Audit Risk Alert: Not-for-Profit Entities Industry Developments, 2018

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Audit Risk Alert: Not-for-Profit Entities Industry Developments, 2018

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New standards for financial statement presentation and revenue recognition have created many not-for-profit financial reporting changes. Combine those with today's technology-centered environment and the ever-present scrutiny of exempt organizations by the IRS and watchdog and rating agencies, and accountants, auditors, and financial managers may wonder how they'll ever tackle all the associated risks.

This alert takes discusses the important developments affecting not-for-profit entities in 2018, and the issues auditors may face. It's jam-packed with targeted discussions of current economic, accounting, and auditing issues affecting nonprofits, as well as changes on the horizon. Topics range from business environment issues like cybersecurity to accounting and auditing challenges like implementation of FASB's new financial statement standard (ASU No. 2016-14) and valuation of gifts-in-kind. This alert also covers legislative and regulatory issues like UBIT, debt-financed property rules, and tax reform provisions of interest to exempt organizations, as well as the new auditing standard on auditor involvement with exempt offering documents.

Among other topics, this alert focuses on risks related to recent nonprofit industry trends, financial statement presentation changes, revenue recognition, and fair value issues. A discussion of tax reform provisions affecting exempt organizations is also included as well as information on emerging issues such as:
- Revenue recognition for grants and contracts
- Phase 2 of FASB's not-for-profit financial statement presentation project
- Changes to the auditor's report
- Cybersecurity
- Blockchain and other transformative technology
Awareness of key trends affecting the nonprofit environment informs audit planning, risk management, strategic planning, and oversight, thereby promoting greater success and sustainability of not-for-profit entities.
1. Not-for-Profit Entities Industry Developments—2018 .01-.471
2. How This Alert Helps You .01-.03
3. Economic and Industry Developments .04-.64
4. The Current Economy .04-.09
5. The State of NFPs .10-.64
6. Legislative and Regulatory Developments .65-.121
7. IRS Exempt Organization Function .65-.69
8. IRS Issue Snapshots .70-.71
9. Department of the Treasury and the IRS Issue Priority Guidance Plan for 2017–2018 .72-.74
10. Listing of Published Guidance—2017 .75
11. Unrelated Business Taxable Income Issues .76-.86
12. Functional Expenses .87-.88
13. Discrepancies between FASB ASU No. 2016-14 and Form .990 .89-.97
14. Tax Cuts and Jobs Act .98-.103
15. Matters Affecting Higher Education .104-.106
16. Matters Affecting Religious Organizations .107-.113
17. Impact of Rising Minimum Wage Law on NFPs .114-.116
18. General Data Protection Regulation .117-.121
19. Audit and Attestation Issues and Developments .122-.188
20. Audit Risks for NFPs .122-.123
21. New Auditing Standard on Going Concern .124-.129
22. New Auditing Standard on Auditor Involvement with Exempt Offering Documents .130-.143
23. Recent Changes to SOC 1 Service Auditor Reports .144-.149
24. Auditing Functional Expense Classifications .150-.156
25. Confirmations .157-.162
26. Auditing Funds Held at Nonfinancial Institutions .163-.171
27. Challenges in Auditing GIK .172-.181
28. Transformative Technology on the Horizon .182-.188
29. Accounting Issues and Developments .189-.353
30. Revenue from Contracts with Customers .189-.219
31. Accounting Standards Updates Effective in 2017 .220-.305
32. The Net Asset Value Practical Expedient and Readily Determinable Fair Value .306-.311
33. Clarification of Key Terms in the Definition of Public Business Entity .312-.330
34. Expiration of the Perkins Loan Program.331-.335
35. Leases .336-.353
36. Not-for-Profit Entities Industry Developments—2018—continued Recent Pronouncements .354-.357
37. Recent Auditing and Attestation Pronouncements and Related Guidance .355
38. Recent ASUs .356
39. Recently Issued Technical Questions and Answers .357
40. Recent AICPA Independence and Ethics Developments .358-.399
41. Proposed Interpretations Responding to Non-Compliance with Laws and Regulations .358-.370
42. Conceptual Framework Implementation Tools and Resources .371-.372
43. Definition of a Client 373
44. New Independence Interpretation—Hosting Services .374-.380
45. Knowing Misrepresentations in the Preparation and Presentation of Information .381-.389
46. Pressure to Breach the Rules .390-.399
47. AICPA NFP Initiatives .400-.410
48. Not-for-Profit Member Section .401-.406
49. Not-for-Profit Certificate Program .407-.410
50. On the Horizon .411-.448
51. Auditing Pipeline .413-.439
52. Accounting Pipeline .440-.448
53. Resource Central .449-.470
54. Publications 450
55. Continuing Professional Education .451-.454
56. Webcasts .455-.456
57. Member Service Center .457
58. Hotlines .458-.459
59. AICPA Online Professional Library: Accounting and Auditing Literature .460
60. Industry Conference .461-.462
61. AICPA Government Audit Quality Center .463-.466
62. AICPA Industry Expert Panel—Not-for-Profit Entities .467
63. AICPA.org Not-for-Profit Interest Area .468
64. Industry Websites .469-.470
65. Appendix—Additional Internet Resources .471
Founded in 1887, the American Institute of Certified Public Accountants (AICPA) represents the CPA and accounting profession nationally and globally regarding rule-making and standard-setting, and serves as an advocate before legislative bodies, public interest groups and other professional organizations. The AICPA develops standards for audits of private companies and other services by CPAs; provides educational guidance materials to its members; develops and grades the Uniform CPA Examination; and monitors and enforces compliance with the accounting profession’s technical and ethical standards.
The AICPA's founding established accountancy as a profession distinguished by rigorous educational requirements, high professional standards, a strict code of professional ethics, a licensing status and a commitment to serving the public interest.