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Financial Reporting and Regulatory Update

Second Quarter 2019

From the CAQ

CECL tool for audit committees

On May 7,  2019, the CAQ released “Preparing for the New Credit Losses Standard: A Tool for Audit Committees.” This new tool is designed to assist audit committees with their oversight responsibilities in implementing the CECL model under ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”

The tool has four sections:

  1. “Understanding the Standard,” which provides an overview of the standard
  2. “Evaluating the Company’s Impact Assessment,” which offers questions for audit committees to consider when discussing the standard’s impact with management and auditors
  3. “Evaluating the Implementation Plan,” which is designed to help audit committees understand and evaluate management’s implementation plan
  4. “Other Important Implementation Considerations,” which covers matters such as transition methods and new disclosure requirements

The tool also includes a list of resources produced by leading auditing firms.

External auditor assessment tool

On April 2, 2019,  the CAQ issued an updated tool to assist audit committees   in evaluating the external auditor. Focused on audit committees serving public companies, “External Auditor Assessment Tool: A Reference for U.S. Audit Committees” updates the CAQ’s 2017 publication.

The updated tool adds questions related to firm-level audit quality considerations, including leadership, culture, engagement team management, audit engagement performance, and monitoring. It also includes information about accounting and auditing developments and potential risks. The tool offers questions for audit committees to consider asking in four categories:

  • Quality of services and sufficiency of resources provided by the engagement team
  • Quality of services and sufficiency of resources provided by the audit firm
  • Communication and interaction with the external auditor
  • Auditor independence, objectivity, and professional skepticism

The tool suggests audit committees refer to the CAQ’s January 2019 publication “Audit Quality Disclosure Framework” for additional considerations when asking external auditors about the quality and sufficiency of resources provided by the audit firm.

CAMs Webcast

The CAQ posted a recording of its April 1, 2019, webcast “The Enhanced Auditor’s Report Is Here: Get the Facts on CAMs and More.” The first in a five-part series,  the webcast addressed early lessons learned in the implementation of CAMs requirements, how audit committees and management can prepare, and how information included in CAMs communications may be used by investors.