How should you account for cash overdrafts (also called negative cash balances)
Accounting and Auditing for CPAs
Understanding accounting and auditing is key to becoming an outstanding CPA. There's no way around it. If you want to be a great accountant or auditor, you have to keep up with the ever-changing accounting and auditing landscape. And believe me, it's always changing.
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Being an excellent accountant or auditor requires knowledge in:
Accounting
Accounting standards primarily come from the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). Other types of reporting frameworks include cash-basis, modified-cash basis, tax-basis, contractual, and regulatory. An accounting framework is used to create financial statements. The selection of the reporting framework is based on legal and regulatory requirements we well as the needs of users.
Once financial statements are created, they may be subject to attest procedures performed by a third-party CPA or CPA firm. Possibilities include a compilation engagement, a review engagement or an audit.
Many accountants are not auditors, but some are.
Auditing
Auditing is the inspection of accounting records, usually financial statements, by a third party CPA or CPA firm. The standards for auditing U.S. entities primarily come from the Association of International Certified Professional Accountants (AICPA) and are called Statements on Auditing Standards (SASs). Additionally, the AICPA provides attestation standards in the form of Statements on Standards for Attestation Engagments (SSAEs). Whether the SASs or SSAEs are used, the accountant--as an independent third party--uses these standards to add credibility to the information by rendering a opinion or report about the subject matter.
Auditors must understand accounting and audit standards.
Below are articles I've published to help you improve your accounting and auditing skills.
Accounting Articles
Below are articles about FASB and GASB standards.
PPP and EIDL Accounting Solutions
Are you wondering about PPP and EIDL accounting? Well, you've come to
ASU 2016-01 – Accounting for Equity Securities
Are you aware of the coming changes in accounting for equity securities?
GASB 87 Lease Accounting
Are you looking for GASB 87 lease accounting information? Are you a
Debt Covenant Violations: How to Report
How does a debt covenant violation affect the presentation of debt on
Financial Statement References
What financial statement references are required at the bottom of financial statement
Understanding the New Nonprofit Accounting Standard
Are you ready to implement FASB’s new nonprofit accounting standard? Back in
ASU 2018-17: A VIEry Good Gift from FASB
It's time for another change to VIE accounting! The variable interest entity (VIE) considerations
Going Concern Accounting and Auditing
Are you preparing financial statements and wondering whether you need to include
Simplifying the Measurement of Inventory
Are you up to speed on ASU 2015-11 Simplifying the Measurement of
Do Loan Guarantees Create Liabilities?
Can a loan guarantees create liabilities that go on the balance sheet
Debt Issuance Costs: New Parking Place
Debt issuance costs have a new parking place. For some time now,
How to Solve Accounting Problems Quickly
Do you ever need to solve accounting problems quickly? I often hear
Account for Finance and Operating Leases
Most CPAs grapple with leases from the lessee’s point of view, so
Changes in Leases and the Leasing Industry
The Leasing Industry will Change In my last lease post, we saw
How to Understand the New Lease Accounting Standard
Do you need help in understanding the new lease accounting standard? This
GASB 63 and 65: Deferred Outflows, Inflows
GASB 63 and 65 provide guidance regarding deferred outflows and inflows in
Auditing Articles
Below are articles about auditing and attesation standards.
Substantive Analytical Procedures: Power Up
Are you using substantive analytical procedures in your audits? Many auditors rely
When are SOC Reports Needed by an External Auditor?
Service organization control (SOC) reports are often necessary to understand outsourced accounting
Audit Planning: Develop Your Audit Plan and Strategy
This article teaches you how to develop your audit plan and strategy.
Audit Assertions in Financial Statement Audits
In this article, I address audit assertions and why they are critical
Audit and Work Paper Mistakes: A List of 40
Audit Mistakes: Seven Deadly Sins
Seven deadly audit sins can destroy you. These audit mistakes kill your
Use of a Specialist: How to Document
As an auditor, you often use the work of specialists such as
Unpredictable Audit Procedures
In this article I explain how you can use unpredictable audit procedures.
Seven Excuses for Unnecessary Audit Work Papers
Unnecessary audit work papers create clutter and potential legal problems. I see
Segregation of Duties: How to Overcome
Segregation of duties is key to reducing fraud. But smaller entities may
Management Override of Internal Controls
Management can override internal controls, resulting in fraudulent financial reporting. Below I
A Guide to Audit Materiality and Performance Materiality
Want to perform your audits correctly but with less time? Then understand
Wrapping Up Audits: The Why and How
Wrapping up audits is a chore. But today's post will help you
Payment Fraud Tests: Five Powerful Ideas
Are you looking for payment fraud tests? Ways to detect fraudulent payments
2018 Yellow Book CPE Requirements
What are the 2018 Yellow Book CPE requirements? You’ve heard about the
Auditing Equity: The Why and How Guide
Auditing equity is easy, until it’s not. Auditing equity is usually one
Single Audit Major Program Determination
Single Audit major program determination can be challenging. And if this determination
Single Audit Applicability and Objectives
In this article, I provide information about Single Audits for local governments
Higher Audit Prices Due to Higher Risk
Audit risk increases uncertainty—and price. At least, it should. In this post,
Auditing Debt: The Why and How Guide
What are the keys to auditing debt? While auditing debt can be
The Why and How of Auditing: Amazon
Auditing Payroll: The Why and How Guide
Auditing payroll is a critical skill. Today I explain how.While payroll is
Auditing Accounts Payable and Expenses: A Guide
Accounts payable is usually one of the more important audit areas. Why?
Test of Controls: When to Perform and How
How to Identify and Manage Audit Stakeholders
Auditing Investments: The Why and How Guide
Want to know how to audit investments? You're in the right place. Below
Auditing Plant, Property, and Equipment
Today, we talk about auditing plant, property, and equipment (or capital assets
Five Dirty, No Good, Terrible, Audit Habits
Today I describe five dirty, no good, terrible, audit habits. Certain peer
Auditing Receivables and Revenues: A Guide
Today we take a look at auditing receivables and revenues. Revenues are
Substantive Procedure: Test of Details
Tests of details, a substantive procedure, is the auditor's primary response to
Auditing Cash: The Why and How Guide
Auditing cash tends to be straightforward. We usually just obtain the bank
Auditing for Fraud: The Why and How
Auditing for fraud is important, but some auditors ignore this duty. So
Audit Documentation: Peer Review Finding
Peer reviewers are saying, “If it’s not documented, it’s not done.” Why?
Audit Risk Assessment: The Why and the How
Today we look at one of most misunderstood parts of auditing: audit
Client Acceptance and Continuance: The Why and How
Client acceptance and continuance may be the most critical step in an
The Why and How of Auditing Series
Audit Lessons from a Brain Tumor
Did you know you can learn audit lessons from a brain tumor?
SSAE 19: Agreed-Upon Procedures Engagements
On December 19, 2019, the AICPA released SSAE 19, Agreed-Upon Procedures Engagements.
Independence in Attest Engagements
Independence in attest engagements in critical. Peer reviewers continue to focus on
Inherent Risk: How to Save Time by Properly Assessing
Do you know how to assess inherent risk? Knowing when inherent risk is low
Emphasis of Matter and Other Matter Paragraphs
First Year Audit Considerations
Congratulations! You've won a new audit client. Now, let's consider the first
Threats to Yellow Book Independence
Yellow Book independence is a big deal. And if you prepare financial
The Skinny on ASU 2016-18: Restricted Cash
FASB issued ASU 2016-18, Statement of Cash Flows, in November 2016. This standard
AICPA Hosting Services Interpretation
As of July 1, 2019, hosting services impair independence, so says the
Government Auditing Standards: 2018
Government Auditing Standards 2018 Revision The Government Accountability Office just issued the
Going Concern Accounting and Auditing
Are you preparing financial statements and wondering whether you need to include
Preliminary Analytical Procedures: Audits
Preliminary analytical procedures are used to identify material misstatements in financial statements.
Supplementary Information: Audits
What’s the difference in supplementary information, additional information, and required supplementary information?
CPA Client Interviews: Four Keys
Today we talk about four keys to better CPA client interviews. Many
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The Why and How of Auditing
Auditing Made Easy
Learn auditing from client acceptance to audit opinion issuance!
