Depository and lending institutions: banks and savings institutions, credit unions, finance companies, and mortgage companies PDF
Preview Depository and lending institutions: banks and savings institutions, credit unions, finance companies, and mortgage companies
Audit and Accounting Guide Depository and Lending Institutions: Banks and Savings Institutions, Credit Unions, Finance Companies, and Mortgage Companies July 1, 2018 Audit and Accounting Guide Depository and Lending Institutions: Banks and Savings Institutions, Credit Unions, Finance Companies, and Mortgage Companies July 1, 2018 23574-349 Copyright © 2018 by American Institute of Certified Public Accountants. All rights reserved. For information about the procedure for requesting permission to make copies of any part of this work, please email [email protected] with your request. Otherwise, requests should be written and mailed to Permissions Department, 220 Leigh Farm Road, Durham, NC 27707-8110. 1 2 3 4 5 6 7 8 9 0 AAP 1 9 8 ISBN 978-1-94830-605-8(cid:1)(cid:9)(cid:81)(cid:66)(cid:81)(cid:70)(cid:83)(cid:10) (cid:42)(cid:52)(cid:35)(cid:47)(cid:1)(cid:26)(cid:24)(cid:25)(cid:14)(cid:18)(cid:14)(cid:26)(cid:21)(cid:25)(cid:20)(cid:17)(cid:14)(cid:23)(cid:17)(cid:23)(cid:14)(cid:22)(cid:1)(cid:9)(cid:70)(cid:49)(cid:86)(cid:67)(cid:10)(cid:1) iii Preface (UpdatedasofJuly1,2018) About AICPA Audit and Accounting Guides This AICPA audit and accounting guide has been developed by the AICPA Guides Combination Task Force to assist practitioners in performing and re- portingontheirauditortheirattestationengagements,andtoassistmanage- mentinthepreparationoftheirfinancialstatementsinconformingwithU.S. generallyacceptedaccountingprinciples(GAAP). An AICPA Guide containing auditing guidance related to generally accepted auditing standards (GAAS) is recognized as an interpretive publication as defined in AU-C section 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Audit- ingStandards.1Interpretivepublicationsarerecommendationsontheapplica- tioninspecificcircumstances,includingengagementsforentitiesinspecialized industries. InterpretivepublicationsareissuedundertheauthorityoftheAICPAAuditing StandardsBoard(ASB)afterallASBmembershavebeenprovidedanoppor- tunitytoconsiderandcommentonwhethertheproposedinterpretivepublica- tionisconsistentwithGAAS.ThemembersoftheASBhavefoundtheauditing guidanceinthisguidetobeconsistentwithexistingGAAS. Although interpretive publications are not auditing standards, AU-C section 200 requires the auditor to consider applicable interpretive publications in planningandperformingtheauditbecauseinterpretivepublicationsarerele- vanttotheproperapplicationofGAASinspecificcircumstances.Iftheauditor doesnotapplytheauditingguidanceinanapplicableinterpretivepublication, the auditor should document how the requirements of GAAS were complied withinthecircumstancesaddressedbysuchauditingguidance. TheASBisthedesignatedseniorcommitteeoftheAICPAauthorizedtospeak fortheAICPAonallmattersrelatedtoauditing.Conformingchangesmadeto theauditingguidancecontainedinthisguideareapprovedbytheASBChair (orhisorherdesignee)andtheDirectoroftheAICPAAuditandAttestStan- dardsStaff.Updatesmadetotheauditingguidanceinthisguideexceedingthat ofconformingchangesareissuedafterallASBmembershavebeenprovidedan opportunitytoconsiderandcommentonwhethertheguideisconsistentwith theStatementsonAuditingStandards(SASs). Any auditing guidance in a guide appendix or exhibit (whether a chapter or back matter appendix or exhibit), though not authoritative, is considered an "other auditing publication." In applying such guidance, the auditor should, exercisingprofessionaljudgment,assesstherelevanceandappropriatenessof such guidance to the circumstances of the audit.Although the auditor deter- mines therelevance of otherauditingguidance,auditingguidanceinaguide appendix or exhibit has been reviewed by the AICPA Audit and Attest Stan- dardsstaffandtheauditormaypresumethatitisappropriate. An AICPA Guide containing attestation guidance is recognized as an inter- pretive publication as defined in AT-C section 105, Concepts Common to All 1 AllAU-CsectionscanbefoundinAICPAProfessionalStandards. ©2018, AICPA AAG-DEP iv Attestation Engagements.2 Interpretive publications are recommendations on the application of Statements on Standards for Attestation Engagements (SSAEs) in specific circumstances,including engagements for entities in spe- cializedindustries.Interpretivepublicationsareissuedundertheauthorityof theASB.ThemembersoftheASBhavefoundtheattestationguidanceinthis guidetobeconsistentwithexistingSSAEs. A practitioner should be aware of and consider the guidance in this AICPA Guide applicable to his or her attestation engagement. If the practitioner does not apply the attestation guidance included in an applicable interpre- tivepublication,thepractitionershoulddocumenthowtherequirementsofthe SSAEwerecompliedwithinthecircumstancesaddressedbysuchattestation guidance. Any attestation guidance in a guide appendix or exhibit (whether a chapter or back matter appendix or exhibit), though not authoritative, is considered an"otherattestationpublication,"Inapplyingsuchguidance,thepractitioner should,exercising professional judgment,assess the relevance and appropri- ateness of such guidance to the circumstances of the engagement. Although the practitioner determines the relevance of other attestation guidance,such guidanceinaguideappendixorexhibithasbeenreviewedbytheAICPAAu- dit and Attest Standards staff and the practitioner may presume that it is appropriate. TheASBisthedesignatedseniorcommitteeoftheAICPAauthorizedtospeak fortheAICPAonallmattersrelatedtoattestation.Conformingchangesmade to the attestation guidance contained in this guide are approved by the ASB Chair (or his or her designee) and the Director of the AICPA Audit and At- test Standards Staff.Updates made to the attestation guidance in this guide exceedingthatofconformingchangesareissuedafterallASBmembershave beenprovidedanopportunitytoconsiderandcommentonwhethertheguide isconsistentwiththeSSAEs. AICPA Guides may include certain content presented as "Supplement," "Ap- pendix," or "Exhibit." A supplement is a reproduction,in whole or in part,of authoritative guidance originally issued by a standard setting body (includ- ing regulatory bodies) and applicable to entities or engagements within the purviewofthatstandardsetter,independentoftheauthoritativestatusofthe applicableAICPAGuide.Bothappendixesandexhibitsareincludedforinfor- mationalpurposesandhavenoauthoritativestatus. TheFinancialReportingExecutiveCommittee(FinREC)isthedesignatedse- niorcommitteeoftheAICPAauthorizedtospeakfortheAICPAintheareasof financialaccountingandreporting.Conformingchangesmadetothefinancial accountingandreportingguidancecontainedinthisguideareapprovedbythe FinRECChair(orhisorherdesignee).Updatesmadetothefinancialaccount- ingandreportingguidanceinthisguideexceedingthatofconformingchanges are approved by the affirmative vote of at least two-thirds of the members of FinREC. Thisguidedoesthefollowing: (cid:2) IdentifiescertainrequirementssetforthintheFASBAccounting StandardsCodification®(ASC). 2 AllAT-CsectionscanbefoundinAICPAProfessionalStandards. AAG-DEP ©2018, AICPA v (cid:2) Describes FinREC's understanding of prevalent or sole industry practiceconcerningcertainissues.Inaddition,thisguidemayin- dicate that FinREC expresses a preference for the prevalent or soleindustrypractice,oritmayindicatethatFinRECexpresses apreferenceforanotherpracticethatisnottheprevalentorsole industrypractice;alternatively,FinRECmayexpressnoviewon thematter. (cid:2) Identifies certain other, but not necessarily all, industry prac- ticesconcerningcertainaccountingissueswithoutexpressingFin- REC'sviewsonthem. (cid:2) Provides guidance that has been supported by FinREC on the accounting,reporting,or disclosure treatment of transactions or eventsthatarenotsetforthinFASBASC. AccountingguidancefornongovernmentalentitiesincludedinanAICPAGuide isasourceofnonauthoritativeaccountingguidance.Asdiscussedlaterinthis preface,FASBASCistheauthoritativesourceofU.S.accountingandreporting standardsfornongovernmentalentities,inadditiontoguidanceissuedbythe SEC. Purpose and Applicability ThisAICPAGuidehasbeenpreparedtoassistfinancialinstitutionsinprepar- ing financial statements in conformity with GAAP and to assist independent accountantsinreportingonfinancialstatements(and,asdiscussedinappendix A,"FDIActReportingRequirements,"otherwrittenmanagementassertions) ofthoseentities. Chaptersoftheguidearegenerallyorganizedbyfinancialstatementlineitem intofoursections: a. Anintroductionthatdescribesthegeneraltransactionsandrisks associatedwiththearea.(Theintroductiondoesnotaddressallpos- sibletransactionsineacharea.) b. Regulatory matters that may be of relevance in the preparation and audit of financial statements. Other regulatory matters may existthatrequireattentioninthepreparationandauditoffinan- cialstatementsfollowingthegeneralguidanceonregulatorymat- ters.Further,the guide does not address regulations that are not relevanttothepreparationandauditoffinancialstatementsand certainoftheregulatoryrequirementsdiscussedmaynotbeappli- cabletouninsuredinstitutions. c. Accounting and financial reporting guidance that addresses ac- counting and financial reporting issues. FASB ASC 105, Gener- allyAcceptedAccountingPrinciples,establishesFASBASCasthe sourceofauthoritativeGAAPrecognizedbyFASBtobeappliedby nongovernmentalentities. d. Auditingguidancethatincludesobjectives,planning,internalcon- trol over financial reporting and possible tests of controls, and substantivetests. ©2018, AICPA AAG-DEP vi Scope Thisguideappliestoallbanks,savingsinstitutions,creditunions,financecom- panies,andotherentities(includingentitieswithtradereceivables).Thatpop- ulationincludesthefollowing: a. Financecompanies,includingfinancecompanysubsidiaries b. Entities that do not consider themselves to be finance companies thatengageintransactionsthatinvolvelendingtoorfinancingthe activities of others (including trade receivables and independent andcaptivefinancingactivitiesofallkindsofentities) c. Depository institutions insured by the FDIC's Deposit Insurance Fund or the National Credit Union Administration's National CreditUnionShareInsuranceFund d. Bankholdingcompanies e. Savingsandloanassociationholdingcompanies f. Branches and agencies of foreign banks regulated by U.S.federal bankingregulatoryagencies g. Statecharteredbanks,creditunions,andsavingsinstitutionsthat arenotfederallyinsured h. Foreignfinancialinstitutionswhosefinancialstatementsarepur- portedtobepreparedinconformitywithGAAP i. Mortgagecompanies j. Entities that do not consider themselves to be mortgage compa- nies that engage in transactions that involve mortgage activities ortransactions k. Corporatecreditunions l. Financingandlendingactivitiesofinsurancecompanies Thisguidedoesnotapplytothefollowing: a. Investmentcompanies,brokerdealersinsecurities,employeeben- efit plans and similar entities that carry loans and trade receiv- ablesatfairvaluewiththeunrealizedgainsandlossesincludedin earnings b. GovernmentalorfederalentitiesthatfollowtheprinciplesofGASB ortheFederalAccountingStandardsAdvisoryBoard As used in this guide, the term depository institution means a bank, credit union,andsavingsinstitution.Thetermsfinancialinstitutionsorinstitutions refertoallentitiescoveredbythisguide. As stated in the previous list,this guide applies to the financing activities of allkindsofenterprises.Certainentitiesmayhavefinancingactivitiesbutare not otherwise covered by this guide—for example, the financing subsidiary, unit,or division of a manufacturing company or retailer.Only those sections and chapters of this guide related to financing activities are intended to ap- plytosuchentities.Theremainingportionsarenotintendedtoapplytosuch entities, but may otherwise be useful to financial statement preparers and auditors. AAG-DEP ©2018, AICPA vii Certaintermsareusedinterchangeablythroughouttheguideasfollows: (cid:2) Creditunionsoftenrefertoshares,dividendsonshares,andmem- bers, which are equivalent to deposits, interest on deposits, and (cid:2) customersforbanksandsavingsinstitutions. Finance companies often refer to finance receivables, which are equivalenttoloansorloansreceivableforotherentities.Acredit (cid:2) officerofafinancecompanyisthesameasaloanofficer. Asupervisorycommitteeofacreditunionisthefunctionalequiv- alentofanauditcommitteeofotherentities. Limitations In July 1990, the AICPA's Board of Directors authorized the AICPA staff to make conforming changes to the Audit and Accounting Guides with the ap- provalofthechairmanoftheASBorthechairmanofFinREC,asappropriate. Theboardresolutiondefinesconformingchangesas"revisionsintendedtoef- fect changes necessitated by the issuance of authoritative pronouncements." Conformingchangesarecarefullyandjudiciouslymadeandnormallylimited toitemsthatresultfromtheissuanceofnewauthoritativeliterature.Conform- ing changes also include nonaccounting and nonauditing revisions that mod- ify,add,ordeleteregulatoryguidanceandindustrybackgroundinformationin responsetochangesintheregulatoryandindustryenvironment.Conforming changesdonotincluderecentlegislativeprogramsorothergovernmentalmea- suresorindustryactionsthatmayhavebeentakenasaresultofthecurrent economicenvironment. Recognition AICPASeniorCommittees AuditingStandardsBoard TracyHarding,Member MichaelJ.Santay,Chair FinancialReportingExecutiveCommittee KellyArdrey,Member JimDolinar,Chair TheAICPAgratefullyacknowledgesthosemembersoftheAICPADepository andLendingInstitutionsExpertPanel(2017–2018)whoreviewedorotherwise contributedtothedevelopmentofthiseditionoftheguide: LindaBergen,Chair AnkerChristensen GrahamDyer LarryGee DomGiuffrida MikeHall JonHoward MikeLundberg RobertShuster ChrisVallez In addition to the 2017–2018 expert panel members listed,the AICPA grate- fully acknowledges those who reviewed and otherwise contributed to the ©2018, AICPA AAG-DEP viii development of this guide: Danielle Austin, Jeremy Goss, Jeannine Hyman, ScottKlitsch,SeanMitchell,TomRobinson,andChrisSheehy. AICPAStaff TeresaBrenan Manager ProductManagement&Development—PublicAccounting KimKushmerick AssociateDirector AccountingStandards—PublicAccounting JasonT.Brodmerkel SeniorTechnicalManager AccountingStandards and StaffLiaisontotheAICPADepositoryandLendingInstitutionsExpertPanel Guidance Considered in This Edition ThiseditionoftheguidehasbeenmodifiedbytheAICPAstafftoincludecer- tainchangesnecessaryduetotheissuanceofauthoritativeguidancesincethe guidewasoriginallyissued,andotherrevisionsasdeemedappropriate.Rele- vantguidanceissuedthroughJuly1,2018,hasbeenconsideredinthedevelop- mentofthiseditionoftheguide.However,thisguidedoesnotincludeallaudit, accounting,reporting,andotherrequirementsapplicabletoanentityorapar- ticularengagement.Thisguideisintendedtobeusedinconjunctionwithall applicablesourcesofrelevantguidance. RelevantguidancethatisissuedandeffectiveonorbeforeJuly1,2018,isin- corporateddirectlyinthetextofthisguide.Relevantguidanceissuedbutnot yet effectiveas of July 1,2018,but becoming effectiveon or before December 31,2018,isalsopresenteddirectlyinthetextoftheguide,butshadedgrayand accompanied by a footnote indicating the effective date of the new guidance. Thedistinctpresentationofthiscontentisintendedtoaidthereaderindiffer- entiatingcontentthatmaynotbeeffectiveforthereader'spurposes(aspartof theguide's"dualguidance"treatmentofapplicablenewguidance). Relevantguidanceissuedbutnotyeteffectiveasofthedateoftheguideandnot becomingeffectiveuntilafterDecember31,2018,isreferencedina"guidance update"box;thatis,aboxthatcontainssummaryinformationontheguidance issuedbutnotyeteffective. In updating this guide,all guidance issued up to and including the following wasconsidered,butnotnecessarilyincorporated,asdeterminedbasedonap- plicability: (cid:2) FASBAccountingStandardsUpdate(ASU)No.2018-08,Not-For- Profit-Entities(Topic958):ClarifyingtheScopeandtheAccount- ingGuidanceforContributionsReceivedandContributionsMade (cid:2) SAS No. 133, Auditor Involvement With Exempt Offering Docu- ments(AU-Csec.945) (cid:2) Interpretation No. 4, "Reporting on Audits Conducted in Accor- danceWithAuditingStandardsGenerallyAcceptedintheUnited States of America and the Standards of the PCAOB" (AU-C AAG-DEP ©2018, AICPA
The list of books you might like
