Real Estate and Construction Industry Developments Audit Risk Alert

This Audit Risk Alert is intended to provide auditors of financial statements of real estate and construction entities with an overview of recent economic, industry, technical, regulatory, and professional developments that may affect the audits and other engagements they perform. This alert can also be used by an entity’s internal management to address areas of audit concern. This alert is an important tool in helping you identify the significant risks that may result in the material misstatement of financial statements. Moreover, this alert delivers information about emerging practice issues and current accounting and auditing developments.

This alert provides regulatory updates for entities in the real estate and construction industries. You will also find information on accounting and auditing standards such as:

• Fair Value Accounting Standards (FASB Nos. 157 and 159)
• Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (FSP 157-3)
• Accounting for Performance of Construction-Type and Certain Production-Type Contracts (SOP 81-1)
• Accounting for Transfers of Financial Assets and Repurchase Financing Transactions (FSP No.140-3)
• Accounting for the Sale of Real Estate Subject to the Requirements of FASB No.66 When the Agreement Includes a Buy-Sell Clause (EITF 07-6)

You will also find information on emerging issues such as:

• Measurements of Fair Value in Illiquid Markets
• Loan Modifications Within the Scope of Qualifying Special Purpose Entities
• Convergence with International Financial Reporting Standards
• The FASB Codification Project
• The ASB's Clarity Project including convergence with international standards

This publication is an other auditing publication as defined in AU section 150. Other auditing publications have no authoritative status; however, they may help the auditor understand and apply the Statements on Auditing Standards. The auditing guidance in this document has been reviewed by the AICPA Audit and Attest Standards staff and published by the AICPA and is presumed to be appropriate. This document has not been approved, disapproved, or otherwise acted on by a senior technical committee of the AICPA.

Content refers to previous edition

Notice to Readers

This Audit Risk Alert is intended to provide auditors of financial statements of construction contractors with an overview of recent economic, industry, technical, regulatory, and professional developments that may affect the audits and other engagements they perform.

This publication is an other auditing publication as defined in AU section 150, Generally Accepted Auditing Standards (AICPA, Professional Standards, vol. 1). Other auditing publications have no authoritative status; however, they may help the auditor understand and apply the Statements on Auditing Standards.

If an auditor applies the auditing guidance included in an other auditing publication, he or she should be satisfied that, in his or her judgment, it is both relevant to the circumstances of the audit and appropriate. The auditing guidance in this document has been reviewed by the AICPA Audit and Attest Standards staff and published by the AICPA and is presumed to be appropriate. This document has not been approved, disapproved, or otherwise acted on by a senior technical committee of the AICPA.

Christopher Cole, CPA CFE
Technical Manager
Accounting and Auditing Publications

Acknowledgments

The AICPA staff is grateful to J. Russell Madray, CPA, who developed and wrote this alert.

022318