ARSC Clarity Project
May 2010
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ARSC Clarity Project
• Background
– ASB approved its clarity project in 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
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Convergence with International Standards
• As part of the ASB’s clarity project, it worked toward
convergence with International Standards on Auditing
(ISAs) issued by IAASB
– Clarity drafts use ISAs as base while avoiding
unnecessary differences with PCAOB standards.
– Most audits performed internationally are of
nonpublic entities – therefore, ASB and IAASB have
a similar focus
Clarity Drafting Conventions
• Introduction
• Objective
• Definitions
– Terms used in the SAS are defined
– Establish separate glossary of terms
• Requirements
• Application Material
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Objective
• Create objectives for each standard
• Establish obligation relating to the objective
• Provide a framework for the application of
professional judgment
• Outcome based goal
• Difficult to achieve the overall objective of the audit
if individual objectives are not achieved
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Requirements & Application Material
• Requirements expressed with must or should.
• Application and other explanatory material presented in
a separate section that follows the requirements
• Application material indicated with may
• Application and other explanatory material paragraphs
numbered using an A prefix
• Cross-referencing between requirements and related
application material
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Common Misconception
• Application material is integral part of
standard – auditor is required to
understand it
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Other
• Special considerations sections
– for governmental entities
– for smaller, less complex entities
• Exhibit of substantive differences with ISA
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Audit and Attest Update
Clarity Project

ASB has issued 4 clarified SASs – SAS Nos.
117-120

Finalized but not issued 11 SASs

Currently considering comments on 30 SASs

3 SASs in exposure

3 SASs not yet exposed
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Audit and Attest Update
Clarity Project

It is expected that all but 6 clarified SASs will be
finalized by October 2010 – remaining SASs
finalized in January 2011

Once all clarified standards have been finalized,
most will be issued in one SAS (SAS No. 12X)
that will be codified in “AU section” format.
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Clarity Project Effective Date

Exposure drafts stated effective for audits of
financial statements for periods beginning on or
after December 15, 2010 (2011 year-end audits)

Effective date will be delayed one year to
periods ending on or after December 15, 2012
(2012 year-end audits)
– Change makes effective for year-end but not interim
periods.
– Allow more time for updating firm methodologies
and training.
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Audit and Attest Update
Clarity Project
http://www.aicpa.org/Professional+Resources/Accounting+and+Auditing/Audit+
and+Attest+Standards/Improving+the+Clarity+of+ASB+Standards.htm
• Clarity Project Explanatory Memorandum
• Clarity Project Questions and Answers
• Clarity Exposure Drafts
• Clarity Final Standards
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Proposed ARSC Clarity Project
• Proposal to clarify the SSARSs in the same format as the
SASs.
• Will consider the international compilation and review
literature but not converge at this time
– Convergence will be considered when the IAASB
issues revised compilation and review literature
• Will use the post SSARS 19 AR sections as a base
– Consider incorporating AR sections 110, 120, 200,
300, 400, and 600 into AR sections 80 and 90.
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Proposed ARSC Clarity Project
• Will consider but does not appear that separate sections
for governmental entities and smaller, less complex
entities is needed.
Proposed ARSC Clarity Project
• Proposed timeline:
– November 2010 – First draft documents
– April/May 2011 – ARSC to consider voting
proposed SSARSs for exposure
– September 2011 – Exposure period ends
– November 2011 – ARSC to consider comment
letters received
– April/May 2012 – ARSC to consider voting for
issuance
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Proposed ARSC Clarity Project
• Proposed effective date:
– Effective for periods ending on or after December
15, 2013 (calendar 2013 compilations and reviews)
– Early implementation would be permitted
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Questions?