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Exposure Drafts, Comment Letters, and Statements of Position

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Proposed statement on auditing standards : the confirmation process;Confirmation process; Exposure draft (American Institute of Certified Public Accountants), 1990, Nov. 13

American Institute of Certified Public Accountants. Auditing Standards Board

The Auditing Standards Board is considering the issuance of this proposed Statement to provide practitioners with additional guidance about the use of confirmations. The Board determined that additional guidance was necessary after reviewing problems identified in the peer review process, in the SEC Enforcement Releases, and in research. The Board's review indicated that practitioners do not always appropriately consider: 1. The financial statement assertions addressed by confirmations; 2. The design of the confirmation request; 3. The third party to whom the request was addressed; 4. The evaluation of confirmation results. This proposed Statement provides guidance about all types of confirmations, including accounts receivable confirmations, and establishes certain performance responsibilities for auditors using confirmations in engagements performed in accordance with generally accepted auditing standards. This proposed Statement: 1. Discusses the relationship of confirmation procedures to the auditor's assessment of audit risk and discusses financial statement assertions addressed by confirmations; 2. Describes certain factors that affect the reliability of confirmations and emphasizes that proper design of the confirmation request is key to achieving specific audit objectives; 3. Provides guidance on performing alternative procedures when responses to confirmation requests are not received; 4. Provides guidance on evaluating the results of confirmation procedures. This proposed Statement retains the notion set forth in existing standards that the confirmation of accounts receivable is a generally accepted auditing procedure. It also states that there is a presumption that the auditor will request the confirmation of accounts receivable during an audit, unless certain conditions exist. If an auditor does not request confirmations in the examination of accounts receivable, this proposed Statement requires an auditor to document how he or she overcame this presumption. This proposed Statement would supersede paragraphs 3-8 of Statement on Auditing Standards (SAS) No. 1, Codification of Auditing Standards and Procedures, section 331 (AICPA, Professional Standards, vol. 1, AU sec. 331.03-.08), and the portion of paragraph 1 of section 331 that addresses the confirmation of receivables. The proposed Statement would not supersede the portion of paragraph 1 of section 331 that addresses the observation of inventories.
Proposed statement on auditing standards : the Proposed statement on auditing standards : the auditor's consideration of the internal audit function in an audit of financial statements ;Auditor's consideration of the internal audit function in an audit of financial statements; Exposure draft (American Institute of Certified Public Accountants), 1990, Mar. 12

American Institute of Certified Public Accountants. Auditing Standards Board

The Auditing Standards Board is considering the issuance of this proposed Statement to provide practitioners with expanded guidance when considering work performed by internal auditors. Internal auditors are responsible for providing analyses, evaluations, assurances, recommendations, and other information to the entity's management and board of directors or others with equivalent authority and responsibility. Many of these activities are relevant to the audit because they provide evidence about the design and effectiveness of internal control structure policies and procedures or direct evidence about misstatements of financial data contained in financial statements. This proposed Statement contains factors to assist auditors in considering the extent of the effect of internal auditors' work on the audit and incorporates concepts of SAS No. 47, Audit Risk and Materiality in Conducting an Audit, and the new terminology and concepts of SAS Nos. 53 through 61, issued in April 1988, particularly SAS No. 55, Consideration of the Internal Control Structure in a Financial Statement Audit.This proposed Statement provides guidance to assist the auditor in: 1. Obtaining an understanding of the internal audit function. 2. Assessing the competence and objectivity of internal auditors. 3. Considering the effect of the internal auditors' work on the auditor's understanding of the internal control structure, assessment of control risk, and design of substantive audit procedures. 4. Evaluating the extent of the effect of the internal auditors' work. 5. Coordinating the audit work with internal auditors. 6. Evaluating and testing the quality and effectiveness of internal auditors' work. 7. Requesting internal auditors to provide direct assistance to the auditor. This proposed Statement would supersede SAS No. 9, The Effect of an Internal Audit Function on the Scope of the Independent Audit.
Auditors' reports under U.S. Department of Housing and Urban Development's Audit guide for mortgagors having HUD insured or Secretary held multifamily mortgages; Statement of position 90-04;

American Institute of Certified Public Accountants. Auditing Standards Division
Directors' examinations of banks : September 17, 1990 amendment to AICPA industry audit guide, Audits of Banks; Statement of position 90-06;

American Institute of Certified Public Accountants. Banking Committee
Inquiries of representatives of financial institution regulatory agencies : August 31, 1990 amendment to AICPA industry audit guide, Audits of banks, AICPA audit and accounting guide, Audits of credit unions, and AICPA audit and accounting guide, Savings and loan associations; Statement of position 90-05;

American Institute of Certified Public Accountants. Banking Committee
Proposed statement on standards for formal continuing professional education (CPE) programs;Statement on standards for formal continuing professional education (CPE) programs; Exposure draft (American Institute of Certified Public Accountants), 1990, June 1

American Institute of Certified Public Accountants. Continuing Professional Education Division. CPE Standards Subcommittee

This proposed statement on standards for formal Continuing Professional Education (CPE) programs was developed by the AlCPA's CPE Standards Subcommittee. It was approved for issuance by the AICPA Board of Directors and CPE Executive Committee. The standards incorporate parts of and supersede the AlCPA's 1971 Resolution of Council regarding CPE and the 1976 Statement on Standards for Formal Group and Formal Self-Study Programs. The standards were widely exposed and the feedback carefully considered in order to promote uniformity and gain the widest possible acceptance from individual state boards of accountancy, the National Association of State Boards of Accountancy (NASBA), state societies of CPAs, other professional associations, appropriate government agencies, and other interested parties. The AICPA urges all groups who set CPE standards for accounting professionals to adopt these standards. The AICPA plans to interpret and revise these standards as necessary.
Proposed audit and accounting guide : audits of employee benefit plans;Audits of employee benefit plans; Exposure draft (American Institute of Certified Public Accountants), 1990, Aug. 31

American Institute of Certified Public Accountants. Employee Benefit Plans Committee

A significant period of time has elapsed since the publication in 1983 of the AICPA Audit and Accounting Guide Audits of Employee Benefit Plans. Many changes have taken place in the generally accepted auditing standards and the application of these standards to the requirements of employee benefit plans, the types of plans offered, and the regulatory and financial reporting requirements. These changes have created the need for revised guidance. The objectives of this proposed guide are to provide (1) a general background of the plan environment and (2) practical guidance to the practitioner on the accounting, auditing, and financial reporting for employee benefit plans. In addition, the guide identifies relevant Employee Retirement Income Security Act of 1974 (ERISA) requirements, regulations, and professional accounting and auditing pronouncements and summarizes key provisions of those regulations and pronouncements. This proposed guide would supersede the 1983 Audit and Accounting Guide Audits of Employee Benefit Plans and the 1988 second edition of the guide, which contains AICPA Statement of Position 88-2, Illustrative Auditor's Reports on Financial Statements of Employee Benefit Plans Comporting With Statement on Auditing Standards No. 58. Reports on Audited Financial Statements.
Accountants' services on prospective financial statements for internal use only and partial presentations : January 5, 1990; Statement of position 90-01;

American Institute of Certified Public Accountants. Financial Forecasts and Projections Task Force
Proposed statement of position : questions and answers on reasonably objective basis and other issues affecting prospective financial statements (Proposed amendment to AICPA guide to prospective financial statements) ;Questions and answers on reasonably objective basis and other issues affecting prospective financial statements (Proposed amendment to AICPA guide to prospective financial statements); Exposure draft (American Institute of Certified Public Accountants), 1990, Feb. 5

American Institute of Certified Public Accountants. Financial Forecasts and Projections Task Force

The proposed SOP contains four questions and answers (Qs & As) that provide guidance to responsible parties preparing financial forecasts as well as guidance to practitioners engaged to perform services in connection with such forecasts. The guidance in these Qs & As is summarized below. 1. Section 400.04 of the Guide requires a responsible party to have a reasonably objective basis to present a financial forecast. A responsible party has a reasonably objective basis if sufficiently objective assumptions can be developed for each key factor. 2. Because responsible parties should limit the length of their forecasts to periods for which they have a reasonably objective basis, a question arises as to what they should do when they believe it is necessary to include certain disclosures, in the forecast, about the effects of anticipated events and circumstances beyond the forecast period. Users of financial forecasts often need this information to evaluate the long-term consequences of their investment decisions. 3. In practice, financial forecasts have been presented for various periods of time, sometimes exceeding ten years. However, the Guide does not specify any fixed minimum or maximum time period to be covered by a financial forecast. The proposed guidance indicates that responsible parties should balance the information needs of users with their ability to estimate prospective results when evaluating the length of the forecast period. It also encourages presentation of financial forecasts that do not exceed three to five years by stating that it ordinarily would be difficult to establish that a reasonably objective basis exists to present longer forecasts. 4. The Guide indicates, in section 500.14, that an accountant engaged to compile or examine a financial forecast should consider whether a responsible party has a reasonably objective basis to present a financial forecast. It also clarifies that both the compilation procedures in section 600 and the examination procedures in section 700 of the Guide contemplate such a consideration.
Auditor's consideration of the internal control structure used in administering federal financial assistance programs under the Single Audit Act : November 28, 1990 : amendment to AICPA audit and accounting guide, Audits of state and local governmental units, and supersession of SOP 89-6, example 26; Statement of position 90-09;

American Institute of Certified Public Accountants. Government Accounting and Auditing Committee
Proposed statement of position : the auditor's consideration of internal controls over federal financial assistance programs under the Single Audit Act : proposed amendment to AICPA industry audit guide, audits of state and local governmental units and supersession of SOP 89-6, Example 26;Auditor's consideration of internal controls over federal financial assistance programs under the Single Audit Act (Proposed amendment to AICPA industry audit guide, audits of state and local governmental units and supersession of SOP 89-6, Example 26); Exposure draft (American Institute of Certified Public Accountants), 1990, Mar. 21

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

This proposed statement of position (SOP) would amend chapter 21 in the AICPA Industry Audit Guide Audits of State and Local Governmental Units, and would supersede example 26 in SOP 89-6, Auditors' Reports in Audits of State and Local Governmental Units. The proposed SOP would update the guide and SOP 89-6 to reflect the following standards affecting the auditor's consideration of, and reporting on, internal controls over federal financial assistance under the Single Audit Act: 1. 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 proposed SOP would be effective for audits done in accordance with the Single Audit Act for fiscal years beginning on or after January 1, 1990. Earlier application would be permissible.
Reports on audited financial statements of property and liability insurance companies : November 30, 1990 : amendment to AICPA audit and accounting guide Audits of property and liability insurance companies; Statement of position 90-10;

American Institute of Certified Public Accountants. Insurance Companies Committee
Omnibus proposal of Professional Ethics Division interpretations and rulings; Exposure draft (American Institute of Certified Public Accountants), 1990, Oct. 23

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

1. PROPOSED ETHICS RULING UNDER RULE 101: Member's Investment in a Partnership That Invests in Member's Client; 2. PROPOSED ETHICS RULING UNDER RULE 101: The Meaning of a Joint Closely Held Business Investment; 3. PROPOSED REVISION OF INTERPRETATION 101-8 UNDER RULE 101: Effect on Independence of Financial Interests in Nonclients Having Investor or Investee Relationships With a Member's Client; 4. PROPOSED ETHICS RULING UNDER RULE 101: Member's Investment in a Limited Partnership; 5. PROPOSED REVISION OF ETHICS RULING NO. 69 UNDER RULE 101: Joint Investment With a Promoter and/or General Partner; 6. PROPOSED DELETION OF ETHICS RULING NO. 62 UNDER RULE 101: Member and Client Are Limited Partners in a Limited Partnership; 7. PROPOSED REVISION OF INTERPRETATION 101-10 UNDER RULE 101: The Effect on Independence of Relationships Proscribed by Rule 101 and Its Interpretations With Nonclient Entities Included With a Member's Client in the Financial Statements of a Governmental Reporting Entity; 8. PROPOSED REVISION OF ETHICS RULING NO. 57 UNDER RULE 101: MAS Engagement to Evaluate Service Bureaus; 9. PROPOSED DELETION OF ETHICS RULING NO. 42 UNDER RULE 101: Members as Life Insurance Policyholders; 10. PROPOSED ETHICS RULING UNDER RULE 502: Use of the AICPA Accredited Personal Financial Specialist Designation
Omnibus proposal of Professional Ethics Division interpretations and rulings;Proposed ethics ruling under Rule 101: Member Joining Client Credit Union;Member Joining Client Credit Union;Proposed ethics ruling under Rule 101: Member as Guarantor of Client's Loan Member as Guarantor of Client's Loan;Proposed ethics ruling under Rule 102: Individual Considering or Accepting Employment With the Client Individual Considering or Accepting Employment With the Client;Proposed ethics ruling under Rule 102: Service on Board of Tax Appeals;Service on Board of Tax Appeals;Proposed revision of interpretation 501-1 under Rule 101: Client's Records and Accountant's Workpapers;Client's Records and Accountant's Workpapers;Proposed revision of ethics ruling no. 17 under Rule 101: Member as Stockholder in Country Club;Member as Stockholder in Country Club;Proposed deletion of ethics ruling no. 34 under Rule 101: Member as Auditor of Common Trust Funds;Member as Auditor of Common Trust Funds;Proposed deletion of ethics ruling no. 17 under Rule 101: Member as Auditor of Mutual Fund and Shareholder of Investment Adviser/Manager;Member as Auditor of Mutual Fund and Shareholder of Investment Adviser/Manager; Exposure draft (American Institute of Certified Public Accountants), 1990, July 23

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

1. The committee concluded that if a credit union meets the definition of a financial institution as provided in interpretation 101-5 and the loan is consistent with the requirements of interpretation 101-1-A4, membership in the credit union would not impair the member's and the member's firm's independence. If the credit union does not meet the definition of a financial institution or the loans or deposits are not in accordance with the interpretations and rulings of the AICPA Code of Professional Conduct, membership in the client credit union would cause the independence of the member and the member's firm to be impaired. 2. The Professional Ethics Executive Committee has been requested to provide guidance to members who question whether their independence would be considered to be impaired with respect to clients for whom the members have guaranteed loans. The committee has concluded that independence would be impaired if the guarantee exists during certain time periods specified in the ruling. 3. The Professional Ethics Executive Committee has concluded that in circumstances in which employment with a client is being offered to or sought by a member, Rule 102, "Integrity and Objectivity," is applicable. The rule requires that a member maintain objectivity and integrity when performing professional services. The committee believes that Rule 102 requires that a member remove himself or herself from the engagement in situations in which client employment is being offered or sought. 4. Rule 102, "Integrity and Objectivity," of the AICPA Code of Professional Conduct provides, in part, that in the performance of any professional services, a member "shall be free of conflicts of interest." Ethics interpretation 102-2 provides that "a conflict of interest may occur if a member performs a professional service for a client or employer and the member or his or her firm has a significant relationship with another person, entity, product, or service that could be viewed as impairing the member's objectivity." The Professional Ethics Executive Committee plans to issue ethics rulings to provide guidance on what circumstances may be viewed as creating conflicts of interest. 5. The proposed revised interpretation requires a member to return clients' records upon request whether or not the member's fees have been paid. Client records are defined as any accounting or other records belonging to the client that were provided to the member by or on behalf of the client. Workpapers are the member's property. 6. The Professional Ethics Executive Committee proposes to revise current Ethics Ruling No. 17 (ET section 191.033-.034) to indicate that an equity interest held by a member in an organization such as a country club constitutes direct financial interest that impairs a member's independence. Further, ownership of a debt interest in such entity would constitute a loan to a client that impairs independence. Membership in a club, absent an equity or debt interest, would not impair independence. 7. The Professional Ethics Executive Committee recommends the deletion of ruling no. 34 because the common trust funds of a bank are not part of the financial statements with respect to which the audit is being performed. 8. The Professional Ethics Executive Committee recommends that ruling no. 47 be deleted. Virtually all mutual funds are subject to the jurisdiction of the Securities and Exchange Commission (SEC). The SEC's rules on auditor independence differ from AICPA rules. It would therefore be misleading for this ruling to be a part of AICPA independence literature.
Omnibus proposal of Professional Ethics Division interpretations and rulings ;Proposed revision of interpretation 101-9 under Rule 101: The Meaning of Certain Independence Terminology and the Effect of Family Relationships on Independence;Meaning of Certain Independence Terminology and the Effect of Family Relationships on Independence;Proposed revision of ethics ruling no. 14 under Rule 101: Member on Board of Directors of United Fund;Member on Board of Directors of United Fund;Proposed revision of ethics ruling no. 41 under Rule 101; Member as Auditor of Mutual Insurance Company;Member as Auditor of Mutual Insurance Company;Proposed deletion of ethics ruling no. 45; Past Due Billings: Client in Bankruptcy;Past Due Billings: Client in Bankruptcy;Proposed revision of ethics ruling no. 52 under Rule 101: Past Due Fees Past Due Fees;Proposed revision of ethics ruling no. 54 under Rule 101; Member Providing Actuarial Services;Member Providing Actuarial Services;Proposed deletion of interpretation 201-4 under Rule 201: Definition of the Term Engagement as Used in Rule 201;Definition of the Term Engagement as Used in Rule 201; Exposure draft (American Institute of Certified Public Accountants), 1990, May 22

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

The Professional Ethics Executive Committee has reconsidered interpretation 101-9 and concluded that revisions are necessary. The following significant revisions are proposed: (1) a revised definition of a member or a member's firm, which includes contractors and entities controlled by persons included in the definition of a member or a member's firm; (2) deletion of reference to "key assistants" to certain financial executives as positions with a client indicating significant influence; (3) a new section defining the phrase "office participating in a significant portion of the engagement"; (4) inclusion of specific time periods during which relationships of the auditor's nondependent close relatives cause independence impairments; and (5) reference to cohabitants as having a relationship that may cause an independence impairment. The Professional Ethics Executive Committee proposes to revise Ethics Ruling No. 14 (ET section 191.027-.028) to recognize that a member's service on the board of a federated fund-raising organization could impair the member's independence with respect to recipients of the funds distributed by that organization. Specifically, independence would be impaired if the fund-raising organization can affect the management decisions of the recipient organizations. The Professional Ethics Executive Committee proposes a revision of Ethics Ruling No. 41 (ET section 191.081-.082) to provide that a member's independence would not be considered to be impaired with respect to an insurance company that receives, holds in a pooled separate account, and invests contributions with respect to the member's retirement plan. The current ruling addresses independence in terms of the materiality of the member's retirement plan funds in relation to the net worth of the insurance company. The Professional Ethics Executive Committee proposes to delete Ethics Ruling No. 45 (ET section 191.089-.090) because the proposed revision of the current ruling on unpaid fees included elsewhere in this exposure draft discusses unpaid fees in relation to bankruptcy. The Professional Ethics Executive Committee proposes a revision of Ethics Ruling No. 52 (ET section 191.103-. 104) to clarify the intent and language of the ruling. The ruling deals with the issue of the effect on an auditor's independence of unpaid fees. The proposed revision clarifies the nature of unpaid fees, specifies the time when fees may impair an auditor's independence, and provides a rationale for such impairment. The Professional Ethics Executive Committee proposes to revise Ethics Ruling No. 54 (ET section 191.107-. 108) to include a member's performance of appraisal and valuation services within the professional services covered by the ruling. Ethics interpretation 101-1-B1 provides that independence would be considered to be impaired if the member was connected with the client in a capacity equivalent to that of a member of management. The proposed addition of appraisal and valuation services does not alter the requirement in the ruling consistent with interpretation 101-1-B1 that all significant matters of judgment relating to these additional services must be determined or approved by the client and the client must be in a position to have an informed judgment on the results of these services. The purpose of this interpretation was to cause attestation and certain other standards that were not covered under rules 202 and 204 of the pre-January 12, 1988 Code of Professional Ethics, to be enforceable under rule 201. As rule 202 of the new Code of Professional Conduct requires members performing professional services to comply with standards promulgated by bodies designated by Council, interpretation 201-4 is no longer necessary. The Professional Ethics Executive Committee therefore recommends the deletion of this interpretation from the Code.
Proposed statement of position : accounting for real estate syndication income;Accounting for real estate syndication income; Exposure draft (American Institute of Certified Public Accountants), 1990, Dec. 5

American Institute of Certified Public Accountants. Real Estate Committee

This proposed statement of position (SOP) provides guidance on applying generally accepted accounting principles in accounting for real estate syndication income. Briefly, the SOP arrives at the following conclusions: 1. FASB Statement No. 66, Accounting for Sales of Real Estate, applies to the recognition of profit on the sale of real estate by syndicators to partnerships. 2. The guidance in FASB Statement No. 66 should be applied by analogy to the recognition of profit on real estate syndication transactions, even if the syndicators never had ownership interests in the properties acquired by the real estate partnerships. 3. FASB Statement No. 66 does not apply to the recognition of fees excluded from sales value. 4. All fees charged by syndicators should be included in the determination of sales value in conformity with FASB Statement No. 66, except (1) fees for which future services must be performed and (2) syndication fees. 5. Syndicators should recognize fees for future services when they render the services. 6. Syndicators should recognize syndication fees when the earnings process is complete and collectibility is reasonably assured. 7. If syndicators are exposed to future losses or costs from (1) material involvement with the properties, partnerships, or partners or (2) uncertainties regarding the collectibility of partnership notes, they should defer income recognition on syndication fees and fees for future services until the losses or costs can be reasonably estimated. 8. Regardless of contractual provisions, for the purpose of determining whether buyers' initial and continuing investments satisfy the requirements for recognizing profit in full in conformity with FASB Statement No. 66, cash received by syndicators should be allocated to unpaid syndication fees before being allocated to sales value. After the syndication fee is fully paid, additional cash received should first be allocated to unpaid fees for future services, to the extent those services have been performed by the time the cash is received, before being allocated to sales value.
Proposed audit and accounting guide : audits of savings institutions ;Audits of savings institutions; Exposure draft (American Institute of Certified Public Accountants), 1990, Aug. 31

American Institute of Certified Public Accountants. Savings and Loan Associations Guide Special Committee

This proposed audit and accounting guide has been prepared to assist the independent auditor in auditing and reporting on the financial statements of savings institutions. It describes relevant matters or procedures unique to those entities and focuses on specific problems of auditing and reporting on the financial statements of savings institutions. This proposed guide would supersede the audit and accounting guide Savings and Loan Associations (Fourth Revised Edition). This proposed guide includes illustrations of the form and content of financial statements for savings institutions and the auditors' reports thereon.
Report on the internal control structure in audits of futures commission merchants : February 12, 1990, amendment to AICPA audit and accounting guide, Audits of brokers and dealers in securities; Statement of position 90-02;

American Institute of Certified Public Accountants. Stockbrokerage and Investment Banking Committee
Financial reporting by entities in reorganization under the bankruptcy code : November 19, 1990; Statement of position 90-07;

American Institute of Certified Public Accountants. Task Force on Financial reporting by Entities in Reorganization under the Bankruptcy Code
Proposed statement of position : financial reporting by entities in reorganization under the bankruptcy code ;Financial reporting by entities in reorganization under the bankruptcy code; Exposure draft (American Institute of Certified Public Accountants), 1990, Apr. 4

American Institute of Certified Public Accountants. Task Force on Financial Reporting by Entities in Reorganization under the Bankruptcy Code

This proposed statement of position provides guidance for financial reporting by entities that have filed petitions with the Bankruptcy Court and expect to reorganize as going concerns under Chapter 11 of title 11 of the United States Code. It recommends that all such entities report the same way while reorganizing under Chapter 11, with the objective of reflecting their financial evolution. To do that, their financial statements should distinguish transactions and events that are directly associated with the reorganization from the operations of the ongoing business as it evolves. The statement recommends that, on emergence from Chapter 11, entities meeting specified criteria adopt fresh start reporting since, in substance, the creditors have acquired the entities. It also recommends how entities not meeting those criteria should report their liabilities.
Proposed interpretation of statement on responsibilities in tax practice (1988 revision) no. 1 : Realistic possibility standard ;Realistic possibility standard, includes SRTP no. 1, 1988 rev;Statements on responsibilities in tax practice, no. 1, 1988 rev; Exposure draft (American Institute of Certified Public Accountants), 1990, Aug. 15

American Institute of Certified Public Accountants. Tax Division

In August 1988 the AICPA Tax Division issued revised Statements on Responsibilities in Tax Practice (SRTPs). The primary purpose of these advisory statements on appropriate standards of tax practice is educational. SRTP (1988 Rev.) No. 1, 'Tax Return Positions," contains the standards a CPA should follow in recommending tax return positions and in preparing or signing tax returns and claims for refunds. The standard in SRTP (1988 Rev.) No. 1 requires that a CPA have "a good faith belief that the [tax return] position [being recommended] has a realistic possibility of being sustained administratively or judicially on its merits if challenged." This standard is referred to in this exposure draft as the "realistic possibility standard." Pursuant to SRTP (1988 Rev.) No.1, if a CPA concludes that a tax return position does not meet the realistic possibility standard, the CPA may still recommend the position to the client, or prepare and sign a return containing the position, if the position is not frivolous and is adequately disclosed on the tax return or claim for refund. This exposure draft interprets the realistic possibility standard. Its purpose, like that of the SRTPs themselves, is educational. This interpretation of the realistic possibility standard was approved by both the Responsibilities in Tax Practice Committee and the Federal Taxation Executive Committee. After the termination of the comment period, the Responsibilities in Tax Practice Committee will consider what changes should be made to the interpretation in light of comments received from the AICPA Tax Division membership and others. The interpretation will again be put to the vote of the Responsibilities in Tax Practice Committee and the Federal Taxation Executive Committee and, if approved in each committee by a two-thirds majority, will become effective.
Proposed revisions to Statements on responsibilities in tax practice (1988 revision) nos. 6 and 7, "knowledge of error" ;Statements on responsibilities in tax practice (1988 revision) nos. 6 and 7, "knowledge of error" Knowledge of error; Exposure draft (American Institute of Certified Public Accountants), 1990, Dec. 18

American Institute of Certified Public Accountants. Tax Executive Committee and American Institute of Certified Public Accountants. Responsibilities in Tax Practice Committee

In August 1988, the AICPA Tax Division issued revised Statements on Responsibilities in Tax Practice (SRTPs). The primary purpose of these advisory statements on appropriate standards of tax practice is educational.. SRTP (1988 Rev.) Nos. 6 and 7 included footnotes indicating that future statements would address (1) the effect of retroactive laws, regulations or court decisions and (2) erroneous accounting methods. The proposed revisions included here modify SRTP (1988 Rev.) Nos. 6 and 7 to address these issues. This exposure draft defines an error as any position, omission, or method of accounting that, at the time the return is filed, fails to meet the standards set out in SRTP (1988 Rev.) No. 1. The definition of error also includes a position taken on a prior year's return that no longer meets these standards because of retroactive laws, judicial decisions, or administrative pronouncements. These revisions were approved by both the Responsibilities in Tax Practice Committee and the Tax Executive Committee. After the termination of the comment period, the Responsibilities in Tax Practice Committee will consider what changes will be made to the standards in light of all comments received. The revision to SRTP Nos. 6 and 7 will again be put to the vote of the Responsibilities in Tax Practice and Tax Executive Committees and, if approved in each committee by a two-thirds majority, will become effective.
Financial accounting and reporting by providers of prepaid health care services; Statement of position 89-5;

American Institute of Certified Public Accountants. Accounting Standards Division
Proposed statement of position : accounting and reporting by continuing-care retirement communities for fees and the obligation to provide future services and the use of facilities, and the use of facilities, and for initial direct costs of acquiring continuing-care contracts ;Accounting and reporting by continuing-care retirement communities for fees and the obligation to provide future services and the use of facilities, and the use of facilities, and for initial direct costs of acquiring continuing-care contracts; Exposure draft (American Institute of Certified Public Accountants), 1989, Jan. 9

American Institute of Certified Public Accountants. Accounting Standards Division and American Institute of Certified Public Accountants. Health Care Committee

This proposed statement of position provides guidance to continuing-care retirement communities on applying generally accepted accounting principles in accounting and reporting for fees, the obligation to provide future services and the use of facilities to current residents, and for initial direct costs of acquiring continuing-care contracts. Briefly, the statement recommends that: 1. Refundable fees should be accounted for and reported as a liability and reclassified to nonrefundable deferred revenue when the obligation to refund fees is removed. The deferred revenue should be amortized to income over future periods based on the remaining estimated lives of the residents (paragraphs 22-23). 2. Fees to be paid to current residents (or designees) only from the proceeds of reoccupancy of the contract holder's unit should be accounted for as deferred revenue. In addition, similar amounts received from new residents in excess of amounts to be paid to previous residents (or designees) should be deferred. The deferred revenue should be amortized to income over future periods based on the remaining useful life of the facility (paragraphs 31-32). 3. Nonrefundable fees should be accounted for as deferred revenue. The deferred revenue should be amortized straight-line to income over the actuarially determined remaining life span of each individual (paragraphs 43-44). 3. A liability recognizing an obligation to provide future services and the use of facilities to current residents in excess of related anticipated revenues should be recorded when the present value of future net cash outflows exceeds unamortized deferred revenue plus depreciation of facilities to be charged related to the contracts and unamortized initial direct costs of acquiring the related continuing-care contracts (paragraphs 53-56). 5. Initial direct costs of acquiring continuing-care contracts that are expected to be recovered from future contract revenues and related to contracts actually issued should be capitalized and amortized to expense on a straight-line basis over the average expected remaining lives of the residents under contract (paragraph 63). The provisions of this statement would be effective for fiscal years beginning on or after the date of final issuance of the statement (with that date to be determined).
Comment letters on on the Proposed SAS, The Confirmation Process

American Institute of Certified Public Accountants. Auditing Standards Board
Questions concerning accountants' services on prospective financial statements; Statement of position 89-3;

American Institute of Certified Public Accountants. Auditing Standards Division
Proposed statement of position : Inquiries of representatives of financial institution regulatory agencies ;Inquiries of representatives of financial institution regulatory agencies; Exposure draft (American Institute of Certified Public Accountants), 1989, Sept. 29

American Institute of Certified Public Accountants. Banking Committee and American Institute of Certified Public Accountants. Savings and Loan Associations Committee

This proposed statement of position (SOP) amends chapter 2 in the AICPA Industry Audit Guide Audits of Banks and chapter 2 in the AICPA Audit and Accounting Guide Audits of Savings and Loan Associations. The proposed SOP emphasizes that the CPA should not overlook regulatory examiners as a source of competent evidential matter in conducting an audit of a financial institution's financial statements and, therefore, should review reports of examination and other communications from examiners and, when appropriate, make inquiries of the examiners. The CPA should: 1. Request that management provide access to all reports of examinations and related correspondence. 2. Review reports of significant examinations and related correspondence received by the financial institution during the period under audit through the date of the CPA's opinion. 3. Communicate with the examiners, with the prior approval of the financial institution, when their examination of the financial institution is in process or a report on a recent examination has not been received by the financial institution. A refusal by management to allow the CPA to review communications or communicate would be a scope limitation, whereas the refusal of the examiner to communicate with the auditor may be a scope limitation, depending on the auditor's assessment of other relevant facts and circumstances.
Proposed audit and accounting guide for consideration of the internal control structure in a financial statement audit ;Consideration of the internal control structure in a financial statement audit; Exposure draft (American Institute of Certified Public Accountants), 1989, Aug. 21

American Institute of Certified Public Accountants. Control Risk Audit Guide Task Force

In February 1988, the Auditing Standards Board issued SAS No. 55, Consideration of the Internal Control Structure in a Financial Statement Audit. SAS No. 55 requires that, in every audit, the auditor: 1. Obtain an understanding of each of the elements (control environment, accounting system, and control procedures) of the internal control structure sufficient to plan the audit, and 2. Assess control risk for assertions related to account balances and transaction classes. This proposed guide was prepared to illustrate how SAS No. 55 might be applied by auditors in certain situations. Specifically, this proposed guide does this by illustrating two different audit strategies among many that an auditor might choose when auditing an assertion. As depicted in the flowchart in figure 1-2, the auditor may plan: 1. A primarily substantive approach (which ordinarily results in a control risk assessment at or slightly below maximum), or 2. A lower control risk assessment. In each case, the preliminary audit strategy may influence the extent of understanding of each element of the internal control structure that the auditor needs to obtain. Therefore, the nature, timing, and extent of procedures performed to obtain this understanding and assess control risk may differ. The audit strategy may also affect the nature, timing, and extent of substantive procedures to be performed. This proposed guide provides guidance on these matters as well as on the related documentation of evidence obtained by the auditor. It supports the guidance with illustrations of the audits of three hypothetical companies --Ownco, Inc., Young Fashions, Inc., and Vinco, Inc. Ownco, Inc. is a small, owner-managed business. Young Fashions, Inc. represents a growing, nonpublic company with multiple locations. Vinco, Inc. is a large public company. Since most accounting systems involve computer processing (through a microcomputer, minicomputer, or mainframe), each of these three hypothetical companies uses some form of computer processing. Through these illustrations, presented in italics throughout, the proposed guide describes how an auditor's procedures to obtain the understanding and assess control risk may differ from audit to audit.
Proposed statement of position : accountants' services on prospective financial statements for internal use only and partial presentations ;Accountants' services on prospective financial statements for internal use only and partial presentations; Exposure draft (American Institute of Certified Public Accountants), 1989, Apr. 25

American Institute of Certified Public Accountants. Financial Forecasts and Projections Task Force

The Forecasts and Projections Audit Issues Task Force developed this proposed statement of position (SOP) to clarify and expand on procedural and reporting guidance contained in the AICPA Guide for Prospective Financial Statements ("the Guide"). Specifically, the SOP provides guidance to practitioners engaged to provide services on: 1. Prospective financial statements for internal use only. 2. Partial presentations of prospective financial information. Sections 900 and 1000 of the Guide provide limited guidance on accountants' services on prospective financial statements for internal use only and partial presentations, respectively. However, much of that guidance was based on rule 201(e) of the AICPA Code of Professional Ethics and related interpretation 201-2. The interpretation, which applied to both partial presentations and prospective financial statements intended for internal use only, discussed the disclosure of assumptions, disclosure of the character of the work done by the accountant, and the degree of responsibility taken by the accountant. Rule 201(e) and its related interpretation, however, were deleted with the adoption of the AICPA Code of Professional Conduct by the membership in January 1988. Therefore, this proposed SOP provides needed guidance in these areas. In addition, practitioners have requested additional guidance on services on partial presentations of prospective financial information. The SOP is divided into two sections: 1. Guidance on the Accountant's Services and Reports on Prospective Financial Statements for Internal Use Only, which would replace Section 900 of the Guide, provides practitioners with suggested procedural and reporting guidance to use in providing services on financial forecasts and projections for internal use only. Specifically, this section amends Section 900 of the Guide for deletion of rule 201(e) and its related interpretation and expands on the guidance in Section 900 when an accountant decides to issue a report on his or her services with respect to prospective financial statements for internal use only. 2. Partial Presentations of Prospective Financial Information, which would replace Section 1000 of the Guide, provides procedural and reporting guidance to an accountant who is engaged to issue or issues a written communication that expresses a conclusion about the reliability of a written partial presentation that is the responsibility of another party. In such circumstances, the accountant should examine or apply agreed-upon procedures to the presentation. Guidance is also included for an accountant engaged to compile a partial presentation. In addition, the SOP describes how much of the guidance in the Guide can be applied to partial presentations.
Auditor's reports in audits of state and local governmental units : August 11, 1989, amendment to AICPA audit and accounting guide Audits of state and local governmental units; Statement of position 89-6;

American Institute of Certified Public Accountants. Government Accounting and Auditing Committee
Accounting and reporting guide for insurance agents and brokers; Exposure draft (American Institute of Certified Public Accountants), 1989, May 3

American Institute of Certified Public Accountants. Insurance Agents and Brokers Tasks Force
Report on the internal control structure in audits of investment companies; Statement of position 89-7;

American Institute of Certified Public Accountants. Investment Companies Committee
Reports on audited financial statements of investment companies : amendment to AICPA audit and accounting guide Audits of investment companies; Statement of position 89-2;

American Institute of Certified Public Accountants. Investment Companies Committee
Omnibus proposal of Professional Ethics Division interpretations and rulings; Exposure draft (American Institute of Certified Public Accountants), 1989, Jan. 12

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

The following revisions and interpretations are being proposed: 1. REVISION OF THE APPLICABILITY SECTION OF THE AICPA CODE OF PROFESSIONAL CONDUCT; 2. REVISION OF INTERPRETATION 101-2: Former Practitioners and Firm Independence; 3. INTERPRETATION UNDER RULE 101: Independence and Attest Engagements; 4. INTERPRETATION UNDER RULE 102: Conflicts of Interest; 5. INTERPRETATION UNDER RULE 301: Application of Exemptions 2 and 4 of Rule 301 to AICPA Members; 6. INTERPRETATION 501-5: Failure to Follow Requirements of Governmental Bodies, Commissions, or Other Regulatory Agencies in Performing Attest or Similar Services; 7. ETHICS RULING UNDER RULE 101: Use of Nonindependent CPA Firm on an Engagement; 8. REVISION OF ETHICS RULING NO. 31 UNDER RULE 101: Financial Interest in a Cooperative, Condominium Association, Planned Unit Development, Homeowners Association, Timeshare Development, or Other Common Interest Realty Association; 9. REVISION OF ETHICS RULING NO. 7 UNDER RULE 301: Revealing Names of Clients; 10. REVISION OF ETHICS RULING NO. 176 UNDER RULE 502: Newsletters and Publications Prepared by Others; 11. REVISION OF INTERPRETATION 502-2 UNDER RULE 502: False, Misleading, or Deceptive Acts in Advertising or Solicitation; 12. DELETION OF INTERPRETATION 502-1 UNDER RULE 502: Informational Advertising; 13. DELETION OF ETHICS RULING NO. 127 UNDER RULE 504: State Controller; 14. DELETION OF ETHICS RULING NO. 132 UNDER RULE 504: Tax Practice: Conflict of Interest; 15. DELETION OF ETHICS RULING NO. 86 UNDER RULE 502: Paid for by Others, Name in Client Ad; 16. DELETION OF ETHICS RULING NO. 4 UNDER RULE 301: Prior Client Relationship; 17. DELETION OF INTERPRETATION 301-1 UNDER RULE 301: Confidential Information and Technical Standards.
Proposed Professional Ethics Division definitions and rulings;Proposed Interpretation providing definitions of words and phrases as used in the AICPA Code of Professional Conduct;Proposed ethics ruling under rule 101: Member on advisory board of client;Proposed deletion of ethics rulings no. 147 and no. 148 under rule 505: Firm designation; Exposure draft (American Institute of Certified Public Accountants), 1989, May 1

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

The Professional Ethics Executive Committee proposes an interpretation of the Code of Professional Conduct that provides definitions of certain terms used in the Code. The defined terms determine the applicability of Code rules to the various segments of Institute membership. For example, a number of the rules apply to members performing "professional services," other rules apply to members in "public practice," and several rules contain the term "client." The proposed interpretation defines those terms and thereby provides guidance on how the rules of conduct apply to members. The Professional Ethics Executive Committee recognizes the diverse responsibiities and structures that advisory boards assume throughout various industries. The committee believes that service on an advisory board would impair the member's independence unless the three criteria delineated in the proposed ruling are met. In light of new rule 505, the Professional Ethics Executive Committee believes that rulings 147 and 148 are no longer appropriate. The committee does not believe that it is "misleading" for a sole proprietor to practice under a firm name that includes "and Company" or "and Associates." The committee recommends the deletion of both rulings from the Code.
Proposed Professional Ethics Division rulings and interpretations ;Proposed ethics ruling under Rule 101;Meaning of the Period of a Professional Engagement;Audits, Reviews, or Compilations and a Lack of Independence;Member Joining Client Credit Union;Proposed Interpretation under Rule 301: Confidential Information and the Purchase, Sale, or Merger of a Practice;Confidential Information and the Purchase, Sale, or Merger of a Practice;Proposed interpretation under Rule 101: Confidential Information and the Purchase, Sale, or Merger of a Practice;Confidential Information and the Purchase, Sale, or Merger of a Practice; Exposure draft (American Institute of Certified Public Accountants), 1989, Aug. 18

American Institute of Certified Public Accountants. Professional Ethics Executive Committee

Rule 101 and interpretation 101-1 specify transactions, interests, or relationships that impair independence, if they exist during various time periods. One of the time periods referred to in interpretation 101-1 is: "The period of a professional engagement." The committee proposes to define the period of a professional engagement as commencing when the member is engaged to perform the professional service and continuing until the relationship is terminated by the member or the client. The Professional Ethics Executive Committee receives many inquiries from members who are uncertain as to whether they may issue compilations or review reports when the members' independence is impaired with respect to the clients. The committee believes that explicit guidance is needed in the Code and recommends the adoption of the proposed ruling. The Professional Ethics Executive Committee is receiving an increasing number of inquiries from members who have the opportunity to join credit unions for which the members provide professional services requiring independence. Interpretation 101-1-A4 provides that independence is considered to be impaired if a member has any loan to or from the client. However, an exception is made if the member has a loan from a client which is a financial institution. Such a loan must meet criteria included in the interpretation and must be made under normal lending procedures, terms, and requirements. After considering the matter, the committee concluded that if a credit union meets the definition of a financial institution as provided in interpretation 101-5, and the loan is consistent with interpretation 101-1-A4, membership in the credit union would not impair the member's and the member's firm's independence. If the credit union does not meet the definition of a financial institution, or the loans or deposits are not in accordance with the interpretations and rulings of the Code, membership in the client credit union would cause the independence of the member and the member's firm to be impaired. Rule 301 provides, in part, that "a member in public practice shall not disclose any confidential client information without the specific consent of the client." In connection with a prospective sale or merger of a member's practice, it is often necessary to disclose confidential client information without obtaining the client's specific consent to do so. However, the committee believes that this should be permitted under rule 301, provided that the member take appropriate action to protect confidential client information. The Professional Ethics Executive Committee believes that an interpretation addressing this issue should be adopted. The proposed interpretation provides guidance regarding a member's independence with respect to both the subject of the assertion and the asserter for those attest engagements that are not covered by Statements on Auditing Standards, Statements on Standards for Accounting and Review Services, and Statements on Standards for Accountants' Services on Prospective Financial Information. The Professional Ethics Executive Committee believes that different independence standards should apply to the attest engagements to which the proposed interpretation applies and to attest engagements not covered by the proposal because of important differences that may exist between those two types of attest engagements. For example, the attest engagements covered by the proposal usually are completed in a brief period and often do not involve a continuing relationship with the client. The committee believes this proposal provides sufficient safeguards regarding the appearance of objectivity and integrity with respect to the member's performance of the covered attest engagements.
Reports on audited financial statements of brokers and dealers in securities : amendment to AICPA audit and accounting guide Audits of brokers and dealers in securities; Statement of position 89-1;

American Institute of Certified Public Accountants. Stockbrokerage and Investment Banking Committee
Reports on the internal control structure in audits of brokers and dealers in securities; Statement of position 89-4;

American Institute of Certified Public Accountants. Stockbrokerage and Investment Banking Committee
Accounting for developmental and preoperating costs, purchases, and exchanges of take-off and landing slots, and airframe modifications : September 30, 1988 amendment to AICPA industry audit guide, Audits of airlines; Statement of position 88-1;

American Institute of Certified Public Accountants. Accounting Standards Division
Proposed statement of position : definition of substantially the same for holders of debt instruments;Definition substantially the same for holders of debt instruments; Exposure draft (American Institute of Certified Public Accountants), 1988, Apr. 29

American Institute of Certified Public Accountants. Accounting Standards Division, American Institute of Certified Public Accountants. Committee on Banking, American Institute of Certified Public Accountants. Savings and Loan Associations Committee, and American Institute of Certified Public Accountants. Stockbrokerage and Investment Banking Committee

The AICPA's Banking Committee, Savings and Loan Associations Committee, and Stockbrokerage and Investment Banking Committee conclude the following: For debt instruments, including mortgage-backed securities, to be substantially the same, all the following criteria must be met: A. The debt instruments must have the same primary obligor, except for debt instruments guaranteed by a sovereign goverment, central bank, or agency, thereof, in which case the guarantor must be the same. B. The debt instruments must be identical in form and type. C. The debt instruments must bear the identical contractual interest rate. D. The debt instruments must have the same maturity except in the case of mortgage-backed pass-through securities for which the mortgages collateralizing the securities must be similar with respect to maturities (that is, expected remaining lives) resulting in approximately the same market yield. E. In the case of mortgage-backed pass-through securities, the securities must be collateralized by a similar pool of mortgages, such as single-family residential mortgages. F. The debt instruments must have the same aggregate unpaid principal amounts, except in the case of mortgage-backed pass-through securities, the aggregate principal amounts of the mortgage-backed securities given up and the mortgage-backed securiities reacquired must be within the accepted "good delivery" standard for the type of mortgage-backed security involved.
Proposed statement on auditing standards : compliance auditing : the auditor's responsibility for testing compliance with laws, regulations, and contractual terms governing financial assistance certain entities receive from government ;Compliance auditing : the auditor's responsibility for testing compliance with laws, regulations, and contractual terms governing financial assistance certain entities receive from government; Exposure draft (American Institute of Certified Public Accountants), 1988, May 6

American Institute of Certified Public Accountants. Auditing Standards Board

In response to findings that a large proportion of independent audits of federal financial assistance were substandard, the AICPA Task Force on the Quality of Audits of Governemental Units was formed to develop a comprehensive plan to improve the quality of audits of governmental units. That plan, presented in a March 1987 report, included a recommendation that "a statement on auditing standards relating to auditing for and reporting on compliance with applicable laws and regulations should be developed and issued." This proposed Statement provides guidance on applying the requirements of SAS No. 54, Illegal Acts by Clients, to audits of certain entities that receive financial assistance from government. It explains the relationship between those requirements and the requirements of the Standards for Audit of Governmental Organizations, Programs, Activities, and Functions issued by the United States General Accounting Office. It also provides guidance on testing compliance with laws and regulations applicable to federal financial assistance programs in audits performed in accordance with the Single Audit Act of 1984.
Proposed statement on auditing standards : special reports ;Special reports; Exposure draft (American Institute of Certified Public Accountants), 1988, Aug. 31

American Institute of Certified Public Accountants. Auditing Standards Board

This Statement changes generally accepted auditing standards as follows: (1) Prescribes a new special report form that parallels the form of the new auditor's standard report in SAS no. 58, Reports on Audited Financial Statements; (2) Clarifies that there is no requirement to describe in the special report how the presentation differs from a presentation in conformity with generally accepted accounting principles; (3) Amends guidance on reporting on compliance with contractual agreements in connection with an audit by restricting the distribution of these reports and limiting the matters that an auditor can provide assurance on to auditing and accounting matters; (4) Clarifies requirments for issuing, and restricts the distribution of, special reports on financial presentations prepared to comply with a basis of accounting prescribed in a contract or agreement that results in a) a presentation that in not GAAP or an other comprehensive basis of accounting (OCBOA) or b) an incomplete GAAP or OCBOA presentation. 5. Deletes the requirement to express an adverse opinion on presentations prepared to comply with contractual agreements or regulatory provisions that are not in conformity with GAAP or OCBOA.
Illustrative auditor's reports on financial statements of employee benefit plans comporting with statement on auditing standards no. 58, reports on audited financial statements, December 15, 1988; Statement of position 88-2;

American Institute of Certified Public Accountants. Auditing Standards Division
Proposed statement of position : questions concerning accountants' services on prospective financial statements : Proposed amendment to AICPA Guide for Prospective Financial Statements;Proposed amendment to AICPA Guide for Prospective Financial Statements : Questions concerning accountants' services on prospective financial statements; Exposure draft (American Institute of Certified Public Accountants), 1988, Sept. 2

American Institute of Certified Public Accountants. Auditing Standards Division. Forecasts and Projections Audit Issues Task Force

The Forecasts and Projections Audit Issues Task Force developed this proposed statement of position (SOP) in response to questions raised by practitioners about some of the procedural and reporting guidance contained in the AICPA Guide for Prospective Financial Statements. This SOP included some of these questions and the recommended responses. Specifically, the SOP provides additional guidance in these areas: 1. Reporting on financial forecasts that include a projected sale of an entity's real estate investment; 2. Sales prices assumed in a projection of the sale of an entity's real estate investment; 3. Reporting on information accompanying a financial forecast in an accountant-submitted document; 4. Financial projections included in general-use documents; 5. Support for tax assumptions; 6. Periods covered by an accountant's report on prospective financial statements.
Proposed statement of position : directors' examinations of banks : proposed amendment to AICPA industry audit guide, Audits of Banks;Directors' examinations of banks : proposed amendment to AICPA industry audit guide, Audits of Banks; Exposure draft (American Institute of Certified Public Accountants), 1988, Feb. 15

American Institute of Certified Public Accountants. Banking Committee

This proposed statement of position modifies the exhibits in appendix C of the 1983 AICPA Industry Audit Guide, Audits of Banks, "Suggested Guidelines for CPA Participation in Bank Directors' Examinations. The SOP emphasizes the scope limitations when CPAs are engaged to perform directors' examinations, particularly those scope limitations that affect accounts with higher risk in the banking industry. Briefly, the principal modifications to the exhibits in appendix C recommended in the SOP include the following: (1) Incorporation of a statement in the illustrative engagement letter and illustrative report identifying the omission of certain procedures relating to accounts with higher risk (for example loans) that are normally performed during an audit of the financial statements in accordance with GAAS; (2) Expansion of the accounts identified in the supplement to the engagement letter to include those with higher risk, such as loans and the allowance for credit losses, (3) Substitution of procedures relating to "Loans" for procedures relating to "Cash and Due From Banks."
Proposed audit and accounting guide : audits of providers of health care services ;Audits of providers of health care services; Exposure draft (American Institute of Certified Public Accountants), 1988, March 15

American Institute of Certified Public Accountants. Health Care Committee and Health Care Audit Guide Task Force

This proposed guide has been prepared to assist the independent auditor in examining and reporting on the financial statements of entities whose principal operations consist of providing health care services to individuals. It describes relevant matters or procedures unique to those entities and focuses on specific problems of auditing and reporting on the financial statements of the health care entities covered by the scope. This proposed guide supersedes the Industry Audit Guide titled Hospital Audit Guide (1972) and the following statements of position: 1. Clarification of Accounting, Auditing, and Reporting Practices Relating to Hospital Malpractice Loss Contingencies; 2. SOP 78-1, Accounting by Hospitals for Certain Marketable Equity Securities; 3. SOP 81-2, Reporting Practices Concerning Hospital-Related Organizations; 4. SOP 85-1, Financial Reporting by Not-for-Profit Health Care Entities for Tax-Exempt Debt and Certain Funds Whose Use Is Limited. This proposed guide includes illustrations of the form and content of financial statements for the health care entities considered and the auditor's reports thereon.
Proposed standards for performing and reporting on quality reviews ;Performing and reporting on quality reviews; Exposure draft (American Institute of Certified Public Accountants), 1988, Oct. 10

American Institute of Certified Public Accountants. Quality Review Executive Committee

This proposed statement establishes the standards for performing and reporting on all reviews conducted under the quality review program. The standards are applicable to firms enrolled in the program, to individuals and firms who perform and report on reviews, to state societies that participate in the administration of the program, to associations of CPA firms that assist their members in arranging and carrying out quality reviews, and to the AICPA Quality Review Division itself. Specifically, this proposed statement: 1. Provides distinctly different performance and reporting standards for two types of quality reviews â€” an on-site review for firms that examine historical or prospective financial statements and an off-site review for firms that issue compilation or review reports, but perform no examinations of historical or prospective financial statements. 2. Provides guidance on general considerations applicable to all quality reviews, emphasizing the importance of independence and confidentiality and the need to avoid conflicts of interest. 3. Describes how review teams are formed and what qualifications must be possessed by review team members and the team captain. 4. Defines the responsibilities of the review team, the reviewed firm, and the entity administering the review and provides standards, procedures, and guidelines that should be followed by each participant in the process. In addition, the appendixes to this proposed statement provide guidance on considerations governing the type of report issued on each type of review and include illustrations of various reports, letters of comment, and letters of response by reviewed firms.
Proposed audit and accounting guide : common interest realty associations ;Common interest realty associations; Exposure draft (American Institute of Certified Public Accountants), 1988, Aug. 31

American Institute of Certified Public Accountants. Task Force on Accounting for Common Interest Realty Associations

This proposed audit and accounting guide provides guidance on the following matters: 1. Accounting recognition of common property and facilities. Questions arise as to whether the common property in a condominium or planned unit development (PUD) and improvements on such property should be reported in a CIRA's financial statements. This proposed guide provides guidance on the recognition of assets maintained or owned by a CIRA. Questions relating to the accounting treatment of recognized assets, the effect of the manner in which the assets were acquired, and depreciation policies are discussed. 2. Major repairs and replacements. A fundamental issue affecting a CIRA's financial condition is whether the CIRA has estimated its future needs for major repairs and replacements and has designated funds for those needs. Because a CIRA's primary function is to maintain and replace common property, the CIRA's legal documents and some state statutes require it to accumulate funds for future major repairs and replacements. This proposed guide discusses disclosure of anticipated major repairs and property replacements and the auditor's role in evaluating the adequacy of disclosures and reporting on the fund for future major repairs and replacements. 3. Financial reporting. The widespread use of financial reports of CIRAs by potential buyers, lenders, sellers, and others creates a need for financial statement formats that are comparable. This proposed guide recommends a format and presents illustrations. 4. Method of accounting. Under GAAP, CIRAs account for their 'financial activities using the accrual basis of accounting. Alternatively, another comprehensive basis of accounting, such as cash basis, may also be used if the results of applying that basis do not differ substantially from the results using the accrual basis. This proposed guide discusses the various methods. 5. Budgets. CIRAs are generally required by their governing documents to base members' assessments on annual budgets. This proposed guide discusses the development of budgets and their implementation in the operations of CIRAs. o Income taxes. The Internal Revenue Service considers most CIRAs to be taxable entities that are required to file federal income tax returns. Guidelines for determining the tax filing alternatives for CIRAs are discussed in this proposed guide. 6. Audit considerations. Audit procedures specifically applicable to CIRAs are discussed. 7. Review and compilation engagements. Because many CIRA engagements are compilations or reviews, applicable procedures are discussed. 8. Cooperative housing corporations. Issues unique to audits of cooperative housing corporations and financial reporting requirements for those entities are discussed.