GAQC Alert No. 255 


    GAQC Alert
     
    New Agent Pension-Related Auditing Interpretations and Summary of Key Pension-Related Guidance
       
      AICPA
    June 26, 2014
    GAQC Alert #255
     
    AICPA
    In This Alert
    New Governmental Agent Pension-Related Auditing Interpretations Issued
    Summary of AICPA Pension-Related Guidance Issued to Date
    Additional AICPA and Other Pension-Related Resources
    Status of Additional AICPA Pension-Related Guidance Expected
    GAQC Required Webcast Rebroadcast Friday
    A CPE rebroadcast of the required GAQC Webcast titled, 2014 GAQC Annual Update Webcast, will be held this Friday, June 27, 2014. If you are not able to make it, a second CPE rebroadcast will be held August 7, 2014. Both will occur from 1:00 PM - 3:00 PM (Eastern Time). Access registration information.
    2014 SLG A&A Guide Now Available
    The 2014 edition of the AICPA Audit and Accounting Guide, State and Local Governments, is now available for downloading in electronic format. Access the electronic download. The paperback version will be available starting July 28, 2014. This guide is a key resource for auditors performing financial statement audits of state and local governments. Place your order now.
    Additional Resources
    GAQC Alerts

    Archived GAQC Web Events

    Audit Practice Aids and Tools

    HUD Information
    Dear Center Members
    The main purpose of this GAQC Alert is to announce the issuance of two additional auditing interpretations relating to issues and questions associated with the implementation of the soon-to-be effective pension standards issued by the Governmental Accounting Standards Board (GASB) as it relates to agent multiple-employer plans (agent plans) and participating employers. Additionally, this GAQC Alert includes:
      A summary of all pension-related guidance issued by AICPA to date to ensure our members, both those auditing governmental plans and participating employers, have not overlooked any of this important guidance;
      A summary of AICPA and other governmental pension-related resources; and
      A quick update on additional AICPA guidance expected.
    New Governmental Agent Pension-Related Auditing Interpretations Issued
    As noted in GAQC Alert #244, the AICPA State and Local Government Expert Panel (SLGEP) has been engaged in numerous and complex discussions regarding accounting and auditing implementation issues facing governmental pension plans, the governmental employers that participate in those plans (employers or participating employers), and their auditors as a result of the GASB's new pension accounting standards. GAQC Alert #253 announced the availability of a whitepaper addressing issues pertaining to both the auditors of agent plans and participating employers. That whitepaper can be accessed on the GASB Matters section of the GAQC Web site.

    Since the issuance of the agent whitepaper, the SLGEP has been working with the AICPA Audit and Attest Standards Team on several related auditing interpretations which were recently issued in final form. These interpretations can be accessed on the Audit and Attest Standards Team's Web page titled "Recently Issued Audit Interpretations." The following includes a brief summary of the agent interpretations and provides direct links to each interpretation.

    Interpretation to Audit Evidence Standard. Interpretation No. 3, "Auditor of Participating Employer in a Governmental Agent Multiple-Employer Pension Plan," of AU-C section 500, Audit Evidence, answers two questions. The first clarifies that the audited financial statements of an agent plan prepared in accordance with generally accepted accounting principles (GAAP) and certain additional unaudited information from the plan would not provide the employer's auditor with sufficient appropriate audit evidence regarding the employer's pension amounts upon which to base the auditor's opinion on the employer's financial statements. The second clarifies that if the plan has prepared a schedule of changes in fiduciary net position by employer and engaged its auditor to audit and report on the schedule based on the best practice recommendations in the AICPA's SLGEP whitepaper, Governmental Employer Participation in Agent Multiple-Employer Plans: Issues Related to Information for Employer Reporting, the employer auditor could utilize the report of the plan auditor as audit evidence.

    Interpretation to Specific Elements of Financial Statements Standard. Interpretation No. 2, "Auditor of Governmental Agent Multiple-Employer Pension Plan," to AU-C section 805, Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement answers two questions. First, it discusses the type of report the plan auditor may issue if engaged to audit a schedule that may be prepared by the plan as described in the AICPA's SLGEP whitepaper, Governmental Employer Participation in Agent Multiple-Employer Plans: Issues Related to Information for Employer Reporting, and provides an illustrative report for such an engagement. Second, it addresses the issue of materiality when the plan auditor is engaged to opine on such a schedule.
    Summary of AICPA Pension-Related Guidance Issued to Date
    Over the last several months, various forms of pension-related guidance have been issued by the AICPA and its SLGEP. If you audit a governmental plan or an employer that participates in such a plan, it is critical that you review such guidance and are considering its implications for your current and/or future audits. Therefore, the following summary of AICPA guidance issued to date is intended to ensure members are aware of the guidance issued addressing the major implementation issues related to plans, employers, and their auditors.

    General Guidance Applicable to Governmental Plans

    Auditing Interpretation to Group Audit Standard. Interpretation No. 1, "Auditor of Participating Employer in a Governmental Pension Plan," to AU-C section 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors), applies to government pension plans broadly. This interpretation clarifies that it would not be appropriate for the employer auditor to make reference to the audit report of the governmental pension plan auditor solely for purposes of GASB Statement No. 68, Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27, because, in this circumstance, a governmental pension plan is not a component of the employer.

    Agent Plan Related Guidance

    Whitepaper on Employer Participation in Agent Plans and Related Auditor Issues. This whitepaper titled, Governmental Employer Participation in Agent Multiple-Employer Plans: Issues Related to Information for Employer Reporting, addresses issues related to how employers participating in agent plans obtain all necessary information to properly recognize and disclose pension amounts in their financial statements and how their auditors obtain sufficient appropriate evidence to support their opinions on employer financial statements. It should be of interest to agent plans, participating employers, and their auditors.

    Agent Auditing Interpretations. These auditing interpretations are discussed in the section above titled, "New Governmental Agent Pension-Related Auditing Interpretations Issued."

    Cost-Sharing Plan Related Guidance

    Whitepaper on Employer Participation in Cost-Sharing Plans and Related Auditor Issues. This whitepaper titled, Governmental Employer Participation in Cost-Sharing Multiple-Employer Plans: Issues Related to Information for Employer Reporting, addresses issues related to how employers participating in cost-sharing plans obtain all necessary information to properly recognize and disclose pension amounts in their financial statements and how their auditors obtain sufficient appropriate evidence to support their opinions on employer financial statements. It should be of interest to cost-sharing plans, participating employers, and their auditors.

    Whitepaper on Plan Census Data Issues. This whitepaper titled, Single-Employer and Cost-Sharing Multiple-Employer Plans: Issues Associated with Testing Census Data in an Audit of Financial Statements, addresses the role of census data in single-employer and cost-sharing plan financial statements and the plan auditor's responsibility for such census data. It should be of primary interest to plans and their auditors. However, participating employers may also wish to review the whitepaper as it could have ramifications for them.

    Cost-Sharing Auditing Interpretations. Interpretation No. 2, "Auditor of Participating Employer in a Governmental Cost-Sharing Multiple-Employer Pension Plan," of AU-C section 500, Audit Evidence, answers two questions. The first clarifies that the audited financial statements of a cost-sharing plan prepared in accordance with GAAP and certain additional unaudited information from the plan would not provide the employer's auditor with sufficient appropriate audit evidence regarding the employer's pension amounts. The second clarifies that if the plan has prepared various schedules and engaged its auditor to audit and report on those schedules based on the best practice recommendations in the AICPA's related SLGEP whitepaper (see above), the employer auditor could utilize the report of the plan auditor as audit evidence. Interpretation No. 1, "Auditor of Governmental Cost-Sharing Multiple-Employer Pension Plan," to AU-C section 805, Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement, also answers two questions. First, it discusses the type of report the plan auditor may issue (and provides an illustration) if engaged to audit schedules that are prepared by the plan as described in the AICPA's related SLGEP whitepaper (see above). Second, it addresses the issue of materiality when the plan auditor is engaged to opine on such schedules.
    Additional AICPA and Other Pension-Related Resources
    The following summary describes other resources available to members needing to address GASB's pension-related standards.

    GASB Pronouncements. The GASB has made available the following pronouncements on its Web site: GASB Statement No. 67, Financial Reporting for Pension Plans, and GASB Statement No. 68.

    GASB Educational Resources. The GASB has made available numerous pension-related resources on its Web site that include podcasts, fact sheets, articles, and more which are all available to the public.

    GAQC Archived Web Events on Pensions (available now to GAQC members). The GAQC has offered several Web events on the GASB pension standards. GAQC members can access the following archived events (note that there is no continuing professional education (CPE) available for listening to an archived event):
      An Overview of the New GASB Pension Accounting Standards, addresses the new GASB accounting. While this event was originally done in February 2013, it is still relevant. Thus, for those that need assistance in understanding the accounting issues related, primarily to GASB Statement No. 68, this 2-hour archived web event is an excellent resource.
      The GASB Pension Standards Part I: Considerations for Cost-Sharing Plans, Participating Employers, and Their Auditors addresses the accounting and auditing challenges related to cost-sharing plans and their participants.
      The GASB Pensions Standards Part II: Considerations for Agent Plans, Participating Employers and Their Auditors addresses the accounting and auditing challenges related to agent plans and their participants. Note that this event was conducted prior to the AICPA finalizing the agent interpretations described in this GAQC Alert and the related SLGEP agent whitepaper. Therefore, if you listen to this archived event, be sure to also focus on the final agent guidance to ensure an appropriate understanding.
    CPE Rebroadcast of GAQC Cost-Sharing Web Event. The GAQC will hold a CPE rebroadcast of its previously held Web event titled, The GASB Pension Standards Part I: Considerations for Cost-Sharing Plans, Participating Employers, and Their Auditors, on Monday, August 4, 2014, from 1:00 PM – 3:00 PM (Eastern Time). Access registration information.

    GASB Matters Section of GAQC Web Site. The GAQC Resource Center titled, "GASB Matters," consolidates issues, resources, and communications from the AICPA and the SLGEP on GASB matters. Included on this page of the GAQC site is a link to a secondary page titled, "GASB Pensions: Issues and Resources," that summarizes or links to much of the guidance and resources described in this GAQC Alert.

    AICPA Governmental Conferences. Anticipating the significant effect the new GASB pension standards will have on plans, employers, and their auditors, the AICPA will provide extensive coverage of these matters in the 2014 AICPA governmental conference agendas. Consider attending the following conferences:
      National Governmental Accounting and Auditing Update Conference (GAAC). This conference is offered in two locations on different dates. GAAC East will be held in Washington, DC, on August 11-12, 2014. Access registration information for GAAC East. GAAC West will be held in Denver, CO on September 23-24, 2014. Access registration information for GAAC West.
      Governmental and Not-for-Profit Training Program. This conference will be held in Las Vegas, NV October 22-24, 2014.
    Status of Additional AICPA Pension-Related Guidance Expected
    A new governmental pension chapter for the Audit and Accounting Guide, State and Local Governments, is currently under development. The chapter will cover various plan and employer auditor considerations, including ramifications when an employer auditor is not able to obtain sufficient appropriate evidence in order to opine on the pension amounts included in employer financial statements. The timing of the issuance of this chapter is still uncertain but the GAQC will issue an announcement when it is available (note that it is not included in the 2014 edition of the Guide described in the sidebar to this GAQC Alert). The SLGEP will also continue to address other practice issues associated with the pension standards as they arise and communicate needed information via the GAQC and the GASB Matters section of the GAQC Web site.
    *   *   *   *   *
    Sincerely,

    AICPA Governmental Audit Quality Center
     
    Stay Informed

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