With the continued issues on independence related to HUD audits, AHACPA want to remind members regarding a few recent changes now becoming effective.
HUD audits have a substantial amount of independence risk related to non-audit services (NASs). One of the most consistently reported NASs is the calculation of depreciation for multifamily clients. However, under the ET Section 1.295.143, practitioners are reminded of the prohibition against hosting services.
Hosting services include the following:
- Housing the attest client’s website or other non-financial information system
- Keeping the attest client’s data or records on the attest client’s behalf, for example, the attest client’s general ledger information, supporting schedules (such as, depreciation or amortization schedules), lease agreements or other legal documents are stored on the member’s firm’s servers or servers licensed by the member’s firm or the member is responsible for storing hard copy versions of the data or records
- Being the attest client’s business continuity or disaster recovery provider
Since most of the multifamily engagements include maintaining the depreciation schedules for the client, CPAs are exposed to increased risk of independence impairment due to the maintenance of these schedules. However, the risk can be mitigated by retaining possession of the depreciation schedule prepared by the member, and then providing the deprecation schedule and related calculations are given to the attest client so that attest client’s books and records are complete.
This new requirement was originally effective September 1, 2018, but has since been extended to July 1, 2019.
Details of such requirements are currently being discussed in the audit update courses being conducted by AHACPA. See below for course information.