American Institute of CPAs aicpa.org/FRC Auditing Standards
Board Clarity Project DISCLAIMER: This publication has not been
approved, disapproved or otherwise acted upon by any senior
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position of, the American Institute of Certified Public
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sought. Copyright 2011 by American Institute of Certified Public
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Slide 2
American Institute of CPAs aicpa.org/FRC Clarity Background
Discussion paper issued March 2007 ASB considered comments received
and approved direction forward August 2007 Goals Address concerns
over length and complexity of standards Make standards easier to
read, understand and implement Will lead to enhancements in audit
quality
Slide 3
American Institute of CPAs aicpa.org/FRC Clarity Convergence?
IAASB, ASB, GAO, PCAOB Convergence with ISAs Harmonize, not adopt
Most audits performed internationally are of nonpublic entities
therefore, ASB and IAASB have a similar focus Avoid unnecessary
differences with PCAOB ASB standardsmore shoulds than ISAs, but
less than existing SASs
Slide 4
American Institute of CPAs aicpa.org/FRC Clarity Drafting
Conventions Introduction Objective Definitions Requirements
Application Material Integral part of standard auditors required to
read and understand Appendices and Exhibits
Slide 5
American Institute of CPAs aicpa.org/FRC Clarity Drafting
Conventions Difference between Must and Should Must = is required
to do action -(always do action, exactly as prescribed) Should = is
required to do [action] -(always do action, but on rare occasions
not exactly as prescribed) Application material is integral part of
standard auditor is required to understand it
Slide 6
American Institute of CPAs aicpa.org/FRC Clarity Project 58 AU
sections 3 withdrawn 37 redrafted to corresponding SAS 7 combined
into 1 new SAS 11 combined/split into 9 SASs Will be replaced by 47
new SASs AU section numbers will be changed to converge with ISA
numbering Effective for audits of periods ending on or after
12/15/2012
Slide 7
American Institute of CPAs aicpa.org/FRC Issuance of Clarified
SASs Issued and Effective: SASs 117-120 Issuance planned for
October 2011 SAS 122, Statements on Auditing Standards:
Clarification and Recodification (39 finalized SASs) SAS 123,
Omnibus Statement on Auditing Standards- 2011 SAS 124, Reporting On
Financial Statements Prepared in Accordance With a Financial
Reporting Framework Generally Accepted in Another Country.
Slide 8
American Institute of CPAs aicpa.org/FRC Issuance of Clarified
SASs Others AU section 532, Restricting the Use of an Auditors
Report AU section 341, The Auditors Consideration of an Entitys
Ability to Continue as a Going Concern, AU section 322, The
Auditors Consideration of the Internal Audit Function in an Audit
of Financial Statements
Slide 9
American Institute of CPAs aicpa.org/FRC Codification 2 volumes
extant (AU) and clarified (AU- C) Codification numbers set by SAS
No. 122 Extras Preface Cross-reference old AU numbers to new AU
numbers Summary of differences between SASs and ISAs Glossary
Slide 10
American Institute of CPAs aicpa.org/FRC Changes from Extant
Standards No substantive changes to requirements for Audit
Documentation Auditors Communication With Those Charged With
Governance Risk Assessment Standards External Confirmations
Analytical Procedures Audit Sampling Auditing Accounting Estimates
Written Representations Subsequent Events Consideration of Omitted
Procedures After the Report Release Date
Slide 11
American Institute of CPAs aicpa.org/FRC Changes to Extant
Standards Primary difference relates to Group Audit Standard More
specific as to what group engagement partner is responsible for.
Additional QC guidance QC responsibilities for the audit more
specifically described Overall QC function remains firm
responsibility, but responsibilities are engagement partners and
engagement teams Some changes in audit report to more clearly
describe managements responsibility New format to use report
headings
Slide 12
American Institute of CPAs aicpa.org/FRC Special
ConsiderationsAudit of Group Financial Statements (AU 600)
Acceptance and continuance - group auditor; identify components;
preconditions Understanding - group; components; component
auditors; make reference? Materiality decisions and responding to
risks of material misstatement Other procedures - consolidation
process; subsequent events; evaluating evidence Communications -
with component auditors; with group governance and management
Slide 13
American Institute of CPAs aicpa.org/FRC Impact of Selected
StandardsGroup Audits Understanding of entity includes components
Extent group auditor will be able to be involved with component
auditor Decision to make reference Obtaining misstatements above
trivial noted by component auditor Communications between group and
component auditor increased Group auditors reporting of component
auditors MW and SD
Slide 14
American Institute of CPAs aicpa.org/FRC Impact of Selected
Standards: Overall Objectives SAS No substantive changes from
superseded sections AU sections 110, 120, 150, 201, 210, 220, and
230 New structure Overall Objective of the Auditor Objective for
each SAS 10 standards superseded New terminology- financial
reporting framework, applicable financial reporting framework,
fair-presentation framework, and regulatory and contractual-based
framework.
Slide 15
American Institute of CPAs aicpa.org/FRC Impact of Selected
Standards: Quality Control SQCS CPA Firm QC SAS Engagement
Partner
Slide 16
American Institute of CPAs aicpa.org/FRC Examples of Impact of
Selected Standards Auditor Reports Exposure Drafts Opinion (Basis
for qualified, adverse, or disclaimer) Emphasis of Matter Matters
appropriately presented or disclosed Other Matter To understand
audit matters Headings and Subheadings Other auditor reporting
responsibilities Managements Responsibilities
Slide 17
American Institute of CPAs aicpa.org/FRC Examples of Impact of
Selected Standards Special Purpose Frameworks Cash BasisTax
BasisContractual Regulatory RestrictedGeneral Opinion Single Dual
Use EOM? Yes No Describe Purpose No Yes Restrict use? No Yes
No
Slide 18
American Institute of CPAs aicpa.org/FRC Implementation
Strategies Wait, hope and pray? Hitch a ride with someone else?
Still need to learn the content Get on your own horse and hit the
trail!
Slide 19
American Institute of CPAs aicpa.org/FRC Implementation
Strategies Gotta Know the Stuff Read, read, read -Application
guidance, appendices, and exhibits -Updated AICPA audit guides
-Risk Assessment Standards -State and Local Governments
-Not-for-profit entities Watch for AICPA Clarity educational
efforts Attend this and other educational events Talk with
others!!!
Slide 20
American Institute of CPAs aicpa.org/FRC Implementation
Strategies A Proactive Approach Begin updating for CY 2012/FY 2013
financial statement audits -Your policies and procedures manuals,
forms, checklists, and audit processes Arizona OAG example -Began
with exposure drafts (i.e., small task forces) -Cataloging changes
(e.g., significant changes; things to watch for;
government-specific) -Some centralized effort, but use/reinstate
task forces for implementation analysis
Slide 21
American Institute of CPAs aicpa.org/FRC Clarity Project
Website Resources Guide to Clarified and Converged Standards for
Auditing and Quality Control All finalized SASs Mapping of Existing
AU sections to Clarified SASs Summary of Differences Between
Existing SASs and Clarified SASs Clarity Project FAQs Matrixes of
detailed differences from ISAs
Slide 22
American Institute of CPAs aicpa.org/FRC Clarity Project
Website Resources Guide to Clarified and Converged Standards for
Auditing and Quality Control All finalized SASs Mapping of Existing
AU sections to Clarified SASs Summary of Differences Between
Existing SASs and Clarified SASs Clarity Project FAQs Matrixes of
detailed differences from ISAs
Slide 23
American Institute of CPAs aicpa.org/FRC Clarity Project
Website http://www.aicpa.org/interestareas/frc/a
uditattest/pages/improvingclarityasbsta ndards.aspx
Slide 24
American Institute of CPAs aicpa.org/FRC Financial Reporting
Center