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ASB Update as of May 15, 2002
Ray
Whittington, DePaul University
Academic Member of the Auditing Standards Board
In
this update, I will focus on the ASB's efforts to update its strategic
plan. As always, please contact me if you have any questions, comments,
or suggestions.
Horizons
II
In December 1997, the ASB issued a strategic plan, Horizons for
the Auditing Standards Board, that set forth its operational
plans for the next three to five years. Much has occurred in the
auditing profession since the issuance of that document. At its
March 20, 2002 meeting, the Audit Issues Task Force decided to form
a task force to develop the ASB's strategic plan for the next 5
years. The project, which tentatively has been labeled Horizons
II, should be completed over the next 9 months.
In
developing Horizons II, representatives of the task force will be
interviewing various stakeholders to get input to determine the
issues that should be addressed by the ASB over this intermediate
term. I will be responsible for getting input from the academic
community. In the remainder of this update I will focus on issues
that the task force has initially identified as potential candidates.
Auditing
Accounting Disclosures
Auditing standards do not currently distinguish between the extent
of the evidence that should be obtained about amounts included in
the basic financial statements vs. information and amounts included
in financial statement disclosures. The ASB may add to its agenda
a project that would address whether there should be a difference
and, if so, the basis for that difference.
Technology
The ASB continues to be concerned that auditing standards do not
adequately address the risks and other implications of new technology.
Thus, a project with the objective of providing more guidance on
effects of technology on audits of financial statements is being
considered. The guidance may not be SAS level but, instead, might
take the form of an audit guide or tool kit.
Outsourcing
SAS No. 70, Service Organizations, provides guidance on the
factors an independent auditor should consider when auditing financial
statements of an entity that uses a service organization to process
certain transactions. There is no guidance in the auditing literature
for situations in which the entity outsources other business processes.
For example, a number of entities have outsourced their entire accounting
function. This possible agenda item would involve developing guidance
on the effect of such outsourcing arrangements on the audit of financial
statements.
Harmonization
of Auditing Standards
Most individuals in the profession agree that harmonization of U.S.
and international auditing standards is desirable. However, there
are a number of ways in which this objective might be achieved.
Several examples are enumerated below:
- Develop SASs
that do not depart significantly from those of the International
Federation of Accountant's International Auditing Standards (ISAs)
- Adopt ISAs
in total and supplement them with SASs for matters that are particular
to the U.S.
- Adopt ISAs
modified to include requirements that are in SASs that are not
currently included in the ISAs
The
issue of harmonization also brings into question the role of the
ASB after harmonization is substantially achieved. The ASB is looking
for insight into the appropriate way to move towards harmonization
of auditing standards.
Education
and Experience of Auditors
Currently, auditing standards view the auditor as proficient in
accounting and auditing. Given advances in technology and the complexity
of business models and accounting standards, the ASB is questioning
whether auditing standards set the appropriate bar with respect
to the auditor expertise. Therefore consideration is being given
to the need to readdress the skills and competencies needed to audit
financial statements.
Other
Issues
The ASB has identified a number of other issues that might be included
in the strategic plan. These include:
- Auditing
assets, liabilities and exchange transactions valued at fair value;
- Auditing
measurements and disclosures that require assumptions about future
events;
- Continuous
auditing, including the appropriate definition of the phrase;
- Enhancing
public confidence in the audit;
- Analytical
commentary by the auditor to assist users evaluate the financial
statements;
- Assurance
about other information in the report on the audit of financial
statements, such as management's discussion and analysis, internal
control, or compliance with laws and regulations;
Please
provide me with any input you might have regarding these matters
or others that you believe should be considered in the ASB's strategic
planning process.
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