2020 Special Considerations in Auditing Financial Instruments - Audit Guide

Get serious about auditing financial instruments.

Entities of all sizes may be subject to risks of material misstatement when using financial instruments. This Audit Guide provides a foundational understanding of financial instruments, as well as practical assistance for auditors to develop an effective audit approach to address such risks.

Understand, implement and apply

Implementation guidance is provided for assessing an entity’s internal control and responding to associated risks, as well as guidance on reporting considerations. A series of case studies is provided to help you understand and apply the concepts specific to financial instruments, including the use of service organizations and accounting for hedging activities.

Developed by experts

This AICPA Audit Guide was developed by leading auditing and financial instrument experts in public practice to provide CPAs with foundational information on financial instruments and related audit considerations.

Changes from the 2016 edition

Conforming updates to FASB ASC content reflect the following ASUs:

• ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
• ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
• ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
• ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
• ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement
• ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments

Relevant auditing guidance

The following standards are discussed in greater detail throughout this guide to address audit considerations unique to financial instruments:

• AU-C section 540B, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures
• AU-C section 315B, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement
• AU-C section 330B, Planning an Audit
• AU-C section 500B, Audit Evidence
• AU-C section 501B, Audit Evidence – Specific Considerations for Selected Items