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Special Considerations in Auditing Financial Instruments - Audit Guide
This guide provides an in-depth understanding of financial instruments, as well as practical how-to guidance for minimizing the risk of material misstatement when using financial instruments.

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Who Will Benefit

Entities of various sizes and across industries use financial instruments for hedging, investment, and trading purposes.  Because of the inherent risks and complexities around this topic, it is critical to consider specific audit considerations and be able to address the risk of material misstatement to perform an effective audit of these financial instruments.  This comprehensive guide has been designed to be beneficial for those practicing in small, regional, and large auditing firms.

Key Benefits

  • Coverage of voluntary disclosures regarding fair value information
  • Guidance on the complexities surrounding the valuation of financial instruments, as well as key presentation and disclosure considerations
  • Detailed case studies to show practical applications on classification of financial instruments, use of work of others, embedded derivatives, interest rate swaps and put options
  • Understanding how to effectively use work performed by a service organization

Entities of all sizes may be subject to risks of material misstatement when using financial instruments. This Audit Guide provides an in-depth understanding of financial instruments, as well as practical assistance for auditors to develop an effective audit approach to address such risks.

Detailed implementation guidance is provided for assessing an entity’s internal control and responding to associated risks, as well as guidance on reporting considerations. A series of case studies is provided to help you understand and apply the concepts specific to financial instruments, including the use of service organizations and accounting for hedging activities.

This AICPA Audit Guide was developed by leading auditing and financial instrument experts in public practice to provide CPAs with foundational information on financial instruments and related audit considerations.

Updates

The following audit and accounting updates affecting financial instruments have been considered and discussed as appropriate.

  • SSAE No. 18, Attestation Standards: Clarification and Recodification
  • SAS No. 131, Statement on Auditing Standards No. 131, Amendment to Statement on Auditing Standards No. 122 Section 700, Forming an Opinion and Reporting on Financial Statements
  • ASU No. 2015-10, Technical Corrections and Improvements
  • ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
  • ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships

In addition to covering auditing standards to address all areas of the audit, the following standards are discussed in greater detail throughout this guide to address audit considerations unique to financial instruments:

  • AU-C section 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures
  • AU-C section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement
  • AU-C section 500, Audit Evidence
  • AU-C section 501, Audit Evidence – Specific Considerations for Selected Items
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American Institute of CPAs

The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 418,000 members in 143 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting.

The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, and offers specialized credentials for qualified professionals who concentrate on personal financial planning; forensic accounting; business valuation; and information management and technology assurance. With The Chartered Institute of Management Accountants (CIMA), it offers the Chartered Global Management Accountant (CGMA) designation, which sets the global benchmark for quality and recognition in management accounting.

The AICPA and CIMA also make up the Association of International Certified Professional Accountants (the Association), which represents public and management accounting globally, advocating on behalf the public interest and advancing the quality, competency and employability of CPAs, CGMAs and other accounting and finance professionals worldwide.

The AICPA maintains offices in New York, Washington, DC, Durham, NC, and Ewing, NJ.

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