Clarified Auditing Standards Toolkit – PCPS Members

SAS Nos. 122-125 are referred to as the Clarified Auditing Standards and are effective for engagements to audit financial statements for periods ending on or after December 15, 2012. Early implementation is not permitted.  Note:  SAS 127, Omnibus Statement on Auditing Standards, amends SAS No. 122, Statements on Auditing Standards: Clarification and Recodification, section 600, “Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors),” and SAS No. 122 section 800, “Special Considerations—Audits of Financial Statements Prepared in Accordance With Special Purpose Frameworks.” The amendment to AU-C section 600 addresses circumstances in which the auditor of the group financial statements may make reference to the audit of a component auditor. The amendment to AU-C section 800 adds an other basis of accounting as a special purpose framework.

These tools and resources have been developed to assist you and your firm in the implementation process; however, they are not a substitute for reading and understanding the standards themselves. The complete Codification of Statements on Auditing Standards is available in the AICPA store along with other resources for understanding the clarified standards.

Note:  AU-C section 600, Audits of Group Financial Statements, is one of the most significant changes as a result of the Clarity Project. AU-C section 600 applies whenever there is an audit of financial statements that include the financial information of more than one component, including combined financial statements of components under common control, or group financial statements. What is a Group Audit?  Review the Audit Risk Alert Understanding the Responsibilities of Auditors for Audits of Group Financial Statements for additional information.

After you’ve read the Audit Risk Alert, check out the technical questions and answers issued regarding Audits of Group Financial Statements included in TIS section 8800, Audits of Group Financial Statements and Work of Others (AICPA, Technical Practice Aids).  You’ll find nonauthoritative guidance regarding the implementation of AU-C section 600.  Recent updates address questions that have arisen from implementation issues, particularly those concerning equity investments.

For further insights into AU-C section 600, Audits of Group Financial Statements, check out these articles in the Journal of Accountancy:


Toolkit Components
  • Learning and Implementation Plan
    Use the Implementation Checklist to organize your path to understanding and implementing the clarified auditing standards.  This practical checklist walks you through the steps of learning what’s different in the new standards, training your staff, revising audit procedures, and communicating with clients.  You’ll find links to toolkit components for each step of the way, along with links to additional AICPA resources that may help with the implementation process.
  • Snapshot Overview
    The Snapshot Overview provides insight into the key provisions of SAS Nos. 122-125, to help you appropriately apply the new standards in your financial statement audits.  Here you’ll find a summary of what’s different, examples of how the work on your desk could change and auditor and client considerations to keep in mind in the transition to the new standards.
  • Map of AU-Cs to Prior AUs
    As a result of the Clarity Project’s objective of converging with IAASB, AU sections have been reorganized and renumbered.  “AU-C” section numbers are being used to indicate the clarified standards to avoid confusion with references to existing “AU” sections, which will remain in AICPA Professional Standards through 2013. Use this map to familiarize yourself with the organizational structure of the AU-Cs and to cross-reference to the existing AU standards.
  • Staff Training PowerPoint
    After you’ve identified the changes in standards that impact your practice and you’ve modified your engagement procedures, it’s time to start training your staff.  The toolkit provides a PowerPoint template your firm can use to introduce your audit staff to the new standards, and you can modify it to fit your firm’s needs.
  • Client Considerations Evaluation Worksheet
    Because the new standards will have varying impacts on your clients, we’ve provided a worksheet you can use to assess the impact on a client-by-client basis.  This tool can also be used as a guide to conversations with your clients to educate them about some of the changes they might notice during the audit engagement.
  • Client Communication Letter Template
    Clients will see new language in engagement letters and audit reports, along with changes in audit procedures.  You can use the template provided in the toolkit to introduce the general changes to your clients and educate them in advance of a more in-depth conversation regarding their audit engagement.
  • Template for Client Newsletters or Firm Websites
    In addition to the client letters, we’ve provided template language for newsletters or website articles.  Use this resource to reach a broader audience in your educational outreach about the new standards and their impact on audit engagements.

Additional Resources
You’ll find other resources relating to the Clarified Auditing Standards within the AICPA’s Financial Reporting Center (FRC) Clarity page. Look for videos explaining key provisions of the clarified standards, along with publications and continuing education offerings to supplement your understanding of the new auditing standards.

The issuance of AU-C section 600, Audits of Group Financial Statements, has resulted in significant changes. Be sure to check out the resources on a dedicated page created by the FRC discussing group audits, including a Technical Practice Aid that provide nonauthoritative guidance regarding the implementation of AU-C section 600. 

Did you know the AICPA provides discounts for firms that purchase resources in bulk quantities? Check out the Clarity Project Bundle available in the AICPA store. Discounts are available for purchases of ten or more of this resource and will be automatically applied at checkout.

Technical Hotline
AICPA members may call the Accounting and Auditing Technical Hotline at 888-777-7077, menu option number 5, followed by menu option number 3.