Update on Auditing Standards
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American Institute of CPAs
Speaker Biography – Mike Glynn
Michael P. (Mike) Glynn is a Senior Technical Manager in the AICPA Audit and Attest
Standards Team. In this capacity, Mike serves as the staff liaison to the Accounting and
Review Services Committee (ARSC). In addition, Mike supports the activities of Auditing
Standards Board (ASB) and its subcommittees by assisting members in drafting and
deliberating authoritative professional standards and interpretations.
Prior to joining the Audit and Attest Standards Team, Mike was a technical manager in the
AICPA SEC Practice Section (SECPS). In that capacity, Mike supported the Quality
Control Inquiry Committee (QCIC) by participating in deliberations of QCIC cases and
participating in meetings with the Securities and Exchange Commission regarding the
SEC’s oversight of the self-regulatory process. Prior to joining the SECPS, Mike was a
technical manager in the AICPA Professional Ethics Division.
Prior to joining the AICPA in April 1998, Mike worked at Ernst & Young LLP in New York.
Mike also serves as a member of the New York State Society of CPAs’ Accounting and
Review Services Committee.
Mike is a graduate of Pace University with a BBA in public accounting.
American Institute of CPAs
DISCLAIMER
Views expressed by AICPA employees are expressed
for purposes of deliberation, providing member
services and other purposes exclusive of practicing
public accounting. Views expressed by AICPA staff do
not necessarily represent the official views of the
AICPA unless otherwise noted. Official AICPA
positions are determined through certain specific
committee procedures, due process and deliberation.
American Institute of CPAs
Clarity Long deck
2
Session Objectives
Discuss the ASB’s current standard setting
activities.
Slide 4
American Institute of CPAs
2014 ASB
Standards Update
American Institute of CPAs
Clarity Project Status – Auditing
Standards
Complete!
Clarified SASs codified with new section numbers
designated “AU-C”
47 AU-C sections – all currently effective
• SASs 117-121: issued 2009-2010; 4 sections
• SASs 122-125: issued 2011; 41 sections
• SAS 126: issued 2012; 1 section
• SAS 127: issued 2013 - omnibus
• SAS 128: issued 2014; 1 section
American Institute of CPAs
Clarity Long deck
Recent Auditing and
Attestation Projects
American Institute of CPAs
SAS No. 126 - Overview
The Auditor’s Consideration of an Entity’s Ability to
Continue as a Going Concern (Redrafted)
• Issued June 2012
• Effective for audits of financial statements for periods ending on
or after December 15, 2012
• Clarity redraft of AU section 341 of the same title
• Not converged with ISA 570, Going Concern
• Convergence postponed pending expected FASB guidance
American Institute of CPAs
SAS No. 126 – Differences From AU 341
Changes, Not Expected to Affect Practice
• New requirement to obtain written representation from
management if conditions or events have been identified that
indicate there could be substantial doubt about the entity’s ability
to continue as a going concern.
- Not previously required, but included in illustrative going
concern representation in appendix B of AU section 333,
Management Representations.
• Interpretation No. 1, “Eliminating a Going-Concern Explanatory
Paragraph From a Reissued Report,” of AU section 341,
incorporated into AU-C section 570 (paragraph .21).
American Institute of CPAs
Clarity Long deck
SAS No. 127 - Overview
Omnibus Statement on Auditing Standards - 2013
• Issued January 2013
• Effective for periods ending on or after December 15, 2012
• Amends:
- AU-C section 600, Special Considerations - Audits of Group
Financial Statements (Including the Work of Component
Auditors)
- AU-C section 800, Special Considerations - Audits of
Financial Statements Prepared in Accordance With Special
Purpose Frameworks
American Institute of CPAs
SAS 127 – Amendments to AU-C 600
Amended preconditions to making reference to
others’ work, relating to
• Basis of component f/s preparation when financial reporting
frameworks differ*
• Auditing standards followed by component auditor, if not GAAS
*exception in application paragraphs for GASB and FASAB, which
address this
American Institute of CPAs
11
SAS 127: AU-C 600 Amendments
Making Reference
• Other audit report restricted as to use
NO
• Component F/S use different financial
reporting framework
MAYBE
• Other auditor met the relevant
requirements of GAAS
American Institute of CPAs
Clarity Long deck
YES
Making Reference – Additional Reporting
Requirements
When frameworks differ
• Disclose the financial
reporting framework used
by component
• Disclose that the auditor of
the group financial
statements is taking
responsibility for evaluating
the appropriateness of the
adjustments to convert the
component’s financial
statements to the financial
reporting framework used
by the group.
When other auditing
standards used but
GAAS requirements met
• Disclose in report the set of
auditing standards used
and
• That the other auditor
performed additional
procedures to meet the
relevant requirements of
GAAS
American Institute of CPAs
SAS No. 127 – Amendment to AU-C 800
Special Purpose Frameworks
Cash
Tax
Contractual
Other
Basis
Other
Basis
A definite set of logical,
reasonable criteria that is
applied to all material
items appearing in
financial statements
Regulatory
Other Basis
American Institute of CPAs
SAS No. 128
Using the Work of Internal Auditors
Clarity redraft of AU section 322, The Auditor's
Consideration of the Internal Audit Function in an
Audit of Financial Statements
• Issued February 2014
• Effective for audits of financial statements for periods ending
on or after December 15, 2014
American Institute of CPAs
Clarity Long deck
SAS No. 128 - Internal Audit
Converged with ISA 610 (Revised 2013), Using the
Work of Internal Auditors, to reflect
• developments in the internal auditing environment
• changes in practice regarding the interactions between the
external and internal auditors
Amendments to several AU-C sections
• Conform language used to describe internal audit function
• Guidance added to AU-C 315, Understanding the Entity and Its
Environment and Assessing the Risks of Material Misstatement
American Institute of CPAs
SAS No. 128 - Internal Audit
Introduces the concept of a systematic and
disciplined approach
New requirement, as a prerequisite to being able to
use the work of the internal audit function, that the
external auditor evaluate the application by the
internal audit function of a systematic and
disciplined approach, including quality control.
American Institute of CPAs
Statements on Standards
for Attestation
Engagements
American Institute of CPAs
Clarity Long deck
Clarifying the Attestation Standards
Commonly known as attestation standards
Apply to engagements that address subject matter
other than historical financial statements, e.g:
•
•
•
an entity’s compliance with laws or regulations
the effectiveness of an entity’s controls over the privacy of
information
a financial forecast
Address examination, review and agreed-upon
procedures (AUP) engagements
American Institute of CPAs
Clarifying the Attestation Standards
4 “general” AT sections that provide a framework for
developing an attestation engagement
• AT 20, Defining Professional Requirements in Statements on
Standards for Attestation Engagements
• AT 50, SSAE Hierarchy
• AT 101, Attest Engagements (which addresses examination and
review engagements)
• AT 201, Agreed-Upon Procedures Engagements
American Institute of CPAs
Clarifying the Attestation Standards
Currently: 6 “topic-specific” AT sections for
reporting on
• prospective financial information (AT 301)
• pro forma financial information (AT 401)
• internal control over financial reporting (AT 501)
• compliance with laws and regulations (AT 601)
• management’s discussion and analysis (AT 701)
• controls at service organizations (AT 801)
American Institute of CPAs
Clarity Long deck
Clarifying the Attestation Standards
Objective: to make AT sections easier to read,
understand and apply
Redraft in clarity format
New structure (objective is to eliminate repetition)
• Chapter 1: Concepts common to all attestation engagements
• Chapters 2-4: Levels of service (examination, review, agreedupon procedures).
- Each chapter addresses a specific level of service and
builds on the common concepts chapter
• Subject-matter specific chapters
- Each chapter builds on common concepts and level of
service chapters
American Institute of CPAs
Clarifying the Attestation Standards
Example – Reporting on an examination of
prospective financial information
• Currently, the following AT sections apply:
- AT 20
- AT 50
- AT 401
• Proposed structure, the following sections would apply:
- Chapter 1, Common Concepts
- Chapter 2, Examinations
- Chapter X, Forecasts
American Institute of CPAs
Clarifying the Attestation Standards
Convergence with standards of the International
Audit and Assurance Standards Board (IAASB)
• Foundation for the common concepts, examination, and review
sections of the proposed attestation standards:
- AICPA’s existing attestation standards
- IAASB International Standards on Assurance Engagements
(ISAE) 3000, “Assurance Engagements Other than Audits or
Reviews of Historical Financial Information” (Dec 2013)
- ISAE 3000 is IAASB’s framework standard for assurance
engagements (equivalent of attestation engagements)
- ISAE 3410, Assurance Engagements on Greenhouse Gas
Emissions
American Institute of CPAs
Clarity Long deck
Clarifying the Attestation Standards
Convergence with standards of the International
Audit and Assurance Standards Board (IAASB)
• AT 801 was converged with ISAE 3402, Assurance Reports on
Controls at a Service Organization, when SSAE No. 16,
Reporting on Controls at a Service Organization, was issued in
April 2010
• Proposed “Reporting on Pro Forma Financial Information,”
includes elements of ISAE 3420, Assurance Engagements to
Report on the Compilation of Pro Forma Financial Information
Included in a Prospectus
American Institute of CPAs
Clarifying the Attestation Standards
July 2013, the ASB issued an exposure draft of the
first four “chapters”
• Common Concepts
• Examinations
• Reviews
• Agreed-upon Procedures
October 2103, the ASB voted to ballot for exposure
the following subject-specific chapters:
• Financial Forecasts and Projections
• Reporting on Pro Forma Financial Information
• Compliance Attestation
American Institute of CPAs
Clarifying the Attestation Standards
AT 801 exposure vote on May 2014 ASB agenda
• Reporting on Controls at Service Organization
• Delayed to include guidance from AAG
One section not being clarified:
• Management’s Discussion and Analysis (AT 701)
- Will remain unclarified
One section moving and being replaced
• An Examination of an Entity’s Internal Control Over Financial
Reporting That Is Integrated With an Audit of Its Financial
Statements (AT 501)
- Will be moved to auditing standards
• Will be replaced by generic AT 501 examination standard on
internal control
American Institute of CPAs
Clarity Long deck
Clarifying the Attestation Standards
Final clarified SSAE will contain all attestation
standards
• One SSAE (SSAE No. 18) even though more than one
exposure draft
- Expected issuance in first half of 2015 (estimate)
- Proposed effective date (estimate):
- No earlier than for reports dated September 15, 2015
American Institute of CPAs
Clarifying the Attestation Standards
Exposure drafts
http://www.aicpa.org/Research/ExposureDrafts/AccountingandAudi
ting/Pages/ExposureDrafts_ASB.aspx
More information
Dedicated ASB Attest Clarity page on AICPA Website at
http://www.aicpa.org/InterestAreas/FRC/AuditAttest/Pages/AttestCl
arityProject.aspx
American Institute of CPAs
Upcoming Projects
American Institute of CPAs
Clarity Long deck
Proposed SAS, Amendments to AU-C 920
Amendments to GAAS on Comfort Letters
Address implementation issues and avoid
unintended changes to previous practice
• Change addresses requirement to attach review report when
auditor states that review was performed
• Additional example letter to address providing negative
assurance on pro forma financial information that is properly
compiled in accordance with the pro forma bases described in
the notes to the financial statements.
ED Issued January 2014; Comment period ends
April 15
ASB to consider comments and vote final May 2014
American Institute of CPAs
GASB Interpretations
ASB working to finalize auditing interpretations to
deal with new GASB pension standards
GAQC will also issue two white papers on best
practices
Focus is on making members aware that when they
audit an employer’s financial statement and that
employer participates in an agency or cost sharing
pension plan, the auditor must get sufficient
appropriate audit evidence from the plan and the
plan’s auditor.
American Institute of CPAs
On The Horizon
The ASB’s current work plan for 2014-2015 includes
a number of projects which should serve to enhance
audit quality, including:
• Monitoring whether the clarified SASs are being consistently
understood and implemented in a way that achieves the ASB’s
goals in revising and redrafting them. For example, the ASB will
look at the group audit standard to see if additional guidance is
needed.
• Determining whether revisions to GAAS are needed with respect
to auditing disclosures and, if so, developing such revisions.
• Working with the AICPA PRB and IAASB to provide more
specificity around the QC standard[s?], specifically when and
how an Engagement Quality Control Review (EQCR) should be
performed.
American Institute of CPAs
Clarity Long deck
On The Horizon - Continued
Enhancing the communicative value and relevance
of the auditor’s report through proposed revisions
to Generally Accepted Auditing Standards. This
would include revisions to the going concern
standard and other information outside the basic
financial statements.
American Institute of CPAs
IAASB Auditor Report Proposals
July 2013 Exposure Draft
Opinion section mandated first
New section to address Key Audit Matters
New section to address Going Concern
New section to address Other Information when
such information is presented with the audited
financial statements – separate project to revise ISA
720
Other proposed improvements to enhance
transparency and clarify responsibilities
American Institute of CPAs
Exposure Draft Issued
IAASB Exposure Draft:
• Proposes amendments to:
- ISA 700 (Revised) Forming an Opinion and Reporting on
Financial Statements
- ISA 705 (Revised) Modifications to the Opinion in the
Independent Auditor’s Report
- ISA 706 (Revised) Emphasis-of-Matter Paragraphs and
Other-Matter Paragraphs in the Independent Auditor’s
Report
- ISA 260 (Revised) Communication with Those Charged with
Governance
- ISA 570 (Revised) Going Concern
• Creates a new proposed ISA 701 Communicating Key Audit
Matters in the Independent Auditor’s Report
American Institute of CPAs
Clarity Long deck
Center for Plain English Accounting
AICPA PCPS national A&A resource center for firms
aicpa.org/CPEA
Services:
Written responses to written technical inquiries Monthly “how‐to” A&A reports
Webcasts Alerts
Content for firm newsletters
Helpful Information and Resources
Authoritative standards for non-issuers (SASs,
SSARSs, SSAEs, SQCSs) as of June 1 are
available at
http://www.aicpa.org/Professional+Resources/A
ccounting+and+Auditing/Audit+and+Attest+Stan
dards/Authoritative+Standards+and+Related+G
uidance+for+Non-Issuers/default.htm
American Institute of CPAs®
aicpa.org/FRC
Helpful Information and Resources
AICPA Accounting and Auditing Technical Hotline
• (877) 242-7212
• techinquiry@aicpa.org
• http://www.aicpa.org/Professional+Resources/Accounting+and+
Auditing/Accounting+and+Auditing+Technical+Help/
American Institute of CPAs®
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aicpa.org/FRC
Questions?
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