required language for the explanatory paragraph (following the opinion paragraph) in the report that describes the auditor's conclusion that there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time not to exceed one year from the balance-sheet date. B. Requires explicitly in the explanatory paragraph the use of the phrase "substantial doubt about its [the entity's] ability to continue as a going concern" or similar wording that includes the terms substantial doubt and going concern. II. Paragraph 83 of SAS No. 58, Reports on Audited Financial Statements (AICPA, Professional Standards, vol. 1, AU sec. 508.83) This proposed amendment: A. Modifies the explanatory language for the successor auditor when the prior-year financial statements audited by a predecessor auditor are restated and the predecessor auditor's report is not presented. B. Replaces the phrase "We also reviewed the adjustments" with the phrase "We also audited the adjustments." The Board, along with the staff of the Securities and Exchange Commission (SEC), believes that the use of the term reviewed confuses users of the successor auditor's report by connoting a different level of service than the service performed. III. Paragraph 16 of SAS No. 1, Codification of Auditing Standards and Procedures, section 543, "Part of Audit Performed by Other Independent Auditors" (AICPA, Professional Standards, vol. 1, AU sec. 543.16) This proposed amendment: A. Modifies the reporting guidance for the auditor who, following a pooling-of-interests transaction, is asked to report on the combination of restated financial statements for one or more prior years when other auditors have audited one or more of the entities included in such statements. B. Conforms the explanatory report language for the same reason the Board is proposing amendment to paragraph 83 of SAS No. 58 (discussed previously). This proposed amendment would replace the phrase "We also have applied procedures to the combination" with the phrase "We also audited the combination." How lt Would Change Existing Standards The proposed amendment solely amends the specific paragraphs of the three existing statements discussed previously.