2019 CPA Exam AUD Updates


The Auditing & Attestation (AUD) Q3 2019 updates to the CPA Exam include changes to Review Services, Government Auditing Standards, and Critical Audit Matters.

Review Services

SSARS No. 24 – Omnibus Statement on Standards for Accounting & Review Services – 2018:

Going Concern: Going concern review standards have been revised to align with existing going concern standards.  Generally, an entity’s ability to continue operating for a reasonable period of time, 1 year, is the basis for it to be a going concern.

International Reporting IssuesSSARS 24 adds a new AR-C section for guidance on compilations and reviews when:

  1. Financial statements have been prepared in accordance with a financial reporting framework of another country (e.g. Japanese GAAP) or
  2. Compilations or reviews are performed in accordance with both SSARS and another set of compilation review standards (e.g. International standard on Related Services).

Guidance is provided on the acceptance, planning and performance of the engagement, and reporting on the financial statements.

The accountant should obtain an understanding of the purpose for which the financial statements are prepared, the intended users of the financial statements, and the steps taken by management to determine that the reporting framework is acceptable.

If the engagement is to be performed with both SSARS and another set of review standards, the accountant should understand the applicable legal responsibilities for reporting, and if the statements will be used both in the US and outside of the US or outside of the US only.

Government Auditing Standards (“Yellow Book”):

The 2018 update supersedes the 2011 version of the standards.  These standards provide the foundation for government auditors in areas of independence, transparency, accountability and quality.  Changes include:

  • Presentation of chapters in a revised format differentiating requirements from application guidance.
  • Additions / removal of 2011 Appendix items into the standards.
  • Expansion of independence standard regarding preparing financial statements from client provided trial balances or underlying accounting records creates significant threats to auditor independence.  These threats should be documented along with the safeguards put in place to mitigate those threats.
  • Modification of peer review standard requiring that auditors comply with their affiliated organizations peer review requirements and Government Auditing Standards peer review requirements.  There are additional requirements provided for auditors not affiliated with recognized organizations like the AICPA’s Peer Review Program.
  • Addition of a definition for waste and related examples.
  • Updating performance audit standards, focusing on internal controls significant to audit objectives.  The auditor will also focus on program effectiveness, economy, and efficiency as the entity is accountable to the public.

Critical Audit Matters:

Starting with audits of large accelerated filers for periods ending on or after June 30, 2019, auditors will be required to communicate critical audit matters (CAMs) in their auditor reports.

What is a Critical Audit Matter (CAM)?

According to the Public Company Accounting Oversight Board (PCAOB), a CAM is a situation that:

  1. Was communicated to the audit committee (e.g., a significant unusual transaction);
  2. Relates to accounts or disclosures that are material to the financial statements (e.g., revenue); and
  3. Involves especially challenging, subjective, or complex auditor judgment.

Okay, what needs to be reported about a CAM?

A section of the PCAOB audit report must be dedicated to CAMs. If there are no CAMs to report, then the auditor must say so. If there is a CAM to report, the auditor should:

  1. Identify the CAM,
  2. Describe what led the auditor to determining that the issue was a CAM,
  3. Describe how the CAM was addressed in the audi; and
  4. Reference the relevant accounts or disclosures

When do these AUD updates become testable on the CPA Exam?

These AUD updates are eligible for testing Q3 2019.

AICPA Auditing Standards

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