Is there a gap in your GAAP library?

Practitioners will soon find a new set of rules defining what generally accepted accounting principles means. That's because the relative authority of some of the standards comprising GAAP has been elevated by the American Institute of CPAS auditing standards board, effective for audits of financial statements with periods ending after March 15, 1992. A proposed statement on standards for accounting and review services makes it clear the rules defining GAAP apply to compilation and review engagements as well.

Effect on average CPA 

After March 15, practitioners will need to apply certain pronouncements previously considered nonauthoritative. For example, nonpublic enterprises were considered in compliance with GAAP even when they didn't apply consensus positions of the Financial Accounting Standards Board's emerging issues task force (EITF). Under the new hierarchy, EITF consensuses will have a higher level of authority and may need to be followed by nongovernment entities.

The new requirements, contained in Statement on Auditing Standards no. 69, The Meaning Present Fairly in Conformity wit Generally Accepted Accounting Principles in the Independent Auditor's Report (see Official Releases, page 108), should cause practitioners to question whether their accounting and auditing libraries include the most up-to-date technical materials. Firms undergoing peer or quality reviews are expected to use appropriate technical source material and manuals in performing it, review and compilation engagements. Often, the source material and manuals are outdated. SAS no. 69 emphasizes the need for CPAS to be knowledgeable about GAAP and provides a general list of sources.

What SAS 69 added or changed

SAS no. 69 accomplished several goals. The new standard elevates the authority of certain accounting pronouncements: FASB and Governmental Accounting Standards Board technical bulletins, AICPA audit and accounting guides, AICPA statements of position and practice bulletins, EITF consensus positions and FASB and GASB Qs and As. Thus, some entities may need to change current accounting practices to follow these elevated accounting pronouncements. The need for entities to change depends on the type of pronouncement and its effective date.

The SAS also sets up two separate but parallel hierarchies-one for state and local governments and another for nongovernment entities. This eliminates the need for the GASB to issue "negative standards" advising state and local governments not to follow particular FASB pronouncements.

GAAP sources

GAAP for nongovernment and government entities now includes four categories each of "established accounting principles" and a fifth category of "other literature." Because several organizations establish GAAP, there is no one publication that includes all GAAP pronouncements.

To help practitioners determine if their firms' libraries are adequate, a recommended listing is presented in the exhibits accompanying this article. Exhibit 1 (nongovernment GAAP library), page 24, and exhibit 2 (government GAAP library), below, list publications that include the specific pronouncements cited in SAS no. 69. Exhibit 3 (AICPA nonauthoritative accounting literature), page 26, lists other sources of accounting information, published by the AICPA, that may assist practitioners in finding or applying GAAP standards.

Order information. The exhibits describe the content of each publication and available formats (book, software, etc.). For prices and order information, call the FASB and GASB at [phone], ext. 10, or the AICPA at [phone] [[phone] in New York State].

Choosing the right format. Many of the publications in the exhibits are available in several formats. What a practitioner orders depends on the extent of his or her accounting practice, the complexity of client transactions and the industries in which the clients operate. The format that's right for a firm's library may not be right for field staff.

For example, if only one client operates in a specialized industry, the paperback version of the relevant guide would be more cost-effective than purchasing the AICPA Audit and Accounting Guides loose-leaf service, which includes guides for over 20 industries. However, if a firm's practice extends across many of the industries covered by the guides, the firm should consider purchasing the loose-leaf service for its library and relevant paperback titles for staff members' field use. Purchasing the loose-leaf service also ensures the guidance is up-to-date; periodic updates are sent automatically. Software subscriptions offer convenient access to the pronouncements and provide more efficient search capabilities.

Alternatives to purchasing. Certain publications included in the exhibits are more specialized than others. Practitioners not wishing to buy all of the sources Hated can take advantage of the AICPA'S library services. AICPA members may borrow circulating materials and may request photocopies or faxes from the library. (This privilege applies to the library's entire collection, including accounting Publications from many publishers.) Although fees are charged for certain services, using the library may be more cost-effective than purchasing an infrequently used item. For a current library price schedule, see the CPA Letter, Oct.91, Page 3. For more information on library services, call [phone] [[phone] in New York State].

Keeping current

Once a basic GAAP library is established, how can practitioners keep it up-to-date? One way is through AICPA publications. Each month, the CPA Letter (free with AICPA membership) informs practitioners of new pronouncements (except EITF consensuses) from the FASB, GASB and AICPA.

In addition, the Official Releases department of the Journal of Accountancy covers newly issued FASB and GASB statements and interpretations. Other new pronouncements enforceable under the AICPA Code of Professional Conduct will be explained in the Journal as necessary.

An article explaining important new standards issued by the AICPA accounting standards executive committee and the EITF will be included in the May 1992 Journal and whenever appropriate thereafter.

Each year, the AICPA publishes nonauthoritative audit risk alerts, which include a section on recent accounting issues and developments. The audit risk alert applicable to all entities appears in each November CPA Letter. Remaining alerts are industry-specific and correspond to the industries covered in the AICPA audit and accounting guide service.

Another member benefit is the AICPA technical information hotline, which provides technical assistance to members on accounting and financial reporting matters. The hotline is open weekdays from 9 Am. to 4-50 P.m. (eastern standard time) and may be reached by calling [phone] [[phone] New York State].