What's up, everyone? Welcome to the 2014 CPA Exam Changes update from Another71.com. It's the moment that you have all been waiting for, I'm sure. Alright, well, let's start off. If you like the format of this video, it's the same format as NINJA Blitz. And if you have no idea what NINJA Blitz is, or why you should care, you should go to another71.com, forward slash, or is that a backslash? Hm. /ninja-blitz, and check out the free videos.
You can get FAR, Auditing, BEC, Regulation, all the good, free stuff there. Okay. So, who exactly is this guy speaking to you? Some of you know who I am, many of you know who I am, just because you visit my site and put up with me.
My name is Jeff Elliott, and by the grace of God, I am a licensed CPA, assuming that I don't get in trouble for anything, and that I turn in my June 2014 CPE. So, this is me, and as you can see, I definitely married up. The football term is I outkicked my coverage. And those are my kids and usually they are pretty well behaved. Although if you see us in a random night out at the Olive Garden, you might see otherwise, depending on whether or not they keep the bread sticks coming. Okay, if you're not familiar with Another71, I'm just going to brag about it for a minute and spam you with some stats.
It is the most-visited CPA exam-related website on the internet, and that's a lot of hyphens. It gets over a million page views per month. And the most popular aspect of it is not me, it is the CPA Exam Forum itself, it's the people in the forum. You can go to another71.com/cpa-exam-forum, and there it is, there's lots of cool people who are way cooler than me on there, interacting, helping each other out, sharing stories of what their mean boss said to them that day or… There's actually some exam content discussed there, too, so.
And if you go to another71.com you will see the NINJAs who created the NINJA notes, NINJA audio, the ten point combo NINJA Blitz, which follows the same format as you're watching right now, and I already said that. And the NINJAs have a 803% pass rate. And we made that up. And… So there you go. Alright, what to do with this video. By the way, the 803% pass rate is a joke, so… Please don't send me any cease and desist letters about misrepresenting my materials, it's, okay, right.
Alright, what to do with this video. Well a lot of people ask, “Are my 2013 materials okay?” or, “What exactly has changed?” and so I want to answer that as quickly and efficiently and effectively as possible. So what we are going to do, order of the updates, starting with Regulation and moving down through Auditing. Regulation and BEC have just a few quick things to say about it, so… If you're taking Regulation, you can watch it, then just drop off the video if want or you can just watch the whole thing, but… so I wanted to put the quick stuff first, so you can drop off and go do better things like… watch season two of The Shield on Amazon Prime Instant Video.
So after you drop off, you'll want to go get some free CPA exam stuff. I would put this at the end, but you're not gonna watch till the end, because there's a lot of auditing updates that you don't care about right now, so… You can go to another71.com and you'll see the free stuff, or you can type in the URL.
Alright, so, Regulation. The big thing with Regulation, with any Regulation update, is the tax law. If you are taking a January through June, of course, June is a dead month, but sometimes they, I'm gonna get emails, “Don't you know “June's not a testing month?” If you're taking an exam the first part of the year, use the previous year's tax law. So you would use 2013 tax law, and, because, the CPA exam starts testing material six months after the law's effective date. So… 2014 tax law is in place January 2014, but it does not become testable until July 2014.
So first part of year, the year, use 2013 tax law, So should your… should your 2013 REG materials be okay? In theory, yes. Assuming that your reviews materials did the July 2013 updates correctly. So for instance, if they're still using the 7.5% deduction on schedule A, for medical expenses for people under the age of 65, well then, that's not, that's not okay. It's now 10%, which affects AMT, et cetera. So if you have the NINJA Notes and materials and all that, you're good to go. If your software, if your materials are still using some questionable numbers, well then maybe your 2000 updates will not suffice. So REG people, the long and short of it, you don't really need to worry about any substantive changes until July. So REG people, I'll see you later.
BEC. Really, the only tweak for BEC was the COSO Internal Control Framework, because they tweaked that back in May, and it's, and it's now testable. However, the AICPA CPA Exam Fall Alert says, “CPA Exam candidates taking the BEC section “should be aware that while the 2013 update “to the Framework is effective “as of the date of issuance, the 1992 version” which is the one, which is in all of your materials, “remains in effect during a transition period which runs until December 15, 2014.” So all of that to say, and really, the new update doesn't really change the meat of the material anyway.
It's still the same concepts, just tweaked a different way. So all of that to say, your 2013 materials are pretty much good to go for BEC. I will put the one caveat in there, it's always best to use updated materials. So hopefully, your review providers are nice, and they, they figure, “Hey, this person has already “been our customer, and has already paid us “for this exam material, so we're going “to give them free updates.” And so obviously, you would want to use their free updates. Now, if they don't do that, if you pay them thousands of dollars and yet they still want more money, well, then you need to make a decision, “Do I want to pay them more money, or will the product that I currently have suffice?” Alright. BEC people, you're outta here.
FAR. The, the only real subset I've changed to FAR is in Governmental Accounting for defined benefit pension plans and we're just going to cover it here. So that you're good to go. So the financial statements that are required for the defined benefit pension plans are the statement of fiduciary net position, and the statement of changes in fiduciary net position. So the statement of change, or, the statement of fiduciary net position, has assets, then deferred outflows, then liabilities, then deferred inflows, then fiduciary net position. You can pause the slide, write that down if you want.
I'm moving on, because the AUD people are like, “Dude, just get to it!” Then you have your statement of changes in fiduciary net position, which have your additions and deductions. You can hit pause and write that down. Then your financial statement notes. Types of benefits provided, plan member classes, board information, investment policies, and fair value determination. So this is new material for FAR. You might see a few questions on it. And the three minutes I spent covering it will hopefully be enough for you on exam day. As always, work some multiple choice questions just to be sure. Alright FAR people, see you later.
Moving on to Auditing. Now everyone knows that with the expiration of the extant standards, moving onto the clarified statements on auditing standards, 2014 was going to be a big year, because even though back in July of 2013, they started testing the clarified audit standards, they still tested both ways, extant and clarified. Now, beginning in 2014 it's only clarified. So hopefully, your review provider has removed… And auditing is one section I would definitely not use 2013 material because you'll have the extant stuff in there, and… best case scenario, it's just an inefficient way, because you're studying both. Worst case scenario, you'll get stuff mixed up.
And so you should use 2014 materials. Hopefully your review provider gives them to you for free, or at nominal cost, because they obviously have costs for new books and stuff, and you should be glad to pay that. But otherwise, anyway, jumping to my soapbox. NINJA materials always come free, with free updates, until you pass. Okay, the 10 GAAS standards are now just principles. So your general standards, your standards of fieldwork, your standards of reporting, they're still there, but they're just kind of the foundational material. The audit engagement agreement and… The tweak here is that with the responsibilities of management, it is the management's responsibility to choose the appropriate financial reporting framework. So it's no longer just GAAP or IFRS, it's the appropriate financial reporting framework. And that's the language used under clarified standards.
The change for the auditor, is that the auditor must remind management that the terms of their engagement still apply. And they should do that annually, and they should document that reminder. So there's some new verbiage and it's group engagement team, group engagement auditor, and all that good stuff. So the group engagement team develops the audit strategy. It is their job to communicate with component auditors, which we will discuss in a second. And the group engagement team establishes the materiality threshold for the audit. And they establish the materiality threshold for the component auditor. And that threshold must be lower than that of the group. Sounds like a good exam question.
The group engagement team performs work on the consolidation process and evaluates audit conclusions. And they have to understand the work of the component auditors. The group engagement team includes partners, a group engagement partner, and the staff. I said group engagement auditors in the, I meant group engagement partner. So group engagement partner is responsible for the group audit engagement, and its direction, supervision, and performance. They're also responsible for the audit report. Now we discussed the component auditor a second ago.
A component auditor audits one component of the entity. If it's a significant component, if it's significant due to financial materiality, then the group needs to audit the financial information. If it's significant due to risk of material misstatement, then they just need to perform some audit procedures until they're satisfied. And documentation showing lists of significant components and the work performed is required. If it's a non-significant component, analytical procedures are performed at the, what? Group level.
Again, a good exam question. Okay, some more things that've changed from the extant standards to the clarified standards. Letter of inquiry. If the auditor suspects legal proceedings could contribute to a material misstatement, then they must contact the entity's legal counsel. Now under the old ways, they could ask management to do it. Now they have to contact the external legal counsel directly. Also, compliance with laws and regulations. The auditor has to inspect any correspondences with any regulatory authorities. So with the extant standards, we know we have the unqualified opinion and all that. Now it's unmodified, and modified. And the unmodified opinion, and we're just going to cover it.
And all of you uptight accounting professors, and CP review teachers, you're going to wanna stop the video now, because my mnemonics are going to make you cringe, and you're going to think it's highly unprofessional, and how dare I, so just stop now. Just do yourself a favor. Alright. Heh. The unmodified opinion says that, “The financial statements present fairly, “in all material respects, “the financial position of the entity–” I'm not gonna read it all.
You can hit pause, look at it. If it's not fairly presented, you discuss the problem with management, and based on the outcome, decide whether or not the opinion should be modified. But you already knew that. Here is the unmodified opinion. It's Timmmaaayyyyy For any of you South Park fans, there you go. Okay, unmodified opinion uses TIM-AA. TIM-AA. Must have a title, that must include “independent”.
Then you have your introductory paragraph. You identify the entity, state what's been audited, you specify the date or period. So title, introductory paragraph. Then management's responsibility, and it's their responsibility to prepare and fairly present the financials and choose the applicable financial reporting framework. They are also responsible for internal control. And its design, implementation, and maintenance.
And then, finally, in TIM-AA, you have the auditor's, wait, that's not true. The first A, you have the auditor's responsibility. Which they conduct the audit in accordance with GAAS, of the US. They plan and perform the audit to obtain reasonable assurance. And then it describes the audit the perform procedures to obtain evidence about amounts and disclosures. And then the last A in TIM-AA is the audit opinion. Now if you don't like my mnemonic, it's the best I could come up with.
Alright, you have your unmodified opinion. But… You have your other matter, or your emphasis-of-matter. So the financial information is appropriately presented but they wanna bring to attention something to the reader. So if there's a going concern issue, or if there's an updated report from a prior period, they wanna point something out. Or the financial information is appropriately presented, and disclosed, but there's some catastrophe that could affect the financials, or some litigation uncertainty, or significant other things. So the emphasis or other matter does not affect the audit opinion. And before they release the emphasis or other matter, they should communicate that with those in charge of governance. So, here we go, the unmodified opinion with an emphasis or other matter. TIM-AA EMO.
Timmy really likes the emo band Other Matter. TIM-AA EMO. Title, introduction, management, auditor's, audit opinion, emphasis, and other-matter. TIM-AA EMO. Now, if there's immaterial issues, you can still issue an unmodified opinion. So if there's immaterial gap or framework issues, you can still issue an unmodified opinion, or issue an unmodified opinion with an emphasis-of-matter. If there's material issues, then you need to have a modified opinion, and include in a basis for modified opinion section.
Well, once you know it. Timmy has a sister named TIMA, and she has a very bad attitude. And she's always stealing his stuff. And she has an adverse attitude. TIMA-BA. Work with me here. TIMA-BA. TIM-AA's sister TIMA has a bad attitude. A very adverse attitude. Title, introduction, management, auditor, basis for modified opinion, and then audit opinion. So we discussed the component auditor before.
And if the group engagement partner assumes responsibility for the comment auditor's work, then they should perform additional procedures, they should be involved in their work, perform risk assessment procedures, and assess the risk of material misstatement. If they don't want to assume responsibility, then they need to reference the work. And the requirements for referencing the component auditor's work, the component financials must be prepared using the same Financial Reporting Framework as the Group Financial Statements.
And the component auditor must have performed the audit in accordance with GAAS or PCAOB Standards. This right here would make an excellent exam question. Alright, well that's it. I hope you enjoyed the updates. I did it in under 13 minutes, that's not too bad. Again, Free CPA exam stuff. Go to another71.com and you'll see all that there. Have a great 2014 everyone.
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