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Ebpaqc 2010 form 11 k audit live forum
EBPAQC 2010Form 11-K Audit Live Forum

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Employee benefit plan audit quality center

Employee Benefit Plan Audit Quality Center

2010 Form 11-K Audit

Live Forum

March 23, 2010


Marilee Lau, CPA


EBPAQC Executive Committee

Hal Hunt, CPA

Mayer Hoffman McCann P.C


Lee Piper, CPA

PricewaterhouseCoopers LLP

Darrel Schubert, CPA

Ernst & Young LLP

William Seymour, CPA

SB & Company, LLC


Cpe credit for participating
CPE Credit For Participating

  • Must have registered for CPE credit prior to this live forum

    • CPE Credit Approval Form posted on webinar instruction site

  • Listen for announcement of 4 CPE codes (7 digits: ALL_ _ _ _ ) and 4 polling questions during the live forum

  • Record CPE Codes on CPE Credit Approval Form (no need to record polling questions)

  • Return completed form (by fax or mail) to AICPA Service Center for record of attendance

  • Keep a copy of completed CPE Credit Approval Form for your records


Marilee Lau, CPA


EBPAQC Executive Committee


Today s forum
Today’s Forum

  • PCAOB/SEC report requirements and PCAOB inspections

  • Fair value of alternative investments using net asset value and other investment valuation issues

  • New requirements related to subsequent events - ASC 855 (FAS 165)

  • A brief look at PCAOB AS No. 7

  • Auditor communications

  • Prohibited services

  • The DOL new EFAST 2 filing system and how this may affect your 11-K audit clients

Pcaob sec report requirements pcaob inspections
PCAOB/SEC Report Requirements & PCAOB Inspections

Hal J. Hunt, CPA


Mayer Hoffman McCann PC

Public company accounting oversight board pcaob
Public Company Accounting Oversight Board (PCAOB)

Established in 2002

CPA firms must register with the PCAOB before preparing or issuing audit reports on financial statements of “issuers”

  • An “issuer” is any public company, including a non U.S. company, that is required to file reports with the SEC or that has filed with the commission a registration statement for a public offering of its securities.

  • An “issuer” includes employee stock purchase, savings and similar plans for which Forms 11 K are filed with the commission.

Sec rules and regulations
SEC Rules and Regulations

  • Form S-8

  • Form 11-K

  • Exemptions

  • Consents

Form s 8
Form S-8

  • Registration of employer stock to be issued pursuant to an employee benefit plan

  • Registration of participants’ interest in a plan if:

    • Plan is both voluntary and contributory and

    • Not managed by an insurance company (separate account) or a bank (common trust fund) or

    • A single-employer plan in which employee contributions are invested in employer securities

  • Determination based on advice SEC counsel!

Form 11 k
Form 11-K

  • For Annual Reports of Employee Stock Purchase, Savings and similar plans, interest in which constitutes securities registered under Securities Act of 1933

    • Existing plan which adds employer securities

    • New plan which includes employer securities

Filing requirements
Filing Requirements

  • Due Dates

    • 90 days after the end of the fiscal year of the Plan if filed under SEC format

    • Plans subject to ERISA and using the ERISA format within 180 days after the end of the fiscal year of the Plan

  • Late filings

    • Could have an effect on Registrant

    • 12b-25 Extension request for 15 calendar days

Financial statements and schedules
Financial Statements and Schedules

  • SEC Format Section 15(d)

    • Article 6A of Regulation S-X

    • Presentation and disclosures are very different

    • 2 years of statements of financial condition and 3 years of statements of income and changes in plan equity

  • ERISA Format

    • Full Scope Audit required/Limited Scope is not acceptable

    • Modified cash basis of accounting is acceptable

    • 2 years of statements of net assets and 1 year of statement of changes

    • Prior year limited scope audit-

      Upgrade of prior year audit required


  • Audited Financial Statements not required in 11-K if:

    • Less than 100 participants and filing in accordance with ERISA

    • Unaudited financial statements could be included in the 11-K filing

  • Otherwise would need audited financial statements using the SEC format

Pcaob standard no 1 references to pcaob standards
PCAOB Standard No. 1 References to PCAOB Standards

  • Title of audit report for filings with SEC

    • Report of Independent Registered Public Accounting Firm

  • Must refer to standards of the Public Company Accounting Oversight Board (United States) and cannot refer to GAAS.

    • SEC could reject filings if GAAS is referred to

  • DOL Regulations require reference to GAAS

    • DOL will accept dual references

    • Could reject filings if the only reference is to PCAOB standards

Consents of independent auditors
Consents of Independent Auditors

  • Auditor required to consent to the use of their report in a 1933 Act registration statement

  • Should be dated close to the filing date (generally within 3 to 5 days in advance of filing date)

Change in auditors
Change in Auditors

  • Form 8-K not required

  • "Five-day letter" required by PCAOB rules to report termination of client-auditor relationship (SEC is copied on notification to client)

  • Form 5500 Schedule C requires reporting of change in auditor

  • Two consents needed: predecessor & successor

  • Effect on audit opinions

  • Additional audit procedures required

The pcaob inspection process
The PCAOB Inspection Process

  • Once registered and performing audits, the firm and its partners are subject to the PCAOB requirements including inspection:

    • Firms that audit 100 or more “issuers” are subject to annual inspections.

    • Firms that audit 100 or less “issuers” are subject to inspections every three years.

      The PCAOB is not only inspecting firms but also individual accountants and others at firms who participate in audits of “issuers”.

      PCAOB inspections also include non-employees, such as independent contractors who participate in the audit.

The pcaob inspection process1
The PCAOB Inspection Process

  • PCAOB inspections focus on the firm’s compliance with provisions of Sarbanes Oxley which require:

    • Certain non-audit services are prohibited!

      • To be covered by Bill Seymour later in this webinar

    • Certain non-audit services are permitted that are pre-approved by an independent audit committee of the company.

The pcaob inspection process2
The PCAOB Inspection Process

  • Lead and reviewing partners must take a five year break from the audit engagement after each five years of service, and audit partners with lesser involvement take a break for two years after seven years of service.

  • Firms with fewer than five audit clients and 10 partners are exempt from the partner rotation requirements. Exemption is not automatically granted and depends upon the results of the triennial PCAOB inspections and the competence of the key personnel of the audit engagement teams.

The pcaob inspection process3
The PCAOB Inspection Process

  • Any person who was on the audit engagement team during the one year period preceding the date that audit procedures commenced does not currently work for the audit client in a financial reporting oversight role

  • Communications with the audit committee, beginning with the execution of the engagement letter and through all stages of the audit engagement

  • Before the auditor's report on the financial statements is filed with the SEC, there is evidence that the financial statements and any accounting issues were discussed with the audit committee

The pcaob inspection process4
The PCAOB Inspection Process

  • The PCAOB will also inspect compliance with its auditing, attestation, quality control, ethical and independence standards.

    • The independence standards include Rule 2 01 of Regulation S X of the commission's rules relating to auditor independence.

  • Under Sarbanes Oxley, any violation of the PCAOB's rules will be treated in the same manner and subject to the same penalties as a violation of the Exchange Act.

  • The inspectors will review client acceptance and continuance policies, including documentation evidencing background checks and other considerations.

The pcaob inspection process5
The PCAOB Inspection Process

The PCAOB inspectors will approach the inspection with the emphasis on “tone at the top”

  • Owners of the firm will be interviewed to access their commitment to audit quality, how they are compensated and their criteria for employee promotion.

  • Employees and prospective partners will be interviewed to determine what message is being disseminated throughout the firm and what they need to do to advance in their careers with the firm.

  • Inspectors will compare the information obtained from the firm’s owners with the information obtained from the firm’s employees and any discrepancies will be noted.

The pcaob inspection process6
The PCAOB Inspection Process

  • The best way to prepare for a PCAOB inspection is for the firm to have a rigorous and regular internal inspection program:

    • The PCAOB considers the firm's internal inspection process one of the most important components of quality controls.

    • A firm's internal inspection should include testing the firm's compliance with quality controls, reviewing selected engagements, summarizing the findings, determining the corrective actions to be taken as a result of any deficiencies, communicating the inspection findings and suggested improvements to the personnel involved, following up to make sure the corrective actions are implemented and documenting all of the above.

The pcaob inspection process7
The PCAOB Inspection Process

  • Internal inspection will likely choose (as will the PCAOB in its inspection) engagements with a high level of assessed risk such as:

    • restatements,

    • litigation,

    • investigations or turnover of auditors,

    • engagements that have not been previously reviewed,

    • and at least one engagement worked on by each audit partner at the firm.

The pcaob inspection process8
The PCAOB Inspection Process

Matters noted in past PCAOB inspections relating to 11-K audits related to failure to perform and document adequate procedures with respect to:

  • Testing existence of investments

  • Testing of investment valuations and transactions

  • Testing of payroll data used in testing contributions

  • Testing of participant loans and benefit payments

The pcaob inspection process9
The PCAOB Inspection Process

  • Audit documentation must contain sufficient information to enable an experienced auditor, with no previous connection to the engagement but with knowledge of the relevant industry and its accounting and auditing issues, to understand the nature, timing, extent and results of the procedures performed, the evidence obtained and the conclusions reached.

  • The documentation should also record who performed the work, the date such work was completed, who reviewed the work and the date of such review.

  • The failure to prepare adequate documentation, particularly when the risk of a material misstatement associated with an assertion is high, is considered a serious violation of the PCAOB rules.

The pcaob inspection process10
The PCAOB Inspection Process

  • Documentation of auditing procedures related to the inspection of significant contracts or agreements should include abstracts or copies of the documents or refer to where they can be found.

  • PCAOB inspectors expect documentation to include third-party audit evidence.

    • For example, obtain written confirmation of plan investments

  • PCAOB inspectors are certain to ask what steps the firm has taken in an audit engagement to detect fraud, as required by SAS 99.

The pcaob inspection process11
The PCAOB Inspection Process

  • 45 days after the audit report release date, a complete and final set of audit documentation must be assembled for retention.

  • Audit documentation must be retained for seven years from the date that all necessary auditing procedures are completed, sufficient evidence has been obtained and the auditor grants permission to use the auditor's report, unless a longer period of time is required by law.

  • After the document completion date, audit documentation must not be deleted or discarded

    • but information may be added to record audit procedures performed as long as it indicates the date the information was added, the name of the person who prepared the additional documentation and the reason for adding it.

The pcaob inspection process12
The PCAOB Inspection Process

  • The PCAOB inspectors will likely conduct an exit interview with the firm or with individual partners.

  • A draft inspection report points out any deficiencies that it found.

  • The firm may object to or otherwise comment on the draft inspection report and may suggest steps that it may take to address any deficiencies.

  • The PCAOB may adopt its draft report as final, revise the draft report, or continue or supplement the inspection before issuing a final report.

  • After a final inspection report is issued, the PCAOB makes it available for review by the firm, and sends a copy to the commission and to each appropriate state regulatory authority, together with the firm's response to the draft report.

The pcaob inspection process13
The PCAOB Inspection Process

  • If a final inspection report contains criticisms of the firm’s quality controls, the firm may demonstrate that it has improved such controls no later than 12 months after the issuance of the PCAOB's final inspection report.

  • The PCAOB will notify the firm whether it deems the deficiencies to have been adequately fixed, and if not, why not.

  • If the PCAOB determines that the firm has adequately fixed the deficiencies, it will notify the firm, the commission and any state regulatory authority to which it had supplied the final inspection report of this fact.

  • Defects in the quality controls that the firm has not adequately corrected during this time period shall be made public.

The pcaob inspection process14
The PCAOB Inspection Process

  • If an inspection leads to an investigation, the PCAOB may commence a disciplinary hearing to determine whether there has been any violations.

  • A violation could result in the imposition of penalties, temporary suspension or permanent revocation of the firm's registration; the temporary or permanent suspension of a person from further association with any registered public accounting firm; prohibiting a firm from accepting new audit clients for a period of time; the assignment of a supervisor to an associated person; requiring a firm to terminate one or more audit engagements; requiring a firm to make functional changes in supervisory personnel organization or in engagement team organization

  • .

The pcaob inspection process15
The PCAOB Inspection Process

  • A failed inspection could lead to a damaged reputation or worse.

  • The PCAOB and firms have one goal in common: it is the protection of the investing public

Online resources
Online Resources

  • PCAOB: http://pcaobus.org/

  • SEC: http://www.sec.gov/

  • AICPA EBPAQC: http://ebpaqc.aicpa.org/

  • AICPA EBPAQC 11-K Audit Resources: http://ebpaqc.aicpa.org/Resources/Accounting+and+Auditing+Resource+Centers/Form+11-K+Audits+Resource+Center.htm

Lee Piper, CPA


PricewaterhouseCoopers LLP

ASU 2009-12, Measuring the Fair Value of Alternative Investments Using NAV (or Its Equivalent)(a/k/a “The Practical Expedient”)


  • Provides additional guidance on how entities should estimate the fair value of certain alternative investments such as hedge funds, private equity funds, real estate funds, venture capital funds, offshore funds and funds of funds

  • Fair value can be determined using Net Asset Value (NAV) as a practical expedient unless it is probable that the investment will be sold at a price that is different than NAV

Overview continued
Overview (continued)

  • New disclosures of the attributes of all investments within scope of the new guidance is required regardless of whether the reporting entity uses “the practical expedient”

  • Effective for the first annual or interim reporting period ending after December 15, 2009

Key provisions
Key Provisions

  • A reporting entity is allowed to estimate the fair value of certain alternative investments using NAV without further adjustment if NAV is calculated consistent with the guidance in ASC 946, Financial Services – Investment Companies (formerly the AICPA Audit and Accounting Guide, Investment Companies (“the AICPA Guide”)) as of the reporting entity’s measurement date

Key provisions continued
Key Provisions (continued)

  • Does not apply to investments in entities for which fair value is readily determinable, as defined in the Master Glossary of the FASB Accounting Standards Codification (formerly paragraph 3 of FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities)

Key provisions continued1
Key Provisions (continued)

  • Reflects the FASB’s desire to avoid potentially arbitrary adjustments being made to NAV in determining fair value and the FASB’s conclusion that the benefit to financial statement preparers of applying such an expedient outweighed the associated costs and effort to make such adjustments


NAV can be used to estimate fair value provided that:

  • The investment in the entity has all the attributes of an investment company as specified in ASC 946-10-15-2 (formerly paragraph 1.06 of the AICPA Guide), or

  • If one or more of the attributes specified in ASC 946-10-15-2 are not present, the investment is in an entity for which it is industry practice to issue financial statements using guidance consistent with ASC 946, Financial Services – Investment Companies

Restrictions on use
Restrictions on Use

When it is probable that an entity will sell its investment at an amount other than NAV, the practical expedient cannot be used and the guidance in ASC 820, Fair Value Measurements and Disclosures, (formerly FASB Statement No. 157, Fair Value Measurements) should be followed to estimate fair value in those instances

Restrictions on use continued
Restrictions on Use (continued)

A sale of an investment is considered probable only if all of the following criteria are met:

  • Management, having the authority to approve the action, commits to a plan to sell the investment

  • An active program to locate a buyer and other actions required to complete the plan to sell the investment have been initiated

  • The investment is available for sale subject only to terms that are usual and customary for sales of such investments

  • Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn

Required disclosures
Required Disclosures

Required for all investments within the scope of ASU 2009-12 not just those for which the reporting entity has elected to use “the practical expedient”

  • Fair value of investments in each major category and a description of the significant investment strategies of the investee(s) in the major category

  • For each major category of investment that includes investments that can never be redeemed with the investees, but the reporting entity receives distributions through the liquidation of the underlying assets of the investees, the reporting entity’s estimate of the period of time over which the underlying assets are expected to be liquidated by the investees

Required disclosures continued
Required Disclosures (continued)

- The amount of the reporting entity’s unfunded commitments related to investments in the major category

- A general description of the terms and conditions upon which the investor may redeem investments in the major category

- The circumstances in which an otherwise redeemable investment in the major category might not be redeemable due to a restriction and an estimate of when the restriction from redemption might lapse

Required disclosures continued1
Required Disclosures (continued)

  • Any other significant restriction on the ability to sell investments in the major category at the measurement date

  • If it is probable that the reporting entity will sell an investment for an amount different from NAV per share, the entity shall disclose the total fair value of all investments that meet the criteria in ASC 820-10-35-62 and any remaining actions required to complete the sale

Required disclosures continued2
Required Disclosures (continued)

  • If a group of investments would otherwise meet the criteria in ASC 820-10-35-62 but the individual investments to be sold have not been identified such that the individual investments continue to qualify for the practical expedient, the reporting entity shall disclose its plans to sell and any remaining actions required to complete the sale(s)

  • Disclosures are required for each major category of investments rather than for each individual investment

Question what is a major category
Question – What is a “major category”?

A major category is determined based on the nature of risks of the investments, consistent with the guidance for major security types for debt and equity securities in ASC 320, Investments – Debt and Equity Securities (formerly paragraph 19 of FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities)

Other significant clarifications
Other Significant Clarifications

  • The practical expedient can be applied on an investment-by-investment basis but must be applied consistently to the entire investment in that entity

  • If the measurement of NAV is not as of the reporting entity’s measurement date, the most recent measure of NAV should be adjusted to reflect significant events between the measurement dates (i.e., a “roll-forward” could be prepared)

Other significant clarifications continue
Other Significant Clarifications (continue)

  • ASU provides guidance regarding classification in the fair value hierarchy of investments within its scope

    • If reporting entity has ability to redeem its investment with the investee at NAV per share at the measurement date, the fair value measurement shall be categorized as a Level 2 fair value measurement

    • If the reporting entity will never have the ability to redeem its investment with the investee at NAV per share, the fair value measurement shall be categorized as a Level 3 fair value measurement

Other significant clarifications continued
Other Significant Clarifications (continued)

  • If a reporting entity cannot redeem its investment with the investee at NAV per share at the measurement date but the investment may be redeemable with the investee at a later date, the reporting entity shall consider the length of time until the investment will become redeemable in determining whether the fair value measurement of the investment shall be categorized as a Level 2 or a Level 3 fair value measurement

Implementation guidance
Implementation Guidance

Technical Practice Aids: TIS Sections 2220.18-.27 – Long-Term Investments are intended to assist in implementing the provisions of ASU 2009-12 to estimate the fair value of investments in certain entities that calculate NAV and are within the scope of paragraphs 4 and 5 of ASC 820-10-15.

Pcaob and fasb updates and auditor communications
PCAOB and FASB Updates and Auditor Communications

Darrel Schubert, CPA


Ernst & Young LLP

ASC 855, Subsequent Events

Amendment to asc 855
Amendment to ASC, 855

  • On 24 February 2010, the FASB issued an Accounting Standards Update to amend ASC 855, Subsequent Events

  • The guidance in the ASU was effective immediately for all financial statements that have not yet been issued or have not yet become available to be issued

Summary of asc 855 evaluation of subsequent events
Summary of ASC 855: Evaluation of Subsequent Events

  • Entities that file a Form 11-K evaluate subsequent events through the date the financial statements are issued

  • All other entities evaluate subsequent events through the date that the financial statements are available to be issued

Summary of asc 855 disclosure of subsequent events evaluation
Summary of ASC 855: Disclosure of Subsequent Events Evaluation

  • Form 11-K filers

    • Do not disclose the date through which management evaluated subsequent events

    • Same treatment for originally issued financial statements and reissued financial statements

  • All other entities

    • Disclose the date through which management evaluated subsequent events for originally issued statements (available to be issued)

    • Do not have to disclose additional date when financial statements are reissued unless the financial statements are revised for either an error correction or retrospective application of US GAAP

Effect on the auditor s report
Effect on the Auditor’s Report

  • The report date should be when the auditor has obtained sufficient appropriate audit evidence

  • Likely the same date that the entity’s financial statements are “issued” (Form 11-K filers) or “available to be issued” (all other entities)

Applicability and effective date
Applicability and Effective Date

  • Adopted by the PCAOB on 28 July 2009

  • Approved by SEC on 15 January 2010

  • Applies to audit engagements and engagements to review interim financial information pursuant to the standards of the PCOAB

  • Supersedes PCAOB’s quality control standard, SECPS Requirements of Membership, Section 1000.08(f); 1000.39, Appendix E

  • Effective for fiscal years beginning on or after 15 December 2009

Overview pcaob as no 7
Overview – PCAOB AS No. 7

  • Provides a framework for the engagement quality reviewer (EQR) to objectively evaluate the significant judgments made and related conclusions reached by the engagement team in forming the overall conclusion about the engagement

  • Not intended to be a second opinion

  • Focuses the EQR’s attention on areas that are most likely to contain a ‘significant engagement deficiency’ and increase the likelihood of identifying and correcting those deficiencies before the audit report is issued

  • Improvement to already important aspect of a firm’s system of quality control

Eqr objective
EQR Objective

  • Perform an evaluation of the significant judgments made and conclusions reached by the engagement team in forming the overall conclusion on the engagement

    • Discussions with engagement partner and team and review of audit documentation

    • Did engagement team respond appropriately to significant risks; does documentation for areas reviewed support the conclusions reached by the team

    • Provide concurring approval based on information that comes to reviewer’s attention

    • Withhold concurring approval if (1) team did not obtain sufficient appropriate evidence, (2) team reached inappropriate overall conclusion, (3) report is not appropriate or (4) firm is not independent of the client

Other provisions
Other Provisions

  • Competence of reviewer - reviewer must possess the level of knowledge and competence to serve as the person who has overall responsibility for the same type of engagement

  • Independence, integrity and objectivity - reviewer cannot make decisions for the engagement team, assume any responsibilities of the engagement team, or supervise the engagement team with respect to the engagement subject to the engagement quality review

  • An associated person of a registered public accounting firm -reviewer does not need to be from the same accounting firm as the engagement team

Staff q a on eqr documentation
Staff Q&A on EQR Documentation

  • On 10 February 2010, the PCAOB issued a Staff Q&A providing implementation guidance for EQR documentation

  • The PCAOB clarified that the reviewer is not required to document all interactions with the engagement team

  • However, for a significant engagement deficiency, the reviewer documents how the significant engagement deficiency was communicated to the team, why it was important and how EQR evaluated the team’s response

Reporting on internal control matters
Reporting on Internal Control Matters

  • SAS 115 updated definitions to align with PCAOB definitions

  • Communicate both significant deficiencies and material weaknesses in writing to management and those charged with governance

  • Timing of communication – prior to the issuance of the auditor’s report

Pcaob communication requirements

Responsibility under GAAS

Major issues discussed with management prior to retention

Significant audit adjustments

Unadjusted misstatements considered to be immaterial

Auditor judgments about quality of accounting principles

Adoption of, or change in, accounting principle

Responsibility for other information

Methods of accounting for significant unusual transactions or for controversial or emerging areas

Sensitive accounting estimates

Consultations with other accountants

Disagreements with management

Difficulties encountered in performing the audit

PCAOB Communication Requirements

Additional requirements of sas 114
Additional Requirements of SAS 114

  • Planned scope and timing of audit

  • Representations we are requesting from management

  • Other findings or issues arising from the audit that are, in the auditor’s judgment, significant and relevant to those charged with governance

  • Certain matters related to going concern when conclude that substantial doubt exists

Sec communication responsibilities
SEC Communication Responsibilities

  • SEC rules require certain additional matters to be communicated to audit committees prior to filing the Form 11-K:

    • All critical accounting policies and practices;

    • All material alternative accounting treatments discussed with management

    • Other material written communications with management

Prohibited services and efast 2
Prohibited Services and EFAST 2

William Seymour, CPA


SB & Company, LLC

Form 5500 overview
Form 5500 Overview

  • All Forms 5500 must file electronically for plan years commencing on or after January 1, 2010, except for 2008 Forms 5500

    • Includes amended and late filing, except for 2008 Forms (2008 Form 5500 and 2008 amended and late filing use EFAST- (1) or paper)

  • An individual (e.g. officer of an employer, preparer) must register prior to being able to file the return

    • The following types of electronic credentials are available:

      (1) filing author, (2) filing signer, (3) schedule author,

      (4) transmitter, and (5) third-party software developer

  • 2010 short years cannot use 2009 forms; can currently use i-File method

  • EFAST-(1) cannot be used after 10/15/2009

Schedule c
Schedule C

  • Recordkeepers, TPAS still have lots of questions

  • Anticipate delays in receiving the 5500s as vendors continue to struggle with this form

  • Rarely will the amounts reported on the Schedule C tie to the plan expenses reported on the Form 5500 Schedule H

Schedule c resources
Schedule C Resources

  • http://www.dol.gov/ebsa/faqs/faq_scheduleC.html

  • http://www.dol.gov/ebsa/faqs/faq-sch-C-supplement.html

  • Questions concerning this guidance may be directed to EBSA’s Office of Regulations and Interpretations at (202) 693-8523

Fasb codification overview
FASB Codification Overview

  • The FASB Accounting Standard Codification (Codification) was launched on July 1, 2009 becoming the single source of authoritative non-governmental US GAAP (other than guidance issued by the SEC).

  • The Codification is not intended to change GAAP, it only changes the way accounting issues are researched and US GAAP is referenced. This new structure organizes pronouncements into an easily accessible and user-friendly manner.

Fasb codification overview continued
FASB Codification Overview(Continued)

  • This means that reference to certain common FASB standards in disclosure notes to the financial statements, for example, will be referenced using the new FASB codification.

  • The example below illustrates how FAS 157 and FAS 168 would be referenced under the new codification.

Fasb codification resources
FASB Codification Resources

  • To prepare for the change, FASB offers a free online Codification tutorial at http://asc.fasb.org/

  • The Center for Audit Quality also prepared the Authoritative Accounting and Reporting Standards for Employee Benefit Plans: FASB Accounting Standards Codification. This can be located at the Center’s website.

  • The Codification Topics for plan accounting:

    • 960 – Defined Benefit Plans

    • 962 – Defined Contribution Plans

    • 965 – Health and Welfare Plans

Prohibited services overview
Prohibited Services Overview

  • Consistent with the direction of Section 208 (a) of the Sarbanes Oxley Act (SOX) of 2002, rules were adopted to:

  • revise the regulations related to non-audit services that, if provided to an audit client, would impair an accounting firm’s independence,

  • require an issuer’s audit committee to approve all audit and non-audit services provided by the auditor of the issuer’s financial statements,

  • prohibit certain audit partners from performing key services for more than five or seven years (ensuring partner rotation), and

  • prohibit an accounting firm from auditing an issuer’s financials if members of the issuer’s management had been members of the accounting firm’s engagement team one year prior to the audit


  • The audit committee and external audit function are designed to be independent from management.

  • The audit committee, therefore, must pre-approve all audit and non-audit services provided by an auditing firm. Section 204 of SOX mandates that the auditing firm report directly to the entity’s audit committee, thus ensuring independence and preventing undue influence from the entity’s management.

Common prohibited services
Common Prohibited Services

  • Bookkeeping or other services related to the accounting records or financial statements of the audit client;

  • Financial information systems design and implementation;

  • Appraisal or valuation services, fairness opinions, or contribution-in-kind reports;

  • Actuarial services;

  • Internal audit outsourcing services;

  • SOX 404 assistance;

  • Management functions or human resources;

  • Broker or dealer, investment adviser, or investment banking services;

  • Legal services and expert services unrelated to the audit;

  • Non-preapproved tax services and other tax services; and

  • Any other service that the Board determines, by regulation, is impermissible.


  • The Public Company Accounting Oversight Board (PCAOB) work in tandem with the Securities and Exchange Commission (SEC) to oversee all public accounting firms and public companies with the purpose of protecting the public interest.

  • PCAOB has the legislated authority to discipline any violators of SOX. It has the ability to conduct investigations and impose sanctions if deemed necessary, including monetary penalties or suspension of the registration of a firm or individual.

Sec resources
SEC Resources

SEC resources can be found at the following link:

  • http://www.sec.gov/rules/final/33-8183.htm

Question answer session
Question & Answer Session

Submit questions to the

EBPAQC mailbox at [email protected]

Upcoming events
Upcoming Events

  • ESOPs Live Forum, April 20, 1:00 – 3:00 pm ET

  • AICPA Annual Webcast on Employee Benefit Plans Strategic Briefing, to take place in late April or Early May 2010

  • AICPA National Conference on Employee Benefit Plans, Las Vegas, NV, May 11 – 13, 2010

  • AICPA Employee Benefit Plan Audit Workshop for Defined Benefit and Defined Contribution Plans, March 29 – 30, 2010, Chicago, Illinois; July 26 – 27, 2010, New York, New York

  • AICPA Annual Employee Benefit Plans Accounting, Auditing and Regulatory Update Conference, Washington, DC, December 13 – 14, 2010


  • 2010 AICPA Audit & Accounting Guide, Employee Benefit Plans – to be available in May 2010

  • 2010 Audit Risk Alert for Employee Benefit Plans – to be available in May 2010

  • AICPA TIS Section 2220, Long Term Investment

  • PCAOB Accounting Standard No. 7, Engagement Quality Review

  • PCAOB Staff Question and Answer, Accounting Standard No. 7, Engagement Quality Review

  • EBPAQC Authoritative Accounting and Reporting Standards For Employee Benefit Plans: FASB Accounting Standards Codification™


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