SSF Summary: Clarified Auditing Standards
Beginning December 31, 2012, auditing standards are changing resulting in changes to the
appearance of auditor’s reports. Understanding these changes is crucial to ensuring that the reports
you receive are correct and are in compliance with current regulations.
Sensiba San Filippo is committed to providing timely and relevant thought leadership and executive
briefing documents on critical industry changes to our clients and “friends” of our firm. Shared below
are details, as reported by Journal of Accountancy on these Clarified Auditing Standards. We hope
you find this helpful and please contact us directly with any questions you may have.
A Brief History
Over the past seven years the AICPA Auditing Standards Board (ASB) has aligned its agenda with
that of the International Auditing and Assurance Standards Board (IAASB). In an effort to converge
U.S. Generally Accepted Auditing Standards (GAAS) and International Standards on Auditing (ISA) by
December 2012, the IAASB has undertaken the Clarity Project to simplify, standardize, and recodify its
auditing standards for nonpublic companies. The Clarity Project will result in the first complete
redrafting and recodification of US GAAS since 1972.
These clarified standards are to be effective for periods ending on or after December 15, 2012.
Current auditing standards will be effective until that time.
Please make note of these critical actionable items that you and your team need to be aware of, to
ensure all reports are in compliance.
Auditor’s reports will need to be returned and reissued IF:
• The reporting period is ON OR AFTER December 15, 2012 and the new standards have NOT been
utilized.
• The reporting period is BEFORE December 15, 2012 and the new standards HAVE been utilized.
Some significant changes are:
• A change to a consistent and more readable format for all standards;
• A change in the authoritative status of the traditional 10 GAAS;
• Changes in the wording of the auditors’ reports; and
• Changes in standards for group audits.
Standard Clarification
Existing auditing standards are being clarified into individual clarified standards or are being grouped
into newly numbered clarified sections. The new clarified standards are to be issued in one new
Statement on Auditing Standards (SAS).
The format and wording of the clarified SASs is as follows: Introduction, Objective, Definitions,
Requirements, and Application and Other Explanatory Material.
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Changes to the 10 GAAS Rules
The basic 10 rules known as GAAS have traditionally been classified into 3 groups: general, fieldwork,
and reporting. With the Clarity Project these 10 rules have been incorporated into various clarified
standards and will now form the basis for “clarified principles” that instead of carrying authority will
provide a broadly applicable framework that will help in understanding and explaining the audit.
Changes to the Auditor’s Report
This is the change that will be most visible to users. While the substance of the report will generally
remain the same the appearance and presentation of the report will change significantly.
Helpful Hint: Look for headers!
Some of the changes are as follows:
• The introduction paragraph will no longer reference either management’s or the auditor’s
responsibility, these will have their own paragraphs and headings.
• Headings are required for all sections:
- Report on the Financial Statements
- Management’s Responsibility for the Financial Statements
- Auditor’s Responsibility
- Opinion
• Additional headings required if an opinion other than unqualified is issued.
- Report of Other Legal and Regulatory Requirements (if applicable).
• Management’s responsibilities are to be described more specifically and in more detail than was
previously required.
• Title must include “Independent”.
Changes in Standards for Group Audits
U.S. standards offered little guidance in regards to group (multilocation) audits. The Clarified SAS will
require group audit firms to consider, among other things, the group engagement team’s process to
assess risk and the determination of materiality to be used on the group audit.
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925.271.8700