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AUDITING
The AICPA Auditing Standards Board (ASB) issued Statement on Auditing Standards (SAS) no. 114, The Auditor’s Communication With Those Charged With Governance, which supersedes SAS no. 61, Communication With Audit Committees, as amended. The new SAS establishes standards and provides guidance to auditors of nonissuer financial statements on matters to be communicated to those charged with governance. Among other things, SAS no. 114 requires such communications to provide an overview of the planned scope and timing of an audit and significant findings from it. The statement also encourages auditors to use professional judgment in deciding to whom, among those charged with governance, they should communicate particular matters and requires them to evaluate the adequacy of that communication.

SAS no. 114 is effective for periods beginning on or after December 15, 2006. It is summarized at http://tinyurl.com/y4pzvp and can be ordered (product no. 060709) at www.cpa2biz.com.

The AICPA staff has developed an audit risk alert to aid auditors in applying SAS no. 112, Communicating Internal Control Related Matters Identified in an Audit. The alert, titled Understanding SAS no. 112 and Evaluating Control Deficiencies, clarifies that asking an auditor to draft financial statements does not cause a control deficiency, although it may be the result of one. It also explains differences between SAS no. 112 and SAS no. 60 and provides case studies of control deficiencies. The alert is available in printed and electronic form at www.cpa2biz.com/stores/sas112.

The AICPA Accounting and Review Services Committee (ARSC) issued an exposure draft of a Statement on Standards for Accounting and Review Services (SSARS), Elimination of Certain References to Statements on Auditing Standards and Incorporation of Appropriate Guidance Into Statements on Standards for Accounting and Review Services. The ARSC determined it would be in the best interest of practitioners performing compilations and reviews to eliminate certain references to the auditing literature from the SSARSs and, instead, incorporate the concepts into the SSARSs themselves. The proposed statement would be effective for compilations and reviews of financial statements for periods ending on or after December 15, 2007. E-mail comments to Michael Glynn at mglynn@aicpa.org by May 18. To download the document, visit http://www.aicpa.org/download/members/div/auditstd/ED_SSARS.pdf.

The International Auditing and Assurance Standards Board issued three exposure drafts of proposed international standards on auditing (ISAs) that follow new drafting conventions designed to enhance the clarity of its pronouncements. The key elements include basing the standards on objectives, rather than procedural considerations; using the word shall to identify requirements accountants are expected to follow in most engagements; eliminating the present tense to describe accountants’ actions; and making structural improvements to enhance the standards’ readability and understandability.

The proposed standards are as follows:

• ISA 320 (Revised and Redrafted), Materiality in Planning and Performing an Audit.

• ISA 450 (Redrafted), Evaluation of Misstatements Identified During the Audit.

• ISA 260 (Revised and Redrafted), Communication With Those Charged With Governance.

Comments are due by February 15 and should be limited to the application of the new drafting conventions. The EDs are available at www.ifac.org/EDs.

EDUCATION
The International Accounting Education Standards Board of the International Federation of Accountants (IFAC) is seeking comments on an ED of its three-year strategic and operational plan.

Proposed high-priority activities beginning this year include

• Conducting a fundamental review of the Framework for International Education Statements, considering developments in accounting education and the profession as a whole since this document was first written.

• Developing a benchmarking methodology to help IFAC members and others achieve the measurable implementation of IESs.

• Reviewing existing IESs to determine areas where the clarity of standards could be improved or additional guidance most usefully developed.

Comments, which are due by February 28, may be e-mailed to edcomments@ifac.org. The ED is available at www.ifac.org/EDs.

ENFORCEMENT
The Financial Crimes Enforcement Network (FinCEN) launched FinCEN Updates, a free e-mail subscription management service that CPAs and others can use to stay informed of news, rulemaking, advisories, enforcement actions and other developments at FinCEN. The service allows users to customize their updates to particular topics and to password-protect their accounts. To subscribe, go to http://service.govdelivery.com/service/multi_subscribe.html?code=USFINCEN.

FINANCIAL REPORTING
The IASB issued International Financial Reporting Standard (IFRS) 8, Operating Segments, which requires entities to adopt a “management approach” to reporting the financial performance of operating segments. This approach requires management to disclose information used internally in evaluating segment performance and deciding how to allocate resources to operating segments. Management would have to explain the basis on which segment information is prepared and reconcile differences with amounts recognized on the income statement and balance sheet.

IFRS 8 replaces IAS 14, Segment Reporting, and aligns segment reporting with FASB Statement no. 131, Disclosures About Segments of an Enterprise and Related Information.

The change is part of a joint short-term convergence project the IASB and FASB have under way to reduce the differences between international financial reporting standards and U.S. GAAP. IFRS 8 applies to periods beginning on or after January 1, 2009, but earlier application is permitted.

GOVERNMENT ACCOUNTING
GASB issued Statement no. 49, Pollution Remediation Obligations, to provide more consistency in how governments report the impact of current and prospective environmental cleanup costs. The statement (see Official Releases, page 81) identifies events that trigger recognition of expenses and liabilities, which would be estimated by expected cash flows, the first time the measurement technique will be employed by governments, GASB said. The statement will be effective for financial reporting periods beginning after June 15, 2007.

The Financial Systems Integration Office and the Office of Management and Budget (OMB) released an exposure draft of a Common Government-wide Accounting Classification Structure (CGAC) for use by all federal agencies. Facilitated sessions to discuss comments are scheduled for February, before the final structure is adopted.

The CGAC—part of the federal government’s effort to standardize the development and implementation of its financial management systems—is designed to reduce the cost and improve the quality of agency financial systems by establishing a standard way to classify the financial effects of government business activities. Federal agencies are expected to adopt the finalized structure when they implement new financial management systems, make major upgrades to an existing system or switch to a shared vendor. Eventually, the CGAC structure will be mandatory for all federal agencies. The ED and the results of an information survey on the topic are available at www.fsio.gov/fsio/fsiodata.

INTERNATIONAL
The International Public Sector Accounting Standards Board of the International Federation of Accountants (IFAC) has issued an exposure draft, ED 32, Financial Reporting Under the Cash Basis of Accounting—Disclosure Requirements for Recipients of External Assistance (www.ifac.org/News/LastestReleases.tmpl).

ED 32 strengthens disclosure of financial information by governments and government agencies in developing countries about external assistance, including emergency assistance and development aid, they receive. It is intended to increase the transparency of financial statements and heighten the accountability of aid recipients. The board will field-test ED 32 before it is approved. Comments are due March 31.

PROFESSIONAL ISSUES
The AICPA has published “Take Charge of Your Career,” a five-step guide to help current and aspiring CPAs with their career planning. It is available free from the Financial Management Center at www.aicpa.org/CPACareerPath.

RETIREMENT PLANS
Sponsors of 401(k) plans typically don’t provide enough information about the fees charged by mutual funds and other investment products, and Congress should require them to disclose investment and recordkeeping fees that participants bear, according to a GAO report.

The study recommended that Congress amend the Employee Retirement Income Security Act (ERISA) to prohibit plan sponsors from providing the information “in a piecemeal fashion” that makes direct comparisons difficult. Congress also should amend ERISA to require 401(k) service providers to reveal any compensation they receive from other providers, the GAO proposed. In addition, the Department of Labor should require plan sponsors to report summaries of fees paid by participants out of plan assets, the GAO said. The full report is available at www.gao.gov/new.items/d0721.pdf.

FYI
Norwood J. Jackson Jr. was appointed to a five-year term on the Federal Accounting Standards Advisory Board effective January 1. Jackson, managing vice-president at consulting firm AOC Solutions Inc., has more than 35 years experience in public and government accounting, auditing and advisory services. He previously was deputy controller of the Office of Federal Financial Management at the OMB, deputy auditor of public accounts for the commonwealth of Virginia, and a partner at KPMG LLP. Jackson also is a former member of the AICPA Auditing Standards Board.

CORRECTION
A January News Digest item on openings for professional accounting fellows in the SEC’s Office of the Chief Accountant should have said that the positions are salaried. The JofA regrets the error.

The fellowships are for two years beginning June 2007. For two positions, the SEC prefers candidates with experience applying U.S. GAAP or International Financial Reporting Standards; candidates for the third position should have experience in analyzing and implementing auditing and other standards. Applications are due as soon as possible. For information, call Mark Barrysmith at 202-551-5304 or Josh Jones at 202-551-5334.