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This Audit and Accounting Guide provides the latest information on accounting and auditing issues affecting the construction industry. Updated with conforming changes as of March 1, 2008, it includes guidance in planning and performing audits under the risk assessment standards (SAS Nos. 104-111). This edition of the guide has also been conformed to reflect the Defining Professional Requirements standards (SAS No. 102 and SSAE No. 13). 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.
The guide summarizes applicable requirements and practices, and delivers "how-to" advice for handling audit and accounting issues common to the construction industry. It describes accounting requirements for construction-type contracts and accounting and consolidation requirements for joint ventures and variable interest entities, and includes discussion of other relevant financial statement considerations. The appendices include examples of computing income earned under the percentage-of-completion method, illustrative financial statements (one for contractors using the completed contract method and one for contractors using the percentage-of-completion method), and an entire re-print of SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. The guide covers the following new accounting and auditing pronouncements:
For a topical listing of subject matter by chapter, click on the Table of Contents tab.
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Notice to Readers
This Audit and Accounting Guide presents recommendations of the AICPA Construction Contractors Guide Committee on the application of generally accepted auditing standards to audits of financial statements of construction contractors. This guide also presents the committee's recommendations on and descriptions of financial accounting and reporting principles and practice for construction contractors. The AICPA Accounting Standards Executive Committee (AcSEC) has found this guide to be consistent with existing standards and principles covered by Rule 202, ComplianceWith Standards (AICPA, Professional Standards, vol. 2, ET sec. 202), and Rule 203, Accounting Principles (AICPA, Professional Standards, vol. 2, ET sec. 203) of the AICPA Code of Professional Conduct. AICPA members should be prepared to justify departures from the accounting guidance in this guide, as discussed in paragraph .07 of AU section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles (AICPA, Professional Standards, vol. 1).*
Auditing guidance included in an AICPA Audit and Accounting Guide is an interpretive publication pursuant to AU section 150, Generally Accepted Auditing Standards (AICPA, Professional Standards, vol. 1). Interpretive publications are recommendations on the application of Statements on Auditing Standards (SAS) in specific circumstances, including engagements for entities in specialized industries. An interpretive publication is issued under the authority of the Auditing Standards Board (ASB) after all ASB members have been provided an opportunity to consider and comment on whether the proposed interpretive publication is consistent with the SASs. The members of the ASB have found this guide to be consistent with existing SASs.
The auditor should be aware of and consider interpretive publications applicable to his or her audit. If an auditor does not apply the auditing guidance included in an applicable interpretive publication, the auditor should be prepared to explain how he or she complied with the SAS provisions addressed by such auditing guidance.
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