Auditors, consider this your friendly reminder not to fuck things up this busy season. Just in case you were thinking about blowing off revenue recognition or going concern issues (that's the standard, not this website), the Center for Audit Quality has released a cheat sheet for you.
The following considerations should be strongly considered, per the CAQ:
- Revenue Recognition
- Going Concern
- Internal Control Over Financial Reporting
- Auditing Accounting Estimates, Including Fair Value Measurements
- Engagement Quality Review
- Professional Skepticism
- Related Parties and Amendments to Certain PCAOB Auditing Standards Regarding Significant Unusual Transactions
You should not take this reminder to mean the CAQ thinks you suck at your job, as that task is better left to the PCAOB.
The CAQ would also like you to remember that proper application of certain PCAOB standards might help you avoid their wrath for deficiencies in the above areas:
When considering these audit areas, auditors also should consider the elements of Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 12, Identifying and Assessing Risks of Material Misstatement (AS 12), and Auditing Standard No. 13 The Auditor’s Responses to the Risks of Material Misstatement (AS 13), as auditing issues identified in these areas may also be indicative of misapplication of these risk assessment standards.
They really bring it down to a 2nd grade level here, which again should not be taken as the CAQ implying you all are idiots who couldn't audit your way out of a paper bag. Let's look at testing revenue recognition, for example:
Testing the recognition of revenue from contractual arrangements: To audit revenue, auditors should understand, among other things, the company's business, its different types of sales or service contracts, and its controls over revenue, including the company's development of accounting estimates for revenue. This also includes understanding the company's key products and services and business processes that affect revenue, including contractual terms by which sales are made, such as the key provisions of contractual arrangements and the extent to which contractual terms are standardized across the company’s organization. The auditor also is required to evaluate whether the company’s selection and application of accounting principles are appropriate for its business and consistent with the applicable financial reporting framework and accounting principles used in the company's relevant industries.
Now, we skimmed this little alert and nowhere does it mention anything about prior year workpapers so maybe it's actually the CAQ that needs a reminder on how to audit. But whatever, acknowledge you appreciate their effort and go about your day. Enjoy!