By: Marci Thomas
At the AICPA conference there was some discussion about certain single audit reports being modified for single audit communications issued on or after December 15, 2012. The financial statement opinions and modifications as well as the report on internal control and compliance over government auditing standards will have new report forms for periods ending on or after December 15, 2012 with early adoption prohibited. The confusion arises because the clarity standards call for new report forms for the periods ending on or after.
The issue deals with the restricted us/purpose alert on the communications.
Restricted Use/Purpose Alert Paragraph—OMB Circular A-133 Reports on Compliance and Internal Control over Compliance
In December 2011, the ASB issued SAS No. 125 (AU-C 905), Alert That Restricts the Use of the Auditor’s Written Communication. SAS No. 125 (AU-C 905) supersede SAS No. 87 (AU 532), Restricting the Use of an Auditor’s Report, and amend, among other standards, AU-C 260, The Auditor’s Communication With Those Charged With Governance, AU-C 265, Communicating Internal Control Related Matters Identified in an Audit, and AU-C 935, Compliance Audits.
SAS No. 125 and AU-C 905 are effective for the auditor’s written communications related to audits of financial statements for periods ending on or after December 15, 2012. For all other engagements (like the compliance audits) conducted in accordance with GAAS, SAS No. 125 and AU-C 905 are effective for the auditor’s written communications issued on or after December 15, 2012.
Therefore, the Yellow Book reports (financial statements) would contain a restricted purpose alert instead of a restricted use alert but the effective date is for periods ending on or after December 15, 2012.
OMB Circular A-133 report on compliance and internal control over compliance would contain a “purpose alert” instead of a “restricted use alert” paragraph but the effective date is for communications issued on or after December 15, 2012. .
This sets up an interesting conflict with the two different effective dates because the Yellow Book report on internal control over financial reporting and compliance and other matters is considered a written communication related to the audit of the financial statements uses the general date for the clarified standards BUT the OMB Circular A-133 report on compliance and internal control over compliance would follow the effective date for other engagements conducted in accordance with GAAS. So the OMB Circular A-133 compliance and internal control over compliance audit reports, the purpose alert is included in reports issued on or after December 15, 2012, regardless of the fiscal year end of the period that was audited.
In December 2012 the AICPA issued a technical practice aid related to this topic. In their response to the question, which effective date applies to the compliance audit was “ Some auditors view the compliance audit performed in accordance with AU-C section and Circular A-133 as related to the audit of the financial statements because A-133 requires a financial statement audit. Others do not. If the auditor, in his/her judgment believes that the compliance audit relates to the financial statements then the AU 532 restricted use language is appropriate. If not, the language identified above is appropriate. All audits with reports for periods ending on or after December 15, 2012 should implement the AU 905 language.
Don’t Miss Marci Thomas at the Not-for-Profit Conference!
Marci will be leading several sessions at this year’s event on May 21 at the Grandover Resort & Conference Center in Greensboro! For more information, visit www.ncacpa.org/NFP.
Marci Thomas, CPA, MHA, is an author and discussion leader for Loscalzo Associates, Ltd., and also performs quality control and risk assessment consultations for the firm. Marci is also a clinical assistant professor at the University of North Carolina at Chapel Hill, where she teaches Healthcare Consulting and Financial Leadership. Additionally, she is a member of NCACPA’s Board of Directors and serves on the Not-for-Profit and Governmental Accounting & Auditing Committees.