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On The Horizon -- AICPA issues guidance for auditors involved with exempt offerings

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Contents

AICPA
Standard issued on auditor involvement with exempt offerings
Audit and accounting guides issued
Technical auditing Q&As issued on other reporting issues
Proposed revision to SOC 2 description criteria
PEEC issues new interpretation on hosting services
Interpretation proposed for state and local governments
GASB proposes OPEB implementation guidance
Comment letter issued




AICPA

Standard issued on auditor involvement with exempt offerings

The Auditing Standards Board (ASB) of the AICPA issued Statement on Standards (SAS) 133, Auditor Involvement With Exempt Offering Documents, addressing the auditor’s responsibilities in situations where the auditor is involved with exempt offerings. The primary objective of SAS 133 is to establish standard-level requirements for when an auditor is involved with an exempt offering document and the procedures required when involved.

Under SAS 133, the auditor is involved with an offering when the auditor’s report on the financial statements, or the auditor’s review report on interim financial information, is included or incorporated by reference in an offering document related to exempt offerings, and the auditor performs certain activities with respect to the offering documents.

For purposes of SAS 133, exempt offerings include:

  • Securities when either the transaction or the securities themselves are exempt from registration under the Securities Act of 1933, as amended
  • Franchise offerings regulated by the Federal Trade Commission or applicable state franchise laws


The SAS also adds a new requirement stating that the auditor must “respond appropriately” when (a) the auditor determines that information included or incorporated by reference in the exempt offering document could undermine the credibility of the financial statements and the auditor’s report, or (b) the auditor becomes aware of subsequent event facts that, had they been known to the auditor before completion of the report, may have caused the auditor to revise the auditor’s report.

SAS 133 does not amend or supersede any previous SAS. It is effective for auditor-involved exempt offering documents that are initially distributed, circulated, or submitted on or after June 15, 2018.

Additional information, including background information on the reasons for the standard, is available in an article published by the Journal of Accountancy.

Audit and accounting guides issued

The AICPA issued updated versions of the following Audit and Accounting Guides (significant changes are highlighted below):

  • Audit Sampling
  • State and Local Governments – Updated to included guidance on accounting and auditing considerations as a result of GASB Statement 74, Financial Reporting for Postemployment Benefits Other Than Pension Plans, and GASB Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions
  • Attestation Engagements on Sustainability Information (Including Greenhouse Gas Emissions Information) – Updated to provide guidance on the interpretation and application of the clarified attestation standards (SSAE 18) when performing an examination or review engagement on sustainability information

Technical auditing Q&As issued on other reporting issues

The AICPA issued the following new technical questions and answers (Q&As) on other reporting issues under Technical Inquiry Service (TIS) Section 9160, Other Reporting Issues

  • TIS Section 9160.31, “Following Accounting Standards as Promulgated by FASB by a State or Local Governmental Entity”
  • TIS Section 9160.32, “Reporting on Accounting Standards as Promulgated by FASB by a State or Local Government”
  • TIS Section 9160.33, “Engagement Acceptance When A State or Local Government Elects to Follow a Special Purpose Framework”
  • TIS Section 9160.34, “Accounting Standards as Promulgated by FASB as a Special Purpose Framework”
  • TIS Section 9160.35, “Reporting on Indian Tribe Financial Statements Prepared in Accordance With Accounting Standards as Promulgated by FASB”

Proposed revision to SOC 2 description criteria

The AICPA issued an exposure draft, Proposed Revision of Description Criteria for a Description of a Service Organization’s System in a SOC 2® Report. In the process of revising the AICPA guide, “Reporting on an Examination of Controls at a Service Organization Relevant to Security, Availability, Processing Integrity, Confidentiality, or Privacy,” the AICPA decided to publish the description criteria in a stand-alone document rather than in the body of the guide. The description criteria will also be codified as measurement criteria in AICPA professional standards. The service auditor’s report will reference the stand-alone document.

The following summarizes the more significant changes to the description criteria: 

  • The description will include new disclosures about the service organization’s principal service commitments and system requirements, as well as certain incidents that resulted in a significant impairment of those commitments and requirements.
  • There will be additional implementation guidance in the description criteria.
  • The description will incorporate privacy criteria and implementation guidance.

Comments are due by September 7.

PEEC issues new interpretation on hosting services

The AICPA’s Professional Ethics and Executive Committee (PEEC) has issued a new interpretation, “Hosting Services,” which provides guidance on what constitutes hosting services under the AICPA Code of Professional Conduct. In addition, the interpretation offers examples of hosting services that would impair independence as well as examples that would not be considered hosting services.

The interpretation is effective on September 1, 2018.

Interpretation proposed for state and local governments

PEEC also issued a proposed interpretation, “State and Local Government Entities,” which proposes a revision to the independence interpretation that defines “client affiliates” for a financial statement attest client (FSAC) in the state and local government sector, as well as a conforming revision to the definition of a FSAC.

Comments on the proposal are due by October 16.



GASB proposes OPEB implementation guidance

The Governmental Accounting Standards Board (GASB) issued the proposed Implementation Guide 201X-Z, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (and Certain Issues Related to OPEB Plan Reporting), which contains questions and answers intended to clarify, explain, or elaborate on guidance for other postemployment benefits (OPEB) and OPEB plans under Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, as amended, and Statement 74, Financial Reporting for Postemployment Benefits Plans Other Than Pension Plans, as amended, respectively.
 
Most of the questions and answers in the final guide would be effective for reporting periods beginning after June 15, 2017. Other questions and answers in the final guide would not be effective until reporting periods beginning after June 15, 2018. Earlier application is encouraged if Statement 74 and Statement 75 have also been applied.

State and local governments would apply the provisions of the final guide retroactively by restating financial statements for all prior periods. If retroactive restatement is not practicable, these provisions would be applied as a restatement of beginning fiduciary net position for the earliest period presented, and certain disclosures would be required.

Comments on the proposal are due by September 25.



Comment letter issued

On July 21, the firm issued a comment letter in response to the FASB’s decision to undertake a research project on distinguishing liabilities from equity.



© 2017 Grant Thornton LLP, U.S. member firm of Grant Thornton International Ltd. All rights reserved. This Grant Thornton LLP On the Horizon provides information and comments on current accounting and SEC reporting issues and developments. It is not a comprehensive analysis of the subject matter covered and is not intended to provide accounting or other advice or guidance with respect to the matters addressed in this publication. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this publication. For additional information on topics covered in this publication, contact a Grant Thornton client-service partner.