AICPA Audit and Accounting Manual

Audit and Accounting Manual (as of June 1, 2008)

Developed exclusively for small-and medium size CPA practices, the Audit and Accounting Manual explains and demonstrates useful techniques and procedures for the engagements you conduct including compilations, reviews, and audit engagements. This manual explains in a plain English format engagement steps from planning to performing procedures to issuing your reports.
Updated as of June 1, 2008, this manual has been substantially revised to conform to the requirements of the risk assessment standards (SAS Nos. 104-111) including understanding the entity and its environment, including its internal control; assessing the risks of material misstatement; audit risk and materiality; and designing and performing further audit procedures that are responsive to the assessed risks. This edition of the manual has also been conformed to reflect the Defining Professional Requirements standards (SAS No. 102, SSAE No. 13, and SSARS No. 16). Furthermore, it provides additional guidance on the auditor’s responsibilities as set forth in SAS Nos. 112-114, including identifying and reporting internal control deficiencies, understanding the link between the auditor’s consideration of fraud and the auditor’s assessment of risk, dating of the management representation letter, and the auditor’s communications with those charged with governance.

This manual has also been updated for the new requirements of SSARS No. 15, Elimination of Certain References to Statements on Auditing Standards and Incorporation of Appropriate Guidance Into Statements on Standards for Accounting and Review Services, which eliminates certain references to the auditing literature from the SSARSs and incorporates, as appropriate, guidance similar to that originally referenced into the compilation and review literature.

As an added bonus, the Audit and Accounting Manual also includes all Audit Risk Alerts published by the AICPA.  The audit risk alerts update CPAs on recent practice issues and professional standards that affect industry specific engagements. The audit risk alerts also help plan and perform audits by identifying significant business risks that may result in the material misstatement of a client's financial statements.
In addition, this Manual includes:

• Guidance on internal controls
• Audit documentation guidelines
• Sample confirmation letters
• Engagement and representation letters
• Accountants' reports for compilations, reviews, and audits
• Guidance on quality control and a full reprint of the AICPA’s Practice Aid, Establishing and Maintaining a System of Quality Control for a CPA Firm’s Accounting and Auditing Practice
• And much more!

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Overview

1. The Audit and AccountingManual (AAM) is designed to provide practitioners with the tools needed to help plan, perform, and report on audit, review, and compilation engagements. The AAM is not intended to serve as a complete or comprehensive quality control system, and is not intended to be used in connection with the audits of entities that are required to be audited under standards set by the Public Company Accounting Oversight Board. The AAM is comprised of the following sections:

Section	Section Name
2000 3000 4000 5000 6000 7000 8000 9000 10,000	Compilation and Review Engagement Planning and Administration Internal Control Designing and Performing Further Audit Procedures Audit Documentation Correspondence, Confirmations, and Representations Alerts Accountants' Reports Quality Control

Audits

2. To perform an engagement in accordance with generally accepted auditing standards (GAAS) an auditor must comply with the General Standards, the Standards of Field Work, the Standards of Reporting, and the Quality Control Standards.
3. The general standards are concerned with the qualifications of the auditor and the qualitative aspect of the work performed. They specifically address the auditor's training and proficiency, independence, and due care in the performance of work.
4. The Standards of Field Work address the manner used by the auditor to perform the audit. This standard begins with the appointment of the auditor and ends with the auditor communicating to those responsible for the oversight of financial reporting of the entity being audited.
5. The Standards of Reporting are concerned with the opinion the auditor renders on the client's financial statements.
6. The AAM will assist the auditor in performing an audit, in accordance with GAAS, in the following ways:
1. AAM section 10,000, Quality Control, includes sample forms which can be used by a firm to document its adherence to the AICPA requirement for a system of quality control for a CPA firm.
2. AAM section 3000, Engagement Planning and Administration, provides guidance in the planning stage. Included in this section are various formats of audit assignment controls and engagement letters.
3. AAM section 4000, Internal Control, conforms to the Internal Control--Integrated Framework, pub- lished by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO report) and AU section 314, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (AICPA, Professional Standards, vol. 1). This section provides guidance in evaluating internal control by utilizing checklists, questionnaires, and other generalized aids.
4. AAM section 5000, Designing and Performing Further Audit Procedures, explains how the auditor should design and perform tests of controls, substantive procedures, or both, that are responsive to the assessed risks of material misstatement.
5. AAM section 6000, Audit Documentation, provides the auditor with a general discussion of the purpose of audit documentation.
6. AAM section 7000, Correspondence, Confirmations, and Representations, provides the auditor with numerous examples of confirmations, illustrative inquiries to legal counsel, representation letters, communications with audit committees, as well as a reliance letter.
7. AAM section 9000, Accountants' Reports, addresses the format of the accountants' report and numerous examples of the auditor's report.

Compilation and Review Services

7. To perform either a review or a compilation engagement in accordance with Statements on Standards for Accounting and Review Services (SSARS), an accountant must comply with the standards promulgated by theAccounting and ReviewServices Committee.As of the date of thismanual, there have been 17 SSARSs issued. Refer to paragraph .10 of AAM section 2100, Introduction, for a complete list of the SSARSs that have been codified in the AICPA's Professional Standards.
8. The AAM will assist the accountant in performing compilation and review engagements in accor- dance with SSARS in the following ways:
1. AAM section 2200, Engagement Planning and Administration, provides guidance in the planning stage. Addressed are engagement letters, changes in the level of service for the engagement, sample acceptance form, sample information form, and sample engagement letters.
2. AAM section 2300, Compilation Engagement, provides sample procedures for compilation engage- ments, representation letters, and checklists.
3. AAM section 2400, Review Engagement, provides sample procedures for review engagements, representation letters, and checklists.
4. AAM section 2500, Form and Content of Financial Statements, provides guidance on the statements, notes, supplementary information, and subsequent discovery of facts.
5. AAM section 2600, Reporting, provides guidance on the basic reporting fundamentals for compi- lation and review engagements.
6. AAM section 2610, Accountants' Reports on Compilation of Financial Statements of a Nonpublic Entity, and section 2620, Accountants' Reports on Review of Financial Statements of a Nonpublic Entity, include examples of several reports for compilation and review engagements.
7. AAM section 2700, Special Areas, section addresses other comprehensive bases of accounting, prescribed forms, and specified elements.

Alerts

9. It is suggested that the accountant also review the following areas when performing compilation and review engagements for additional guidance:
• Correspondence, Confirmations, and Representations (AAM section 7000)
• Quality Control (AAM section 10,000)

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