AICPA issues EDs and SOP.

Two exposure drafts, on auditing standards and personal financial planning, and a statement of position on investment companies are available.

ED amends statement

The American Institute of CPAs auditing standards board has issued a proposed Statement on Auditing Standards, Amendment to Statement on Auditing Standards no. 58, "Reports on Audited Financial Statements," and called for comments on the proposed statement's provisions by October 20, 1995.

The exposure draft would eliminate the requirement that when certain criteria are met the auditor add an uncertainties explanatory paragraph to his or her report. Other significant provisions concern guidance on other matters the auditor may wish to add to or emphasize in the report, such as the addition of an emphasis-of-a-matter paragraph and an auditor's disclaimer of an opinion on financial statements due to uncertainties.

The ASB noted that in developing guidance it considers the relationship between the cost imposed, and the benefits reasonably expected, to be derived from audits. It also considers differences the auditor may encounter in auditing financial statements of small businesses and makes special provisions to meet those needs. The board would "particularly appreciate comments on those matters."

ED on PFP practice

The Institute's personal financial planning executive committee has issued an exposure draft of the proposed Statement on Responsibilities in Personal Financial Planning Practice no. 5, Developing a Basis for Recommendations, and has requested comments by October 16.

This ED provides guidance on performing each of the three functions that are involved in developing recommendations:

1. Collecting relevant information, including the client's goals, financial situation and resources; nonfinancial factors; external economic factors; and reasonable estimates, projections and assumptions furnished by the client and his or her advisers or developed by the CPA.

2. Analyzing the client's current situation and identifying its strengths and weaknesses.

3. Formulating, evaluating and recommending appropriate strategies and courses of action for achieving the client's goals.

SOP amends guide

Statement of Position 95-3, Accounting for Certain Distribution Costs of Investment Companies, prepared by the accounting standards executive committee, amends the AICPA audit and accounting guide, Audits of Investment Companies.

The SOP applies to investment companies that adopt plans complying with rule 270.12b-1 of the Investment Company Act of 1940. It requires

* Investment companies with enhanced 12b-1 plans to recognize a liability, with a corresponding charge to expenses, for excess costs. Changes in the liability should be recognized in the statement of operations as an expense or reduction in expense.

* Reporting the liability at its present value, calculated using an appropriate current interest rate, if certain conditions are met.

* Investment companies with board-contingent plans to recognize a liability for excess costs, computed in the same way as for an enhanced 12b-1 plan, when the company's board commits to pay such costs.

* Certain disclosures for both traditional and enhanced plans.

This SOP is effective for annual financial statements for fiscal years beginning after December 15, 1995, and for interim financial statements for periods in such years. The cumulative effect of adopting this statement should be reflected in the calculation of net asset value on the first day of the fiscal year of adoption.

The statement includes background information on the issue, conclusions and illustrations of the applications of the SOP and a discussion of the public comments received on the ED.

How to comment on Eds or order SOP

Any individual or organization may obtain one copy of the EDs, Amendment to Statement on Auditing Standards No. 58 (product no. 800096JA) and Developing a Basis for Recommendations (product no. 800096JA), without charge until the end of the comment periods by calling the AICPA order department, [phone], menu #1; fax no. [phone]. To obtain a copy of the SOP (product no. 14885JA), priced at $8.50 for members and $9.50 for nom-nembers, contact the order department.