CAQ helps audit committees assess rev rec standard
The Center for Audit Quality has released a document to help audit committees to evaluate how far along their companies have come in implementing the new revenue recognition accounting standard.
The document, “Preparing for the New Revenue Recognition Standard: A Tool for Audit Committees,” comes as recent studies indicate that many companies are far behind in getting ready for the impending standard, which takes effect in about a year for public companies.
Only 17 percent of public companies said they are in the implementation phase, according to a recent survey of executives by PwC and the Financial Executives Research Foundation. In contrast, 75 percent of the public companies polled indicate they are still assessing the impact of the new standard, while 8 percent indicated their company has not even begun assessment and implementation yet. The CAQ hopes the document will provide a tool for audit committees to begin such an assessment.
“Oversight of the implementation of new accounting standards is an important part of the audit committee's responsibilities, and revenue is one of the most important financial reporting measures,” said CAQ executive director Cindy Fornelli in a statement. “The CAQ is pleased to provide this tool to help audit committees oversee the implementation of the new standard, including their interaction with external auditors on the subject.”
The document includes information to help audit committee members better understand the new revenue recognition standard, which the Financial Accounting Standards Board and the International Accounting Standards Board debuted in 2014.It also helps audit committee members talk with management and auditors about the impact of the new standard on different factors pertaining to the company’s business. The document can help audit committees understand and evaluate management’s implementation project plan and make decisions on the transition and new disclosure requirements. Questions and answers for audit committees help them understand the impact of the new standard. It also includes a list of the resources on revenue recognition developed by CAQ member firms and the American Institute of CPAs.
For more information, visit the CAQ's audit committee resources page.