PRS-PA-0.1: LIST OF SUBSTANTIVE CHANGES AND ADDITIONS ...

PRS (9/15)

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Index [WPRef]

PRS-PA-0.1: LIST OF SUBSTANTIVE CHANGES AND ADDITIONS

PPC's Practice Aids for Audits of Real Estate Entities

Second Edition (September 2015)

Highlights of This Edition

The following are some of the important new features of the 2015 Edition of PPC's Practice Aids for Audits of Real Estate Entities:

? Revised AICPA Code of Professional Conduct. The AICPA published a revised Code of Professional Conduct in 2014, which is primarily effective as of December 15, 2014. When applicable, your Practice Aids have been updated for the revised Code of Conduct.

? New Practice Aids. Your Practice Aids include--

o New Confirmation and Correspondence Letters. We've added two new letters. We added a new correspondence letter that will help component auditors communicate findings and results of their work to the group auditor. We've also added a new representation letter to use when the current year financial statements have been audited and the prior year financial statements have been reviewed under SSARS No. 21.

o New Practice Aid. We've added a new practice aid that can be used to document conclusions on compliance with independence requirements applicable to the engagement, including the identification of any threats to independence and safeguards that apply. Also, the form can be used to satisfy the documentation requirements pertaining to the understanding with the client of permissible nonattest services to be performed.

? Accounting Standards Update. Since the last edition of these Practice Aids, the Financial Accounting Standards Board (FASB) has issued several new Accounting Standards Updates (ASUs). When applicable, we've included practical considerations or updated steps in your Practice Aids for those standards.

? Comprehensive, Up-to-date Disclosure Checklists. The most effective way to ensure you have properly disclosed all of the required information in the financial statements you prepare is to use our comprehensive disclosure checklists. The disclosure checklists have been completely updated for the ASUs issued since the last edition of your Practice Aids.

Practice Aid General

Substantive Changes and Additions

Reference

1) Changed references throughout the Practice Aids, where Various

applicable, due to the issuance of the AICPA revised Code of

Professional Conduct.

2) Changed references from "OCBOA" to "special purpose Various framework."

3) Where necessary, changed references to the "Documentation and Various Analysis of Group Components" at PRS-CX-3.5 that was previously numbered PRS-CX-11.6 .

INTRODUCTION TO AUDITS OF REAL ESTATE ENTITIES (PRS-PA)

1) Updated the discussion of revenue recognition guidance due to PRS-PA-1 the issuance of ASU 2015-14.

2) Updated the discussion of lease accounting with recent PRS-PA-1 developments.

CONFIRMATION AND CORRESPONDENCE LETTERS (PRS-CL)

PRS-PA-0.1

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Practice Aid Audit Engagement Letter

Engagement Letter Change Order Form Legal Letters Management Representation Letters

Internal Control Communications Communication with Those Charged with Governance

Cash Confirmations and Letters Receivable Confirmations and Letters

PRS (9/15)

Substantive Changes and Additions

Reference

1) Updated the language in the letter regarding the preparation of PRS-CL-1.1

the tax return and financial statements. Also, updated the letter for

management's responsibilities for nonattest services (along with

the associated note).

2) Modified the language in the letter regarding fees.

PRS-CL-1.1

3) For the note on the schedules and confirmations to be prepared PRS-CL-1.1 by the client, added expanded language that can be used regarding client assistance.

4) For the note that discusses signing the engagement letter, added PRS-CL-1.1 clarification of management's responsibilities.

5) Modified the format of the inside address of the letter.

PRS-CL-1.2

6) Modified the note referring to the ABA's website.

PRS-CL-2.1

7) Added items to the practical consideration detailing additional PRS-CL-3.1 ,

representations that might be obtained.

PRS-CL-3.2

8) For the practical consideration indicating the periods that PRS-CL-3.1 , representation letters should address, added guidance from TIS PRS-CL-3.2 8900.11, Management Representations Regarding Prior Periods Presented That were Audited by a Predecessor Auditor (link) .

9) For the practical consideration regarding substantial doubt about PRS-CL-3.1 , the entity's ability to continue as a going concern, provided PRS-CL-3.2 guidance due to the issuance of ASU No. 2014-15, Presentation of Financial Statements--Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.

10) Amended a practical consideration to discuss the issuance of PRS-CL-3.2 SSARS No. 21, Statements on Standards for Accounting and Review Services: Clarification and Recodification.

11) Added a letter, "Management Representation Letter When the Current Year Financial Statements Have Been Audited and the Prior Year Financial Statements Have Been Reviewed (After Implementation of SSARS No. 21)," due to the issuance of SSARS No. 21.

PRS-CL-3.3

12) Modified the inside address format of the letters.

13) Modified the inside address format of the letters.

14) Modified the letter to indicate the name of the engagement partner.

PRS-CL-4.1 , PRS-CL-4.2 , PRS-CL-4.3 PRS-CL-5.1 , PRS-CL-5.2 , PRS-CL-5.3 PRS-CL-5.1

15) For the practical consideration on other matters required to be PRS-CL-5.2 , communicated by various auditing standards, noted the issuance PRS-CL-5.3 of ASU No. 2014-15.

16) Modified the name of the letter to "Receipt for Cash Observed by PRS-CL-6.2 Auditor" and modified the wording in the letter.

17) Provided additional instructions for the letters.

PRS-CL-7.1 , PRS-CL-7.2

PRS-PA-0.1 (Continued)

PRS (9/15)

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Practice Aid Investments and Securities Confirmations and Letters Materials and Supply Inventories Confirmations and Letters Benefit Plan Confirmations and Letters

Substantive Changes and Additions

Reference

18) Modified the name of the letter to "Receipt for Count of Securities PRS-CL-8.1

Observed by Auditor" and modified the wording in the letter.

19) Provided additional instructions for the letter.

PRS-CL-8.3

20) Modified the instructions for the letter.

PRS-CL-9.2

21) Added a practical consideration due to the issuance of ASU No. 2015-04, Compensation--Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets.

PRS-CL-11.1 , PRS-CL-11.2

Other Confirmations and Letters

Group and Other Auditor Communications

22) Added a practical consideration on adding a listing of identified PRS-CL-12.4 related parties.

23) Add a reference to the new letter, PRS-CL-14.9 , to one of the PRS-CL-14.4 practical considerations.

24) Added a new letter, "Letter from Component Auditor to Group PRS-CL-14.9 Auditor on Results of Work and Findings When Responsibility is Assumed."

CHECKLISTS AND PRACTICE AIDS (PRS-CX) Application of Practice Aids to Engagements Engagement Acceptance and Continuance Form

1) Updated for the new practice aid added and a checklist that was PRS-CX-0.1 renumbered.

2) Added a factor to consider regarding various services that are PRS-CX-1.1 now considered to be nonattest services. Made reference to a new practice aid at PRS-CX-1.2 .

3) Modified a factor to consider regarding the requirements of PRS-CX-1.1 AU-C 220.13 and how the related procedures can be documented on PRS-CX-1.2 .

4) Modified a factor to consider about concerns about management's PRS-CX-1.1 integrity.

5) Added a factor to consider about situations where an auditor's PRS-CX-1.1 going concern emphasis-of-matter paragraph has occurred or might be a possibility.

6) Added a factor to consider about whether individuals participating PRS-CX-1.1 in the engagement are not properly licensed.

Engagement

7) New form in this edition. (Replaces the previous "Nonattest PRS-CX-1.2

Independence

Services Documentation Form.")

Compliance and

Nonattest Services

Documentation Form

Financial Statement 8) Made minor edits to terminology and wording.

PRS-CX-2.1

Materiality Worksheet

for Planning Purposes

Component

9) Provided additional guidance in the instructions and to certain PRS-CX-2.2

Materiality Worksheet

steps.

10) Made minor edits to terminology.

PRS-CX-2.2

Understanding the Entity and Identifying Risks

11) Modified instructions to note that additional documentation or PRS-CX-3.1 forms may be necessary for identified components.

PRS-PA-0.1 (Continued)

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PRS (9/15)

Practice Aid Engagement Team Discussion

Substantive Changes and Additions

Reference

12) Modified the instructions to emphasize that the discussion should PRS-CX-3.2

include an exchange of ideas or brainstorming.

13) Added an additional required discussion item.

PRS-CX-3.2

Fraud Risk Inquiries Form

14) Provided additional guidance in the instructions.

PRS-CX-3.3

15) Provided additional guidance in the practical considerations on PRS-CX-3.3 whom to interview.

Documentation and Analysis of Group Components Understanding the Design and Implementation of Internal Control Financial Reporting System Documentation Form--IT Environment and General Computer Controls Activity and Entitylevel Control Forms

Entity-level Control Form for Risk Assessment Control Activities Form for Investments and Derivatives Entity Risk Factors

Risk Assessment Summary Form

Inherent Risk Assessment Form

Test of Controls Form

Checklist for Determining Whether a Contract is a Derivative

Variable Interest Entity Assessment Accounting Worksheet

Closing Entry and Audit Adjustment Form

16) Renumbered form. Previously numbered PRS-CX-11.6 .

PRS-CX-3.5

17) Expanded a practical consideration for the control environment to PRS-CX-4.1 discuss independent outside directors.

18) Added additional minor clarifications.

PRS-CX-4.2.2

19) Made minor edits and revisions to clarify the form and certain PRS-CX-5

control objectives and controls.

series

20) Moved certain controls between principles.

PRS-CX-5.2

21) Moved a control between principles.

PRS-CX-5.12

22) Added an additional financing risk factor to consider and modified PRS-CX-6.1 others.

23) Combined the "Accounts Payable" and "Other Liabilities" sections PRS-CX-7.1 to be consistent with audit programs.

24) Expanded a note to emphasize that audit programs need to be PRS-CX-7.1 tailored to address the nature, cause, and direction of potential misstatements at the relevant assertion level.

25) Combined the "Accounts Payable" and "Other Liabilities" sections PRS-CX-7.2 to be consistent with audit programs.

26) Modified and added practical considerations on IT-dependent PRS-CX-10.1 controls and the use of inquiries.

27) Added a practical consideration discussing the issuance of ASU No. 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity.

PRS-CX-11.4

28) Noted the issuance of ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which affects reporting entities that are required to evaluate whether they should consolidate certain legal entities.

PRS-CX-11.6

29) Made formatting changes to the form.

PRS-CX-12.1

PRS-PA-0.1 (Continued)

PRS (9/15)

Practice Aid Audit Difference Evaluation Form Disclosure Checklists

Going Concern Checklist

Significant Estimates Identification Checklist Confirmation and Correspondence Control AUDIT PROGRAMS (PRS-AP) Audit Program for General Planning Procedures

Other General Planning Procedures

Audit Program for General Auditing and Completion Procedures

Audit Program for Receivables and Tenant Revenues

Audit Program for Receivables and Sales of Real Estate Other Audit Procedures for Receivables and Sales of Real Estate Audit Program for Property (including Real Estate Held for Use in Rental Operations)

Substantive Changes and Additions 30) Added additional qualitative factors in evaluating materiality.

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Reference PRS-CX-12.2

31) Updated the checklists for disclosure requirements of recently PRS-CX-13

issued professional accounting standards.

series

32) Modified instructions and added practical considerations due to PRS-CX-16.1 the issuance of ASU No. 2014-15.

33) Added an additional item for the amortization of goodwill if the PRS-CX-16.2 accounting alternative was elected.

34) Added a new confirmation letter to the form.

PRS-CX-17.3

1) Modified practical consideration to note that activities such as PRS-AP-1 financial statement preparation, cash to accrual conversions, and reconciliations will be considered nonattest services for periods beginning on or after December 15, 2014.

2) Added a practical consideration discussing inquires that should be PRS-AP-1 made.

3) Added a practical consideration discussing the use of the new PRS-AP-1A confirmation letter at PRS-CL-14.9 .

4) Added a practical consideration discussing the issuance of ASU PRS-AP-2 No. 2014-15.

5) Added practical consideration to note that activities such as PRS-AP-2 financial statement preparation, cash to accrual conversions, and reconciliations will be considered nonattest services for periods beginning on or after December 15, 2014.

6) Added a practical consideration discussing the issuance of ASU PRS-AP-4 2014-09, Revenue from Contracts with Customers (Topic 606).

7) Added a practical consideration discussing the FASB's proposed PRS-AP-4 ASU, Leases (Topic 842)--a revision of the 2010 proposed FASB Accounting Standards Update, Leases (Topic 842), and tentative decisions on leases.

8) Added a practical consideration discussing the issuance of ASU PRS-AP-5 2014-09.

9) Added a practical consideration discussing PPC's Workpapers for PRS-AP-5A Nonpublic Companies that includes an electronic "Interim Receivables Rollforward" worksheet.

10) Added a practical consideration discussing the issuance of ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.

PRS-AP-7

PRS-PA-0.1 (Continued)

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