ASB Reaches Major Milestone in Clarity Project
In 2004, the AICPA Auditing Standards Board began work to clarify Statements on Auditing Standards, Statements on Quality Control Standards and Statements on Standards for Attestation Engagements to make them easier to read, understand and apply. At the same time, the ASB undertook a project to converge its standards with those issued by the International Audit and Attestation Standards Board.
Last week, the ASB announced it has achieved a major milestone in the Clarity Project with the issuance of SASs Nos. 122–124. Together with the issuance of SASs Nos. 117-120, 44 (out of 47) clarified SASs have been completed and issued.
Most Clarified SASs become effective for periods ending on or after Dec. 15, 2012. For exceptions to this effective date, view the AICPA’s resource which highlights those standards with a different effective date. This is the first complete recodification of U.S. generally accepted auditing standards since 1972.
While the main goal of the Clarity Project is make U.S. GAAS easier to read, understand and apply, another goal was to converge with international standards while avoiding unnecessary differences with the auditing standards issued by the Public Company Accounting Oversight Board. Some differences are necessary as the auditing standards are used for audits of public companies while the SASs apply to audits of private companies.
So what does the Clarity Project mean for you?
There are, however, some significant changes which will require auditors to prepare accordingly. A complete list of changes from the original SASs to the clarified SASs is available on AICPA.org. One area with significant change is the auditor’s report, which will require headings to precede each paragraph to clearly distinguish each section of the report. Additionally, two new sections of the report will be added: “Management’s Responsibility for the Financial Statements” and “Auditor’s Responsibility,” which were previously found within the introduction paragraph. A more specific list of changes and how this will affect the auditor’s report can be found in the AICPA Professional Standards publication, which has a free trial available for AICPA members and non-members.
Another significant change is reflected in the clarified SAS, Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors), which strengthens existing standards by making it easier for auditors to understand and apply the requirements of GAAS. Group financial statements include components, often audited by other auditors. The clarified SAS requires the auditor of the group financial statements to be involved with the component auditors. These requirements apply even when the component auditor works for a network firm of the group engagement partner’s firm or for a different office of the same firm.
Next year, all clarified standards will be published in a volume of AICPA Professional Standards. Additional resources are available from the AICPA to help you understand these changes and prepare for their effective date.
Ahava Goldman, CPA, Senior Technical Manager - Audit and Attest Standards, American Institute of CPAs. Ahava is the staff liaison for the Auditing Standards Board and staffs the Clarity Task Force which supports the ASB with its Clarity Project to revise its standards to make them easier to read, understand and apply.
Posted by Guest Blogger on Oct 19, 2011
in Ahava Goldman, CPA, Financial Reporting
