LIST OF SUBSTANTIVE CHANGES AND ADDITIONS

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LIST OF SUBSTANTIVE CHANGES AND ADDITIONS

PPC's Guide to Audits of Nonprofit Organizations

Thirty-second Edition (January 2019)

Highlights of this Edition

The following are some of the important new features of the 2019 edition of PPC's Guide to Audits of Nonprofit Organizations:

? Updates for Major New Accounting Standards. This edition of the Guide has updated guidance, practice aids, and audit programs for the requirements in FASB ASC 606, Revenue from Contracts with Customers, and ASU 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made. We have also updated the Guide for ASU 2016-01, Financial Instruments--Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. In addition, so that you can consider the implications on your audit procedures for the upcoming effective date of the new leasing standard, ASU 2016-02, Leases (Topic 842), we have provided supplemental audit program procedures that will apply when the standard is adopted.

? New Practice Aid. In additional to our recurring updates for recent developments, we have added a new practice aid that can be used to document procedures performed related to service auditor's reports and controls at a service organization that are relevant to internal control over financial reporting.

? Revised Risk Assessment Summary Form. We revised and clarified the Risk Assessment Summary Form at NPO-CX-7.1 throughout to promote greater understanding of risk assessment concepts applied.

? Compilation and Review. Your Guide is updated for the issuance of SSARS No. 24, Omnibus Statement on Standards for Accounting and Review Services--2018, which revises AR-C 60 and AR-C 90, adds AR-C 100, and withdraws Interpretation No. 1 of AR-C 90.

? Summary of the Yellow Book Revision. The GAO recently issued Government Auditing Standards, 2018 Revision (the 2018 Yellow Book). Though the revised guidance may not be implemented early (effective for periods ending on or after June 30, 2020), your Guide includes a summary of some of the key changes you can expect when the 2018 Yellow Book becomes effective.

? Updated Guidance on Single Audits. If you perform Single Audits, you know how complex the auditing requirements are and that they change every year. Your Guide's text and practice aids provide up-to-date guidance for performing and reporting on Single Audits, including the latest guidance and tips to help you successfully perform audits of nonprofit organizations that are required to be conducted in accordance with the OMB's Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) audit requirements. In addition, your Guide has been updated for the changes in the 2018 Compliance Supplement and the 2018 edition of the AICPA Audit Guide, Government Auditing Standards and Single Audits, and provides information about the upcoming 2019 Compliance Supplement. The OMB issued the 2018 Compliance Supplement in a different format than previously issued Compliance Supplements. The 2018 Compliance Supplement only modifies those sections of the 2017 Compliance Supplement that had significant updates and changes. The sections of the 2017 Compliance Supplement that were not superseded remain effective, but they were not included in the 2018 Compliance Supplement.

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Therefore, auditors will need to use both the 2017 and the 2018 Compliance Supplements for audits of fiscal years beginning after June 30, 2017, covered by those Compliance Supplements. Your Guide also continues to provide guidance for Single Audits in accordance with the previous administrative and internal control requirements.

? Comprehensive, Up-to-date Disclosure Checklist. The most effective way to ensure the statements properly disclose all the required information is to use our comprehensive disclosure checklist. The disclosure checklist for nonprofit organizations has been completely updated for the many ASUs issued since the last edition of your Guide.

In addition to these featured items, your Guide includes the following update items detailed below:

Chapter General

CHAPTER 1 Background Information

CHAPTER 2 Pre-engagement Activities

Substantive Changes and Additions 1. Changed references throughout the Guide, where

applicable, for the March 1, 2018, edition of the AICPA Audit and Accounting Guide, Not-for-Profit Entities.

2. Changed references throughout the Guide, where applicable, for the March 1, 2018, edition of the AICPA Audit and Accounting Guide, Government Auditing Standards and Single Audits.

1. Updated footnote for issuance of ASU 2018-08, Notfor-Profit Entities (Topic 958): Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made.

2. Added the AICPA Audit and Accounting Guide, Revenue Recognition, to the list of available audit guidance.

3. Added a discussion on the SAS, Omnibus Statement on Auditing Standards--2019, that the ASB has voted to issue as a final SAS.

4. Updated the discussion on the AICPA initiative on enhancing audit quality for recent developments.

5. Streamlined the discussion on the Panel on the Nonprofit Sector for recent developments.

6. Updated for the issuance of the Government Auditing Standards, 2018 Revision (2018 Yellow Book).

1. Updated for the issuance of the 2018 Yellow Book.

2. Added or updated a footnote to note that the ASB has voted to issue a final SAS, Omnibus Statement on Auditing Standards--2019.

3. Added a footnote discussing when AU-C 915 applies to oral advice.

4. Added a footnote discussing the firm's quality control procedures' impact on independence matters.

5. Updated the effective date of the ethics interpretation, Hosting Services, at ET 1.295.143.

6. Added a footnote for two Frequently Asked Questions from the Professional Ethics Committee.

7. Added a footnote for an approved revision of ET 1.260.040, Leases.

Reference Various

Various

Paragraph 102.5

Paragraph 104.6

Paragraph 104.19

Paragraphs 104.27?.32 Paragraph 107.4

Paragraphs 108.6 and 108.31?.34 Paragraph 200.2 Paragraphs 202.24 and 208.29 Paragraph 202.27 Paragraph 202.34 Paragraph 202.52 Paragraph 202.68 Paragraph 202.71

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Chapter

CHAPTER 3 Risk Assessment Procedures and Planning

CHAPTER 4 Assessing Risks and Developing the Detailed Audit Plan

Substantive Changes and Additions 8. Added proposed revisions to ethics interpretations on

information systems and staff augmentation arrangements.

9. Added a discussion for the issuance of the 2018 Yellow Book.

10. Noted the addition of NPO-CX-4.4, "Documentation Form for Reliance on a SOC 1 Report," that may be used when considering complementary controls.

11. Added a footnote for consideration of group audits for certain investments after the adoption of ASU 201601, Financial Instruments--Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

1. Added a footnote to note that the ASB has voted to issue a final SAS, Omnibus Statement on Auditing Standards--2019.

2. Added a footnote discussing the increased scrutiny of the area of risk assessment.

3. Added a footnote for the issuance of the 2018 Yellow Book.

4. Added a footnote discussing the effect on risk assessment and other planning procedures by the entity's adoption of new accounting guidance.

5. Added a discussion on the AICPA Guide to Audit Data Analytics.

6. Added an item to the fraud-related matter list.

7. Updated the discussion of the AICPA Audit Risk Alert, Not-for-Profit Entities Industry Developments--2018.

8. Added a discussion on the consideration of new accounting standards.

9. Updated a footnote for the issuance of new risk assessment-related resources.

10. Updated a footnote and discussion on materiality.

11. Expanded the discussion on using other benchmarks when determining planning materiality.

12. Expanded the discussion on assessing risks of material misstatement at the financial statement level.

1. Expanded the discussion on risk assessment procedures performed to gather information to be used as audit evidence to support the auditor's assessment of risks of material misstatement.

2. Expanded the discussion on documenting identified risk at the relevant assertion level.

3. Expanded the discussion on assessing risks of material misstatement at the relevant assertion level.

Reference Paragraphs 202.72?.73

Paragraphs 202.75?.76 Paragraph 206.27

Paragraph 208.4

Paragraphs 300.3 and 301.31

Paragraph 300.3

Paragraph 300.3

Paragraphs 301.1, 301.16, and 301.40 Paragraph 301.62 Paragraph 301.79 Paragraph 302.21 Paragraphs 302.51?.58 Paragraph 303.14 Paragraph 306.7 Paragraphs 306.23?.28 Paragraph 306.63 Paragraphs 402.2?.4

Paragraph 402.27 Paragraphs 403.1, 403.9, and 403.11

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Chapter

CHAPTER 5 Substantive Procedures

CHAPTER 6 Testing Internal Control

CHAPTER 7 Audit Sampling in a Nonprofit Organization Audit Engagement

CHAPTER 8 Audit Documentation

Substantive Changes and Additions 4. Clarified the discussion on PPC's approach to the

steps to assess the risks of material misstatement at the relevant assertion level.

5. Expanded the discussion on determining significant audit areas.

6. Added a discussion on the need for improvement in assessing control risk.

7. Revised the table that assists auditors in determining the combined assessed risk of material misstatement when the auditor makes separate assessments of inherent risk and control risk and the related discussion to clarify that a range of combined risk results needs to be considered.

8. Clarified the importance of documenting the linkage of procedures with the assessed risk of material misstatement due to fraud at the assertion level.

9. Expanded the discussion on the need for appropriate linkage of risk assessments and audit procedures planned and performed.

10. Expanded the discussion on selecting extended procedures.

11. Expanded the discussion on tailoring specified risk audit programs.

1. Added a footnote to discuss that it may be difficult to develop appropriate expectations using prior-period information during the implementation of FASB ASC 606, Revenue from Contracts with Customers.

2. Added an example to the common examples of test of details of statement of activities transactions.

3. Added a footnote discussing that the implementation of FASB ASC 606 may affect the design and use of confirmations.

4. Added a footnote on considerations for ASU 2016-02, Leases (Topic 842).

1. Expanded the discussion for considerations when tests of controls are not efficient.

2. Added a footnote to discuss audit data analytics and related resources.

1. Expanded the discussion on identifying unusual items.

2. Revised the table that assists auditors in determining the combined assessed risk of material misstatement when the auditor makes separate assessments of inherent risk and control risk to clarify that a range of combined risk results needs to be considered.

1. Expanded the discussion on signatures and sign-offs to consider precautions to ensure retention of the preparer and reviewer information when archiving in an electronic environment.

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Reference Paragraphs 403.13?.15

Paragraphs 403.20?.21 Paragraphs 403.57?.59 Exhibit 4-8; Paragraph 403.61

Paragraph 404.30

Paragraphs 405.1?.2 and 405.9 Paragraph 405.22 Paragraph 405.38 Paragraphs 503.25 and 506.2; Exhibit 5-4

Paragraph 503.29 Paragraph 504.5

Paragraph 506.33 Paragraph 603.16 Paragraph 603.20 Paragraph 702.13 Exhibit 7-7

Paragraph 805.14

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Chapter CHAPTER 9

Special Accounting and Audit Considerations for Nonprofit Organizations

CHAPTER 10 Tax Considerations in Audits of Nonprofit Organizations

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Substantive Changes and Additions 1. Restructured and revised for the adoption of ASU

2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. 2. Updated for the adoption of ASU 2016-01.

3. Updated discussion for adoption of ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash.

4. Updated for the issuance of ASU 2018-08.

5. Restructured and revised for adoption of ASU 201409, Revenue from Contracts with Customers (Topic 606).

6. Added a discussion on a proposed ASU that would extend accounting alternatives regarding goodwill to nonprofit organizations.

7. Added a discussion for the adoption of ASU 2017-04, Intangibles--Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.

8. Added a discussion for a proposed ASU, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections.

9. Added audit responses to common property and equipment fraud schemes.

10. Updated the footnote discussing a proposed ASU, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent).

11. Added audit responses to common liabilities and other liabilities fraud schemes.

12. Added a symptom and an audit response to common cash disbursement fraud schemes.

1. Added a footnote discussing the consideration to seek legal advice to determine if a group exemption is appropriate.

2. Updated the discussion on Form 1023-EZ for recent revisions and other activities.

3. Updated the discussion for the 2018 Charities Bureau of the New York Office of the Attorney General publication.

4. Updated the discussion on recent legislation for developments regarding the Tax Cuts and Jobs Act of 2017 (TCJA).

Reference Various

Paragraph 900.29; section 902 Paragraph 901.1

Paragraphs 903.3, 903.40, 903.74, 904.6, and 904.30?.31; Exhibits 9-7 and 9-9 Section 904

Paragraph 908.14

Paragraphs 908.23?.26

Paragraph 909.11

Exhibits 9-11 and 9-12 Paragraph 910.3

Exhibit 9-14

Exhibit 9-15

Paragraph 1000.6

Paragraphs 1000.11 and 1000.13?.14 Paragraph 1000.17

Paragraph 1000.20

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Chapter

CHAPTER 11 Concluding the Audit

Substantive Changes and Additions 5. Updated the discussion on the IRS website and social

media resources for the IRS2Go app and information provided on Instagram and LinkedIn.

6. Updated the discussion for the transition to the Tax Exempt Organization Search tool.

7. Updated the discussion for the mention of ASU 201614 in the Form 990 instructions.

8. Expanded the discussion on special considerations for Form 990.

9. Updated the discussion on written contemporaneous acknowledgement of contributions for final regulations.

10. Added a footnote on a new revenue procedure allowing automatic consent for the early adoption of recognizing revenue under ASU 2014-09.

11. Updated the discussion on unrelated business income for requirements under the TCJA.

12. Added a discussion on the excise tax on excess compensation under the TCJA.

13. Updated the discussion for recent activity involving sales taxes related to Internet sales.

14. Updated the discussion on TE/GE priorities.

15. Updated the discussion on tax-exempt bonds.

1. Noted the issuance of the 2018 Yellow Book.

2. Added discussions about the ASB voting to issue a final SAS, Omnibus Statement on Auditing Standards--2019, that will impact the auditor's responsibilities in several areas.

3. Added a discussion on the impact of the adoption of ASU 2014-09 will have on the number of accounting estimates.

4. Updated a footnote for the adoption of ASU 2016-01.

5. Added a footnote for the issuance of ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework--Changes to the Disclosure Requirements for Fair Value Measurement, and Concept Statement No 8, Conceptual Framework for Financial Reporting--Chapter 8, Notes to Financial Statements.

6. Updated the discussion on materiality considerations related to disclosure for the FASB's issuance of Amendments to Statement of Financial Accounting Concepts No. 8, Conceptual Framework for Financial Reporting--Chapter 3, Qualitative Characteristics of Useful Financial Information.

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Reference Paragraph 1000.35

Paragraph 1000.50 Paragraph 1001.29 Paragraph 1001.31 Paragraph 1001.35

Paragraph 1003.1

Paragraph 1003.5 Paragraph 1003.8 Paragraph 1005.8 Paragraphs 1006.8?.9 Paragraphs 1006.21?.22 Paragraph 1100.3 Paragraphs 1106.5, 1110.9, and 1115.1

Paragraph 1109.8

Paragraph 1109.35 Paragraph 1109.37

Paragraph 1110.24

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Chapter

CHAPTER 12 Financial Statements of Nonprofit Organizations

CHAPTER 13 Auditor's Reports

CHAPTER 14 Single Audits

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Substantive Changes and Additions 7. Updated a footnote on possible changes to the

definition of material.

1. Restructured and revised for the adoption of ASU 2016-14.

Reference Paragraph 1114.20

Various

1. Added a discussion, footnote, or note for the issuance of the 2018 Yellow Book.

2. Updated discussion for a new SAS on the auditor's report that has been voted to ballot by the AICPA.

3. Expanded the discussion for when part of the reporting entity does not have a Yellow Book audit.

4. Updated the discussion on comparative totals for the adoption of ASU 2016-14 and the requirement to present an analysis of expenses by their functional and natural classifications in one location.

5. Expanded the discussion on reporting on internal control for handling the organization's response to findings identified in the audit as described in the accompanying schedule of findings and questions costs.

6. Added a Note on dating the auditor's report on supplementary information.

7. Added a Caution regarding the 2018 Yellow Book.

1. Added a discussion or footnote for the issuance of the 2018 Yellow Book.

2. Updated the discussion on transition considerations for OMB's Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.

3. Updated the discussion on resources from the Chief Financial Officers Council.

4. Updated the discussion on the OMB Compliance Supplement.

5. Added a discussion on the information that must be included in the corrective action plan and views of responsible officials for noncompliance caused by 2017 Hurricanes Harvey, Irma, and Maria cited in audit findings.

6. Updated the discussion on extensions of time to file the reporting package.

Paragraphs 1300.1, 1300.6, 1301.12, and 1306.1; Exhibit 13-4 Paragraphs 1300.4?.5 Paragraph 1301.23 Paragraph 1301.28

Paragraph 1306.5

Appendix 13A-2

Appendixes 13A3 and 13D-1 to 13D-4 Paragraphs 1400.5?.6, 1400.16, and 1404.23 Paragraph 1400.9

Paragraph 1400.12 Paragraphs 1400.14?.15 and 1407.22 Paragraph 1409.10

Paragraph 1409.21

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Chapter

CHAPTER 15 Compilation and Review Engagements

CONFIRMATION AND CORRESPONDENCE LETTERS (NPO-CL)

Management Representation Letter

Internal Control Communications

Communication with Those Charged with Governance

Receivables Confirmations and Letters

Benefit Plan Confirmations and Letters

Lease Confirmation Requests

Substantive Changes and Additions 7. Updated a footnote on the incorporation of the

AICPA's attestation standards in the attestation standards in the Yellow Book.

1. Updated for the issuance of SSARS No. 24, Omnibus Statement on Standards for Accounting and Review Services--2018, and the addition of AR-C 100, Special Consideration--International Reporting Issues.

2. Added a discussion for when the engagement letter is addressed only to those charged with governance.

3. Updated the discussion on actions necessary when information from the client is incorrect, incomplete, or otherwise unsatisfactory.

4. Added a discussion on requirements when using the work of other accountants.

5. Added a discussion on requirements when there is an indication that there is uncertainty about the entity's ability to continue as a going concern.

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Reference Paragraph 1410.6

Paragraphs 1501.3?.5

Paragraphs 1502.12?.13 Paragraph 1503.5

Paragraphs 1504.13?.15 Paragraphs 1504.16?.21

1. Added matters relating to ASU 2016-01, ASU 2016-02, and discontinued operations of any program or any significant services or activities to the Practical Consideration on common representations.

2. Added matters relating to classification of contributions, amounts held for others under agency and/or split interest agreements, debt covenant compliance, designations of net assets, loss contingencies, cybersecurity, and other IT-related matters to the Practical Consideration on financial statements or information provided.

3. Updated the Practical Considerations to note that the ASB voted to issue a final SAS, Omnibus Statement on Auditing Standards--2019.

4. Updated the Practical Considerations to note that the ASB voted to issue a final SAS, Omnibus Statement on Auditing Standards--2019.

5. Updated for terminology used for FASB ASC 606.

NPO-CL-3.1

NPO-CL-3.1

NPO-CL-4.1, NPO-CL-4.2, and NPO-CL-4.3 NPO-CL-5.1 and NPO-CL-5.2 NPO-CL-7.1

6. Updated a Practical Consideration for the issuance of ASU 2018-14, Compensation--Retirement Benefits (Subtopic 715-20): Disclosure Framework--Changes to the Disclosure Requirements for Defined Benefit Plans.

7. Updated a Practical Consideration to reference a new confirmation of lease contract after adoption of ASU 2016-02 and for ASU 2018-11, Leases (Topic 842): Targeted Improvements.

8. Added a new confirmation of lease contract after adoption of ASU 2016-02.

NPO-CL-11.1 and NPO-CL11.2 NPO-CL-12.3.1

NPO-CL-12.3.2

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