The American Institute of Certified Public Accountants (AICPA) on Aug. 21, 2019, said that it issued a consultation document to solicit comments on the challenges of determining materiality when CPAs attest to subject matters that cannot be measured, such as sustainability programs, employee education initiatives or fair labor practices.
Comments are due by Oct. 31 on Invitation to Comment, Discussion Paper: Materiality Considerations for Attestation Engagements Involving Aspects of Subject Matters That Cannot Be Quantitatively Measured. The discussion paper was developed by a working group of the AICPA’s Assurance Services Executive Committee (ASEC).
“In today’s world, stakeholders are placing great importance on information about an entity in addition to that which is traditionally provided in historical financial statements,” AICPA Chief Auditor Robert Dohrer said in a statement. “When providing assurance services, it’s important that practitioners understand what information will most significantly impact stakeholders’ decision-making process, which is central to a practitioner’s consideration of engagement materiality. In that spirit, we are asking for comments about how users of such information and practitioners consider ‘materiality’ with respect to subject matter that cannot be quantitatively measured.”
The discussion paper said that other examples of attestation engagements that cannot be quantitatively measured include System and Organization Controls (SOC) examinations or reviews of compliance with contractual or other requirements.
The consultation document lists 49 topics and issues that the AICPA wants CPAs to address.
One topic deals with a CPA’s perception of the common information needs of intended users as a group. Issue number 10, for example, the attestation standards state that CPA’s consideration of materiality is affected by his or her perception of the common information needs of intended users as a group.
“However, the attestation standards do not provide further guidance about what constitutes a practitioner’s perception of the common information needs of intended users,” the discussion paper says. “For this reason, there may be differing views about what actions, if any, need to be taken to inform a practitioner’s perception of the common information needs of intended users as a group.”
When preparing a feedback, the AICPA said that respondents should address whether the discussion paper is helpful in considering materiality in these types of attestation engagements, among other things.
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