Improving the Clarity of Auditing Standards

Now is the time for auditors to prepare for the transition to the clarified standards, which are effective for calendar year 2012 audits. For example, new requirements may involve planning discussions with clients; some may affect interim testing and other fieldwork; and some require changes to the report. If your firm develops and maintains its own audit methodologies then you need to start now to be prepared. If your firm relies on commercially provided audit methodologies you still need to understand the underlying standards and requirements to ensure you use your methodology to complete audits as effectively and efficiently as possible while remaining compliant with the standards.
ASB Clarity Project Harold Monk, former Chair of the ASB, and Ken Odom discuss AU-C section 600, Special Considerations - Audits of Group Financial Statements (Including the Work of Component Auditors). Additional information is available on AU-C section 600, Special Considerations - Audits of Group Financial Statements (Including the Work of Component Auditors) at our dedicated Group Audit page.	The Auditing Standards Board (ASB) has redrafted almost all of the auditing sections in Codification of Statements on Auditing Standards (contained in AICPA Professional Standards) now reflecting the ASB’s established clarity drafting conventions designed to make the standards easier to read, understand, and apply. Among other improvements, generally accepted auditing standards (GAAS) now more clearly states the objectives of the auditor and the requirements with which the auditor has to comply when conducting an audit in accordance with GAAS. As the ASB redrafted the standards for clarity, it also converged the standards with the International Standards on Auditing (ISAs), issued by the International Auditing and Assurance Standards Board (IAASB). Although the purpose of redrafting the auditing standards is for clarity and convergence and not to create additional requirements, auditors will need to make some adjustments to their practices as a result of this project. The AICPA has developed a Learning and Implementation Plan to help you prepare for the transition.

*Exposure Draft of Proposed Statement on Auditing Standards Using the Work of Internal Auditors* Released** The ASB has completed the clarity redrafting of its last AU section in AICPA Professional Standards and has issued proposed Statement on Auditing Standards (SAS) Using the Work of Internal Auditors. This proposed SAS would supersede AU section 322 and AU-C section 610, The Auditor’s Consideration of the Internal Audit Function in an Audit of Financial Statements, and, among other amendments, would also significantly amend AU-C section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (AICPA, Professional Standards). Read about the most significant changes to the existing SAS in the explanatory memorandum of the proposed SAS. Among other things, readers are specifically requested to respond to the proposed requirements and application guidance relating to using internal auditors in a direct assistance capacity and whether the changes from the requirements and guidance included in International Standard on Auditing 610 (Revised 2013), Using the Work of Internal Auditors, are appropriate. Comments are due July 15, 2013.

The AICPA offers guidance and training on the Audit Clarity Standards, including:
Video Library In addition to the featured video above, videos discussing the following areas of the Clarity Standards are also available on AICPA TV: Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards The Clarified SASs, Audit Documentation, and Audit Considerations for Smaller, Less Complex Entities Elements of the Clarified SASs and Considerations for Audits of Smaller Less Complex Entities Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosure Understanding the Estimation Process Responding to Significant Risks in Auditing Accounting Estimates Auditing Accounting Estimates: Considerations for Audits of Smaller, Less Complex Entities Using the Work of Others Special Considerations - Audits of Group Financial Statements (Including the Work of Component Auditors) Significant Components Component Auditors, Materiality and Communication in a Group Audit Auditor's Reports Special Reports Audit Documentation
Guidance Clarified Auditing Standards—Learning and Implementation Plan Effective Dates for AU-C Sections of the Clarity Project ASB Clarity Project Extant AU Sections Mapped to the Clarified AU-C Sections Auditing Standards Board Clarity Project (Powerpoint presentation) Scalability of Generally Accepted Auditing Standards According to the Size and Complexity of an Entity Substantive Differences Between the International Standards on Auditing and Generally Accepted Auditing Standards Mapping of Existing AU Sections to Clarity Statements on Auditing Standards Clarity Project: Questions and Answers Summary of Differences Between Clarified SASs and Existing SASs Summary of Clarified Auditing Reporting Standards The AICPA has collected archive information on the Clarity Project, available on the Archive page.
Publications Clarity Standards (AU-C sections), contained in AICPA Professional Standards AICPA Student Members are eligible to access Professional Standards online (and many other AICPA publications, including the two Audit Risk Alerts below) at student discount rates SAS No. 127, Omnibus Statement on Auditing Standards—2013 Practice Aid Related-Party Audit Considerations: A Case Study Approach More information about related party transactions Practice Tool The Auditor's Report: Comprehensive Guidance and Examples Practice Tool The Engagement Letter: Best Practices and Examples Audit Risk Alert Understanding the New Clarified Auditing Standards Audit Risk Alert Understanding the Responsibilities of Auditors for Audits of Group Financial Statements More information about group audit standards Codification of Statements on Auditing Standards AICPA guides will be updated for the clarified auditing standards as follows: Audit guides will be fully conformed to the clarified auditing standards in the 2012 editions. Audit and Accounting (industry) guides will be updated using a "dual guidance" approach in 2012 editions highlighting where you may need to make changes to your practice or methodology, and then will be fully conformed in the 2013 editions.
Tools and Toolkits PCPS Clarified Auditing Standards Toolkit (for PCPS members) Not a PCPS Member? Purchase the Clarified Auditing Standards Toolkit from the AICPA Store Excerpt of Preface to the Clarified Auditing Standards Snapshot Overview (included in the PCPS Clarified Auditing Standards Toolkit)
Learning CPE Webcasts Group Study [covering all previous clarity and webcast topics] (Coming soon in 2013!) CPE On-Demand Understanding the Clarity Project
Additional Information A number of additional publication and training courses will be available in 2013 to assist CPAs with this transition, covering topics such as auditor reports, engagement letters, related parties, service organizations, and auditing fair value. In addition, within the clarified auditing standards and other resources available through the AICPA, particular efforts have been made to address special considerations for either smaller, less complex organizations or governmental entities.