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New Auditing Interpretations Have Been Issued Related to GASB 67 and 68

The American Institute of Certified Public Accountants (“AICPA”) recently issued interpretation of certain standards related to implementation of Governmental Accounting Standards Board (“GASB”) Statements 67 and 68. Summaries of these interpretations follow. If you are interested in additional information regarding your specific circumstance, you can find the interpretations on the AICPA’s website.

Interpretations to Audit Evidence Standard

Interpretation No. 2, “Auditor of Participating Employer in a Governmental Cost-Sharing Multiple-Employer Pension Plan,” of AU-C section 500, Audit Evidence, answers two questions. The first clarifies that the audited financial statements of a cost-sharing plan prepared, in accordance with generally accepted accounting principles (U.S. GAAP) and certain additional unaudited information from the plan would not provide the employer’s auditor with sufficient appropriate audit evidence regarding the employer’s pension amounts. The second clarifies that if the plan has prepared various schedules and engaged its auditor to audit, and report on those schedules based on the best practice recommendations in the AICPA’s SLGEP whitepaper, Governmental Employer Participation in Cost-Sharing Multiple-Employer Plans: Issues Related to Information for employer Reporting, the employer auditor could utilize the report of the plan auditor as audit evidence.

Interpretation No. 3, “Auditor of Participating Employer in a Governmental Agent Multiple-Employer Pension Plan,” of AU-C section 500, Audit Evidence, answers two questions. The first clarifies that the audited financial statements of an agent plan prepared in accordance with U.S. GAAP and certain additional unaudited information from the plan would not provide the employer’s auditor with sufficient appropriate audit evidence regarding the employer’s pension amounts, upon which to base the auditor’s opinion on the employer’s financial statements. The second clarifies that if the plan has prepared a schedule of changes in fiduciary net position by employer and engaged its auditor to audit, and report on the schedule based on the best practice recommendations in the AICPA’s SLGEP whitepaper, Governmental Employer Participation in Agent Multiple-Employer Plans:  Issues Related to Information for Employer Reporting, the employer auditor could utilize the report of the plan auditor as audit evidence.

Interpretations to Specific Elements of Financial Statements Standard

Interpretation No. 1, “Auditor of Governmental Cost-Sharing Multiple-Employer Pension Plan,” to AU-C section 805, Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement, answers two questions. First, it discusses the type of report the plan auditor may issue (and provides an illustration) if engaged to audit schedules that are prepared by the plan as described in the AICPA’s SLGEP whitepaper, Governmental Employer Participation in Cost-Sharing Multiple-Employer Plans:  Issues Related to Information for Employer Reporting. Second, it addresses the issue of materiality when the plan auditor is engaged to opine on such schedules.

Interpretation No. 2, “Auditor of Governmental Agent Multiple-Employer Pension Plan,” to AU-C section 805, Special Considerations—Audits of Single Financial Statements and Specific  Elements, Accounts, or Items of a Financial Statement answers two questions. First, it discusses the type of report the plan auditor may issue if engaged to audit a schedule that may be prepared by the plan as described in the AICPA’s SLGEP whitepaper, Governmental Employer Participation in Agent Multiple-Employer Plans: Issues Related to Information for Employer Reporting, and provides an illustrative report for such an engagement. Second, it addresses the issue of materiality when the plan auditor is engaged to opine on such a schedule.

Interpretation to Group Audit Standard

Interpretation No. 1, “Auditor of Participating Employer in a Governmental Pension Plan,” to AU-C section 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors), clarifies that it would not be appropriate for the employer auditor to make reference to the audit report of the governmental pension plan auditor solely for purposes of GASB Statement No. 68, Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27, because, in this circumstance, a governmental pension plan is not a component of the employer. It should be noted that this interpretation applies to government pension plans broadly and is not limited to a particular type of plan.

For questions regarding the new audit interpretations, please contact Melisa Galasso or visit our Government Services industry page.

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