The AICPA recently hosted another installment of its popular A&A Focus Series, a monthly webcast designed to keep members up to date on the latest developments in accounting, auditing, and assurance. Hosted by Bob Durak, director–A&A Technical Services, and Andrew Merryman, senior manager–A&A Technical Services, the event featured four subject matter experts sharing their insights on several important topics, including the consideration of ethics when using artificial intelligence (AI) tools in audit procedures and how the information in the recently released Association of Certified Fraud Examiners’ (ACFE’s) report Occupational Fraud 2024: A Report to the Nations can help auditors in their practices.
The broadcast also began two, multimonth dives into common revenue recognition issues and the new world of digital assets and their accounting and auditing treatment. The series is free for AICPA members, is simple to register for, and earns one CPE hour each month.
AICPA members can watch an on-demand recording of the broadcast on the series’ webpage and find additional valuable member-only resources.
Ethical considerations when using AI in accounting and auditing
Danielle Supkis-Cheek, CPA, vice president and head of analytics & AI at Caseware, began the guest expert segments and addressed ethical considerations surrounding the use of AI in accounting and auditing. Supkis-Cheek emphasized that although AI tools are becoming increasingly prevalent, they do not absolve practitioners of their ethical obligations. She likened the use of AI to leveraging staff or experts, stressing the need for proper review and oversight of AI-generated outputs.
Supkis-Cheek also highlighted automation bias as a key consideration, urging practitioners to maintain professional skepticism when using AI tools. She also pointed to the growing importance of prompt engineering skills in effectively using AI, suggesting that the ability to craft precise and effective prompts may become a valuable skill for accounting professionals..
The discussion on AI ethics also touched on the accounting profession’s efforts to develop policies and best practices around AI use. As the technology continues to evolve, the profession must strike a balance between leveraging AI’s capabilities and ensuring adherence to ethical standards and professional judgment.
Understanding the basics of digital assets
Next up, Robert Sledge, CPA, a partner at KPMG and a member of the AICPA’s Digital Assets Working Group, provided an overview of this rapidly evolving area. The Digital Assets Working Group is a joint working group under the Financial Reporting Executive Committee (FinREC) and the Assurance Services Executive Committee. The digital assets group consists of accounting and auditing subgroups. Together, these subgroups contribute expert insights from industry leaders and the AICPA to address considerations related to the prevalent risks in the digital asset space. With suggested audit procedures focused on the most common transactions seen today, the practice aid equips professionals to meet the challenges presented by the evolving digital asset ecosystem.
Sledge stated that digital assets are defined as digital records created using cryptography and recorded on distributed ledgers, often referred to as blockchains. He emphasized the wide diversity of digital assets, from cryptoassets like bitcoin to nonfungible tokens (NFTs) representing unique digital or physical assets.
Sledge stressed the importance of understanding the specific nature and purpose of each digital asset, because this understanding is crucial for determining appropriate accounting treatments, internal controls, and audit approaches. He also highlighted the AICPA’s recently updated practice aid on accounting and auditing digital assets, which provides nonauthoritative guidance on these complex issues.
The discussion on digital assets underscored the need for accountants and auditors to stay informed about emerging technologies and their implications for financial reporting and assurance. As digital assets become more prevalent in business transactions, practitioners must be prepared to navigate the unique challenges they present.
What the ACFE’s occupational fraud report can tell auditors
The third segment of the webcast focused on occupational fraud, featuring insights from David Zweighaft, CPA, partner, RSZ Forensic Associates, on the Occupational Fraud 2024: A Report to the Nations. This biennial report provides valuable data on fraud schemes, perpetrators, detection methods, and anti-fraud controls, serving as a crucial resource for practitioners in assessing and mitigating fraud risks.
Zweighaft noted that although asset misappropriation remains the most common type of fraud, financial statement fraud typically results in the largest monetary losses. He emphasized the report’s usefulness in informing fraud risk assessments during audit engagements, advocating for comprehensive discussions across the audit team and with client personnel at all levels to identify potential vulnerabilities.
The shift to remote work and increased reliance on electronic documentation in recent years has altered the fraud risk landscape, Zweighaft observed. This change highlights the need for practitioners to continually reassess and adapt their fraud detection and prevention strategies to address evolving risks in the digital age.
Revenue recognition and FASB ASC 606 — an overview of continuing challenges
The final segment of the webcast tackled ongoing challenges with revenue recognition under FASB ASC Topic 606, Revenue From Contracts With Customers, featuring insights from Angela Newell, CPA, a partner at BDO and the immediate past chair of FinREC. Despite being in effect for several years, the standard continues to present complexities for many practitioners and companies.
Newell emphasized that although Topic 606 created a single, comprehensive model for revenue recognition across industries, the process and thinking around revenue recognition have fundamentally changed. She noted that even in cases when the ultimate revenue figures remained largely unchanged, the path to arriving at those figures often involves significantly different considerations and judgments.
Ongoing challenges highlighted included principal vs. agent determinations, identifying distinct performance obligations within contracts, and accounting for variable consideration. The complexity of these issues underscores the need for continued focus on revenue recognition in professional development and training programs.
Newell also touched on the expanded disclosure requirements under Topic 606, which have significantly increased the volume and detail of revenue-related information in financial statements. This change has implications not only for preparers but also for auditors in evaluating the adequacy and accuracy of these enhanced disclosures.
Throughout the webcast, the hosts emphasized that these topics were complex and could benefit from more in-depth discussion in future events. They stressed the importance of staying current on accounting and auditing developments to maintain high standards of practice in a rapidly evolving business environment.
In other matters
In addition to the featured topical segments, the A&A Focus Series webcast provided updates across several timely emerging issues:
- The AICPA Auditing Standards Board (ASB) issued Statement on Standards for Attestation Engagements (SSAE) No. 23, Amendments to the Attestation Standards for Consistency With the Issuance of AICPA Standards on Quality Management. SSAE No. 23 aligns certain concepts in the attestation standards related to quality management with the suite of quality management standards, which were issued in June 2022. The alignment is necessary because engagements performed in accordance with the attestation standards are part of a firm’s accounting and auditing practice and, therefore, are within the scope of Statement on Quality Management Standards (SQMS) No. 1, A Firm’s System of Quality Management. SSAE 23 is effective for engagements performed in accordance with the SSAEs beginning on or after Dec. 15, 2025:
- The AICPA has issued TQA Section 6960.13, Related Party Disclosure Requirements Issued by the U.S. Department of Education for Institutions of Higher Education, which provides guidance on the audit and reporting implications of the U.S. Department of Education’s requirement for institutions of higher education that participate in financial assistance programs under Title IV of the Higher Education Act to disclose in their financial statements all related-party transactions based on the definition set forth in FASB ASC Topic 850, Related Party Disclosures, and additional identifying information that would enable the department to readily identify the related party.
- The AICPA’s Financial Reporting Executive Committee has issued a working draft of Chapter 8, “Programmatic Investments,” of the Audit & Accounting Guide: Not-for-Profit Entities, for application of FASB ASC Topic 326, Credit Losses (CECL).
- The AICPA’s Financial Reporting Executive Committee issued an early working draft of chapter 8, “Inferring Value From Transactions in a Private Company’s Securities,” and chapter 9, “Selected Accounting and Disclosure Matters,” which are part of a broader forthcoming update of the 2013 edition of the AICPA Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.
- The CPEA has issued several recent reports:
- The July JofA featured the article “Audit Smarter by Reassessing Audit Risk.”
- A study, Financial Restatement Trends in the United States: 2013–2022, conducted by the Center for Audit Quality (CAQ) found that the number of financial restatements filed with the SEC fell by more than 50% over a recent 10-year period.
Looking ahead
The webcast concluded with a preview of next month’s A&A Focus, live on Aug. 7, 2024, which will feature discussions on using technology in an audit, specifically when performing risk assessment procedures, a visit from our colleagues in the peer review area, and a look at the Financial Reporting Framework for Small and Medium Size Entities (FRF for SMEs), its benefits, and providing guidance to your clients. Throughout 2024, the AICPA plans to leverage the A&A Focus Series as a vital channel to keep members apprised of new accounting, auditing, and reporting developments impacting their work across all industries and domains of practice. Members can access archives of past sessions here.
— Dave Arman, CPA, MBA, is senior manager–Audit Quality at AICPA & CIMA, together as the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.
