Let’s talk ethics for a few minutes.

Specifically, let’s talk violations of professional standards. Want to know which violations take place most often?

You’re in luck.

The AICPA’s Professional Ethics Division has released lists of the most frequent violations it has documented during audit investigations over the past two years. The lists focus primarily on government / not-for-profit investigations and those centering on employee benefit plans. Here’s the scoop:

Most frequent government / NFP violations:

Single-audit issues:

  • Failure to accurately identify and test all major programs
  • Incorrect dollar threshold used
  • Improper risk assessment
  • Missing information in the SEFA

Auditor’s reporting:

  • Improper audit report date
  • Character of examination and degree of responsibility
  • Summarized information
  • SAS No. 115
  • Opinion units and departures not specified
  • Omitted required opinion and report wording

Audit procedures:

  • Allocation of indirect expenses
  • Failure to obtain sufficient competent evidential matter
  • Inadequate documentation
  • Failure to utilize or customize an audit program

Financial statement deficiencies related to:

  • Reporting expenses
  • Donated services
  • Failure to disclose the nature and amount of donor-imposed restrictions
  • Fair-value disclosure
  • Management discussion and analysis
  • Improperly classified revenues
  • Unreserved fund balance
  • Interfund balances
  • Disclosure of prior-period adjustments
  • Disclosure concerning liabilities and debt service
  • Subsequent events

Other:

  • Failure to comply with CPE requirements.

Get details on government / NFP violations here.

Most frequent employee benefit plan violations

Auditor’s reporting:

  • Improper audit report date
  • Character of examination and degree of responsibility
  • Improper certification

Audit procedures

  • Failure to obtain sufficient competent evidential matter
  • SAS 70 reports
  • Inadequate documentation
  • Failure to utilize or customize an audit program

Financial statement deficiencies related to:

  • Benefit responsive contracts
  • Fair-value disclosure
  • Accumulated plan benefits
  • Other financial statement deficiencies

Get details on employee benefit plan violations here.

“These violations of professional standards are similar to the matters that are frequently noted during the peer reviews of these types of engagements,” the Professional Ethics Division notes. “You should continue to be cognizant of such departures from professional standards as these engagements are subject to an increased degree of regulatory scrutiny and oversight. We also recommend that you encourage your peer review clients performing engagements of these types of entities to be aware of these frequent departures from professional standards.” 

So now you know.

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