Alternative Investments Task Force formed to explore audit evidence.Over the past several years, certain not-for-profit organizations, healthcare entities, pension plans and investment companies--including funds of funds have dramatically increased their investment in financial instruments that do not have a readily determinable Liable to come to an end upon the happening of a certain contingency. Susceptible of being determined, found out, definitely decided upon, or settled. determinable adj. market value. These investments are commonly referred to as alternative investments. Generally, these entities are required by generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting to carry these investments at fair value. The continued increase in the percentage of alternative investments to both net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. and total investment portfolio subjects these entities to complex fair value accounting and has exposed their investment portfolios to greater risk and volatility. Due to the increased risk of misstatement mis·state tr.v. mis·stat·ed, mis·stat·ing, mis·states To state wrongly or falsely. mis·state  ment n. inherent with these investments, the Audit Issues Task Force of the Auditing Standards Board In the United States, the Auditing Standards Board (ASB) is the senior technical committee designated by the American Institute of Certified Public Accountants (AICPA) to issue auditing, attestation, and quality control statements, standards and guidance to certified public established the Alternative Investments Task Force. The task force was charged with providing additional guidance to auditors of investor entities as to how the auditor may obtain sufficient appropriate audit evidence in order to conclude that the financial statements are free of material misstatement. As a result, the Alternative Investments Task Force has developed and issued a practice aid for auditors, Alternative Investments--Audit Considerations. The task force believes that this non-authoritative practice aid will assist auditors in auditing alternative investments. The practice aid includes guidance on: 1. General considerations pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to auditing alternative investments. 2. Addressing management's financial statement existence assertion. 3. Addressing management's financial statement valuation assertion. 4. Management representations. 5. Disclosure of certain significant risks and uncertainties. 6. Reporting. The practice aid also includes the following Appendixes: Appendix 1: Example Confirmation for Alternative Investments; and Appendix 2: Illustrative Examples of Due Diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. , Ongoing Monitoring and Financial Reporting Controls. The document can be downloaded at: [website] www.aicpa.org/members/div/auditstd/alternative_investments.htm |
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