Three Ways to Keep Up with Standards
The accounting profession is controlled by standards, and regardless of our viewpoints, adhering to these standards is integral to any practice management plan. The primary providers of our professional standards include:
- Financial Accounting Standards Board (FASB) Accounting Standards Codification — the source of authoritative nongovernmental GAAP
- American Institute of CPAs (AICPA), including:
- Statements on Standards for Accounting and Review Services (SSARS)
- Statements on Standards for Tax Services (SSTS)
- Public Company Accounting Oversight Board (PCAOB) and Securities and Exchange Commission (SEC) for public companies
- Governmental Accounting Standards Board (GASB) for governmental entities
- IRS Circular 230 for tax practices
These standards, having evolved with economic, industrial and regulatory changes, give users a basis for evaluating our products. Some of our standards came about from financial failures or professional deficiencies (think Enron or the savings and loan failures). The AICPA’s Peer Review Program and malpractice issues further stress the importance of compliance with our professional standards.
With so many standards to keep track of, how can you keep up? Here are three ways.
1. Leverage CPE
The most common way to keep up with standards is through continuing professional education (CPE). The New Jersey State Board of Accountancy and the AICPA both have mandatory CPE requirements to ensure compliance with professional standards. CPE requirements are further expanded if practice areas include governmental audits and employee benefit plans. Some of the avenues for obtaining CPE are:
- Seminars, webinars and conferences offered by the AICPA, NJCPA or other registered providers
- NJCPA chapter offerings, such as season pass seminars and annual tax updates
- Membership in the AICPA’s Governmental Audit Quality Center and Employee Benefit Plan Audit Quality Center, when applicable
- Various self-study programs such as “CPE Direct” offered through the Journal of Accountancy
Firms can conduct in-house seminars throughout the year and encourage staff to join NJCPA interest groups or other professional groups that offer CPE programs.
Firms can also monitor staff’s CPE and develop plans tailored to practice areas and clients’ industries. With several new accounting pronouncements and reporting standards taking effect, it’s best to emphasize these for audit and attest teams. Needless to say, tax staff should be focused on the Tax Cuts and Jobs Act.
2. Use Engagement Templates
It’s important to develop templates for engagement files. Templates assist the engagement teams in meeting the performance and reporting standards for each level of assurance associated with financial statements. They should be utilized during all phases of the engagement and be updated at least annually by a quality control committee. The contents of these templates vary depending on the assurance level of the financial statements and the nature of the client’s industry. They should be used for both GAAP-basis financials and financials prepared using a special purpose framework. They should include checklists, recommended inquiries and analytical procedures (for reviews and audits) and audit programs. There are a number of sources for engagement checklists and guides; our firm uses Checkpoint/PPC and AICPA publications as our primary reference sources.
3. Establish Quality Control
All CPA firms have a responsibility to conform to professional standards in financial statement and tax-related engagements.
A firm’s quality control document should state the procedures used to provide reasonable assurance that professional standards as well as applicable regulatory requirements are adhered to. A firm should have a quality control committee that is responsible for monitoring compliance with quality control policies. The committee should perform all engagement quality control reviews prior to financial statement issuance as well as the post-issuance review and inspections.
The financial cost of keeping up with professional standards can be significant, including loss of billable hours; fees for attending seminars and webinars; travel expenses for out-of-town events; and subscriptions to reference and research libraries. But the professional and financial costs of not keeping up with standards can be more significant and may lead to negative peer reviews and/or professional liability issues.
Michael J. Swantic
Michael Swantic, CPA, is a partner at Cullari Carrico LLC. He is a member of the NJCPA State Taxation and Cannabis interest groups.
This article appeared in the January/February 2019 issue of New Jersey CPA magazine. Read the full issue.