And now you know: CBA finalizes reporting, documentation and notification regs.

• Author: Allen, Bruce C.
• Position: Government Relations - California Board of Accountancy

After months of deliberation, the California Board of Accountancy as agreed on new regulations that implement the accountancy legislation passed in California last year. Amended regulations will be re-noticed for a 15-day comment period before proceeding to the Office of Administrative Law for final review and approval.

Major provisions include:

* New audit documentation standards;

* A requirement that CPAs notify clients of the potential or actual participation of non-CPA owners in providing services to clients; and

* Clarification of the requirements for CPAs to report client financial statement restatements to the CBA.

The official text of the regulations will be posted at www.calcpa.org/ members/GR when they become available and on the CBA website at www.dca.ca.gov/cba.

Audit Documentation

Legislation passed last year in California defines audit documentation in Business and Professions Code Sec. 5097 as:

"A licensee's records of the procedures applied, the tests performed, the information obtained, and the pertinent conclusions reached in an audit engagement. Audit documentation shall include, but is not limited to, programs, analyses, memoranda, letters of confirmation and representation, copies of abstracts of company documents, and schedules or commentaries prepared or obtained by the licensee. Audit documentation shall contain sufficient documentation to enable a reviewer with relevant knowledge and experience, having no previous connection with the audit engagement, to understand the nature, timing, extent, and results of the auditing or other procedures performed, evidence obtained, and conclusions reached, and to determine the identity of the persons who performed and reviewed the work."

Failure to document sufficiently or to retain the documentation for a minimum of seven years would establish a rebuttable presumption that the work was not performed.

In addition to those basic requirements, the CBA also is requiring, by its newly adopted Regulation 68.2, that audit documentation include an index or guide and that work papers include the preparation date, review date, report date and date of issuance of the audit along with the identity of the preparer and reviewer.

The CBA also adopted the new SEC requirement for retention of audit documentation whether or not the documentation supports the auditor's final conclusions.

"All audit documentation regarding any significant matter related to the audit shall be retained whether or...