Auditing Standards Board Update
March 2010

Mark H. Taylor
Weatherhead School of Management
Case Western Reserve University
Cleveland, OH

Since the last update, the Auditing Standards Board (ASB) met in Phoenix, AZ October 26-30, 2009, and in Amelia Island, FL January 11-14, 2010.  The meetings ran from Monday through Thursday afternoon and were open to the public.  The agenda for each of these meetings was ambitious as is usual.  This update provides highlights of the two meetings' content and outcomes.  I encourage members of the section to contribute to the work of the ASB by developing comment letters related to any of the numerous exposure drafts.  If you have any questions regarding any of the ASB activities, please contact me at mt@case.edu. 

RSI/SI/OI Task Force.  Jeff Markert, RSI/OSI/OI Task Force Chair, led a discussion of revisions to the proposed Statements on Auditing Standards, Required Supplementary Information (the “RSI SAS”), Other Supplementary Information in Documents Containing Audited Financial Statements (the “OI SAS”), and Supplementary Information in Relation to the Financial Statements as a Whole (the “IRT SAS”).
 
RSI SAS. The ASB directed the Task Force to (1) revise the effective date to be consistent with other clarified SAS, but permitting early application, (2) revise the objectives statement to read, and to make other changes including to the modifying the definition of RSI (stating that a designated accounting standard setter considers the information to be an essential part of financial reporting), and list those bodies designated to establish professional standards with respect to financial accounting and reporting principles pursuant to Rules 202 and 203.  

OI SAS.  The ASB discussed the draft document and directed the Task Force to (1) delete the definitions of RSI and designated accounting standard setter because such terms are defined in the RSI SAS, (2) revise paragraph 13 to clarify that the requirement is applicable when material inconsistencies have been identified in OI obtained subsequent to the release of the auditor’s report, (3) revise paragraph 15 to clarify that the entity receives the advice from legal counsel with respect to a potential material misstatement of fact and that the auditor then considers that advice when determining whether the matter is a material misstatement of fact, and (4) retain the use of report release date as the date before which the auditor should read the OI.  ISA 720 uses the date of the auditor’s report but the ASB determined that the report release date, as defined in auditing standards generally accepted in the United States, is more appropriate in the U.S. environment. The ASB determined that since early implementation will be permitted, the SAS should refer to the extant literature and that conforming changes could be made once the clarified SASs become effective.

IRT SAS.  The ASB discussed the draft document and directed the Task Force to (1) revise the effective date so that it is consistent with the proposed RSI and OI SASs; (2) delete the definitions of other information, required supplementary information, and designated accounting standard setter as those terms are defined in the other proposed SASs; (3) revise the guidance to state that it is inappropriate to issue an opinion on supplementary information when an adverse opinion or a disclaimer of opinion was issued on the financial statements.  Such guidance would be consistent with that in the SAS on summary financial statements in which, unless the auditor withdraws from the engagement, the auditor would deny an opinion on the supplementary information; (4) add a paragraph clarifying that the auditor has no responsibility for subsequent events with respect to supplementary information. However, if information comes to the auditor’s attention prior to the release of the auditor’s report on the financial statements regarding subsequent events that affect the financial statements, the auditor should apply the relevant requirements of AU 560, Subsequent Events; (5) require the auditor to obtain an acknowledgement from management that it understands its responsibility to present the supplementary information with the audited financial statements or to make the audited financial statements readily available to intended users of the supplementary information when the supplementary information is not presented with the audited financial statements; (6) require the auditor to obtain a written representation from management when the supplementary information is not presented with the audited financial statements; and (7) include application material as to when financial statements are deemed to be readily available, consistent with the guidance in SAS No. 116, Interim Financial Information.  The Task Force made changes to the three drafts during the course of the October meeting and the ASB unanimously voted to ballot the revised drafts for exposure. 

Analytical Procedures.  Walt Conn, Chair of the Analytical Procedures Task Force (Task Force), led a discussion of the materials for proposed SAS Analytical Procedure. The proposed SAS represents the redrafting of SAS No. 56, Analytical Procedures (AICPA, Professional Standards, vol. 1, AU sec. 329), for clarity and convergence with ISA 520, Analytical Procedures.   The ASB directed the Task Force to revise the objective in paragraph 3(b) based on a discussion as to whether the objective of performing analytical procedures at the end of the audit is to assist the auditor in (a) forming an overall conclusion about whether the financial statements are consistent with the auditor’s understanding of the entity, as stated in ISA 520, or (b) assessing the conclusions reached and in the evaluation of the overall financial statement presentation, as stated in extant AU 329. The ASB concluded that the purpose is to assist the auditor in determining whether additional procedures are needed to obtain sufficient appropriate audit evidence.  The ASB also directed the Task Force to revise the documentation requirements in paragraph 8 of the proposed SAS to be consistent with the requirement in extant AU 329.22, and to revise paragraph A5 to include some prose from extant AU 329.03 about auditor judgment vis-à-vis identification of the relationships and types of data used. The ASB voted to ballot the draft for exposure. 

AU section 625.  Thomas Ratcliffe, Chair of the AU Section 625 Task Force (Task Force), led a discussion of the materials for proposed SAS, Reports on Application of Requirements of an Applicable Financial Reporting Framework (proposed SAS). The proposed SAS represents the redrafting of SAS No. 50, Reports on the Application of Accounting Principles (AICPA, Professional Standards, vol. 1, AU sec. 625), in accordance with the clarity conventions. There is no ISA that corresponds to AU Section 625. The ASB directed the Task Force to (1) revise the effective date to be based on the engagement undertaken rather than the reporting accountant’s action of providing the written report or oral advice, such that the proposed SAS will be effective for engagements that begin on or after December 15, 2010, (2) change the term “type of opinion that may be expressed on a specific entity’s financial statements” to “type of report that may be issued on a specific entity’s financial statements” in order to update the use of “opinion” since SAS No. 50 was issued, and to broaden the scope and objective of the proposed SAS to include the request for an opinion regarding the report and not just a transaction, (3) expand the definition of the term “specific transaction” to encompass matters of a business situation (for example, going concern) and not necessarily only mean a discrete transaction. Divide paragraph 10 subparagraph (b) regarding the requirement for the reporting accountant to establish an understanding with the client into subparagraphs (b) and (c) in order to clarify management’s responsibilities, and (4) add a requirement for the reporting accountant to obtain an understanding of the conditions relevant to the type of report that may be issued on a specific entity’s financial statements, to reflect the change from “type of opinion…” to “type of report…” made in the proposed SAS.  The ASB unanimously voted to ballot the proposed SAS for exposure during a brief conference call in November 2009.

Risk Assessment.  Darrel Schubert, Chair of the Risk Assessment Task Force, led a discussion of the following proposed SASs: Audit Evidence (Redrafted), Materiality in Planning and Performing an Audit (Redrafted), Evaluation of Misstatements Identified during the Audit, Planning an Audit (Redrafted), Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (Redrafted), and Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained (Redrafted).  Mr. Schubert noted that the PCAOB planned to soon re‐expose their version of the risk assessment standards (which they did before the January 2010 meeting…see below) and that the Task Force will review the PCAOB standards when issued and may bring any conforming changes to the ASB standards to the ASB at that time. The ASB discussed conforming amendments arising from other standards that impact the risk assessment standards.  ASB operating procedures require that conforming amendments not be reflected in the standards until the conforming amendment has been subject to due process. The ASB agreed with the Task Force’s recommendations regarding the following conforming amendments:

• Include a conforming amendment to proposed SAS Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement to require the auditor to obtain an understanding of the entity’s internal audit function. This conforming amendment originated from the IAASB final clarifying changes.  Ordinarily the conforming amendment would be exposed with redrafted AU section 322, The Auditor's Consideration of the Internal Audit Function in an Audit of Financial Statements and then reflected in the proposed SAS; however, that project has been delayed. The Task Force does not believe that this conforming amendment is a significant change that would cause the proposed SAS to be re‐exposed.

• Wait to incorporate a conforming amendment to proposed SAS Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained until proposed SAS The Confirmation Process is finalized. The amendment arises from an amendment in the final ISA 505, External Confirmations to final ISA 330, The Auditor’s Responses to Assessed Risks.

• Wait to incorporate a conforming amendment to proposed SAS Audit Evidence to reflect the management’s specialists content (as ISA 500 does). The management’s specialists content will be incorporated into the redrafted SAS Audit Evidence via a conforming amendment when AU section 336, Using the Work of a Specialist, is redrafted.

The ASB voted to issue the redrafted risk assessment standards as final standards.
Internal Control.  Keith Newton, Chair of the Internal Control Task Force, led the ASB in a discussion of a proposed SAS Communicating Internal Control Related Matters Identified in an Audit (Redrafted) and related issues. The proposed SAS represents the redrafting of SAS No. 115, Communicating Internal Control Related Matters Identified in an Audit, for clarity and convergence with certain aspects of ISA 265, Communicating Deficiencies in Internal Control to Those Charged with Governance. The ASB agreed with the task force to continue to allow the issuance of no‐material‐weakness letters with use restricted to the intended users identified in extant SAS No. 115. Since such communication is an audit by‐product, use is restricted to management, those charged with governance, others within the organization, and any specified governmental authority to which the auditor is required to report, consistent with the requirements in previous standards and conclusions. The ASB also directed the task force to revise the objective in paragraph 6 of the proposed SAS to describe the types of deficiencies the auditor communicates as those that, in the auditor’s professional judgment, are of sufficient importance or severity to merit the respective attentions of management and those charged with governance. The reference to “severity” was added as the proposed SAS includes the communication of both significant deficiencies and material weaknesses.  The ASB also directed the Task Force to clarify the language in the written communications of significant deficiencies and material weaknesses to better describe the auditor’s consideration of internal control in an audit of financial statements.  Additionally, other modifications were made to the illustrative no material weakness letter.  The ASB voted to ballot the proposed SAS for exposure.   

Specific Items.  Art Winstead and Megan Zietsman led a discussion of the proposed SAS Audit Evidence ‐ Specific Considerations for Selected Items. This proposed SAS represents a redrafting of AU section 331, Inventories, AU section 332, Auditing Derivative Instruments, Hedging Activities, and Investments in Securities, and AU section 337, Inquiry of a Client's Lawyer Concerning Litigation, Claims, and Assessments, for clarity and convergence with ISA 501, Audit Evidence ‐Specific Considerations for Selected Items.   Recall that at its August meeting the ASB directed the Task Force that the requirements in the proposed SAS should address investments other than equity method investments and should refer users to proposed SAS Group Audits, which addresses auditing equity method investments. After revising the proposed SAS accordingly, the Task Force considered whether the requirements in extant AU section 332 regarding equity method investments are appropriately addressed by proposed SAS Group Audits as drafted or whether conforming changes to proposed SAS Group Audits might be needed.   Paragraph A2 of proposed SAS Group Audits states that “Investments accounted for under the equity method constitute a component for purposes of this SAS.” Accordingly, the requirements and guidance in the proposed SAS Group Audits apply to equity method investments as they would to any other component, including whether to make reference to the report of another auditor in the auditor’s report. The ASB agreed with the Task Force’s conclusion that although the requirements of proposed SAS Group Audits are principles‐based, they fully address the requirements in extant AU 332 and that no conforming changes to proposed SAS Group Audits are required. The ASB voted to ballot the SAS for exposure.

Consistency.  Dan Montgomery, Chair of the Auditor’s Report Task Force, led a discussion of the materials for “Evaluating Consistency of Financial Statements.”  The ASB agreed with aligning the proposed SAS with PCAOB Auditing Standard No. 6, Evaluating Consistency of Financial Statements and to exclude the listed interpretations from the proposed SAS.  The ASB directed the task force to include application material regarding a change in an accounting entity, include application material regarding when a change in an accounting estimate is inseparable from a change in accounting principle, and to provide further guidance in paragraph A4 to provide an example of a change in the method of applying an accounting principle. The ASB requested the Task Force to return with a revised draft at the January 2010 meeting. 

Association with Financial Statements.  Dan Montgomery, Chair of the Auditor’s Report Task Force, led a discussion of the materials for Agenda Item 8 Association With Financial Statements. The ASB agreed to include the requirements and application material for summary financial information. Also, the ASB directed the task force to revise the scope to state it addresses the auditor’s responsibility when the auditor is associated with financial statements and move the definition of association with financial statements to the scope section, to expand the guidance on disclaiming an opinion due to lack of independence as it relates to all types of entities, not only governmental entities. The ASB requested the Task Force to consider the guidance in Government Auditing Standards and the proposed SSARS Compilation of Financial Statements, and to clarify the section for reporting on audited and unaudited financial statements to better explain why it is included in this proposed SAS and its relationship to the requirements in the proposed SAS Forming an Opinion and Reporting on Financial Statements. The ASB requested the Task Force to return with a revised draft to a future ASB meeting.

Service Organizations.  Walt Conn, Chair of the Service Organizations Task Force, led a discussion of a proposed Statement on Standards for Attestation Engagements (SSAE) that would establish standards and provide guidance to service auditors reporting on controls at a service organization. Currently, that guidance is included in AU section 324, Service Organizations, along with the guidance for user auditors. The objective of the task force is to align the proposed SSAE with International Standard on Assurance Engagements (ISAE) 3402, “Assurance Reports on Controls at a Service Organization.” The draft SSAE was aligned with the September 2009 draft ISAE, which the IAASB voted to issue as a final standard at its September 2009 meeting. The ASB directed the task force to redraft the last subparagraph of paragraph 2, which addresses combined reports, as application material rather than a requirement, add to exhibit B the differences between the proposed SSAE and ISAE 3402, and revise paragraph 53(m) to include a statement about the risk of projecting to future periods any evaluation of the fairness of the presentation of management’s description of the service organization’s system or conclusions about the suitability of the design of the controls to achieve the related control objectives The ASB requested the Task Force to present a revised draft of the proposed SAS at the January 2010 meeting.

Omitted Procedures.  Sheila Birch, Chair of the Omitted Procedures task force, led a discussion of proposed SAS Consideration of Omitted Procedures After the Report Date, which represents the redrafting of AU section 390, Consideration of Omitted Procedures After the Report Date, in accordance with the clarity conventions. There is no comparable ISA.  The ASB directed the task force to add an application paragraph stating that failure to document performance of an audit procedure when documentation is required by generally accepted auditing standards is considered an omitted procedure, and replace the term “date of the auditor’s report “and other forms of that phrase with “report release date.” The ASB requested the Task Force to present a revised draft at the January 2010 meeting.

Specialists.  Darrel Schubert, Chair of the Specialists Task Force, led a discussion of the proposed SAS Using the Work of an Auditor’s Specialist, which represents the redrafting of AU section 336, Using the Work of a Specialist using ISA 620, Using the Work of an Auditor’s Expert, as a base. The ASB discussed the disposition of AU 9336, Use of Legal Interpretation to Support Management’s Assertion That a Transfer of Financial Asset Has Met the Isolation Criterion. AU 9336 provides guidance about obtaining sufficient appropriate audit evidence when an entity has derecognized financial assets in connection with a transfer to another entity. The Task Force recommended that, because the interpretation provides guidance on a narrow, specific issue, it be retained as an interpretation and concluded revision was not required in light of the issuance of SFAS 166. The ASB concluded that AU 9336 needs revision and members volunteered to assist in this project. The ASB voted to ballot the proposed SAS for exposure. 

Auditor’s Report Research.  Mark Taylor, Chair of the Auditor’s Report Research Task Force, provided a brief update about the joint meeting of the IAASB and AICPA Working Group the met in October 2009. At that meeting a representative of each research team provided an overview of the research performed and the results obtained, and answered questions that were raised about various aspects of the research. Also at that meeting, members of the IAASB Working Group provided presentations on auditor reporting on financial statements as it has developed in the United Kingdom, Japan, and France. The Working Group’s report will be brought to the IAASB at its December 2009 meeting and to the ASB at its January 2010 meeting.

January 2010 Meeting, Amelia Island Florida
Lest anyone is deceived that the January meeting in Amelia Island was spring break, the temperature Monday morning was well below freezing and didn’t change much during the entire meeting.  The ASB welcomed six new members at the January meeting:  Brian Bluhm, Rob Chevalier, David Duree, David Morris, Kenneth Odom, and Steven Vogel.  Biographies of these individual are available on the AICPA website.

Service Organizations SSAE.  Walt Conn, Chair of the Service Organizations Task Force, led the ASB in a discussion of a revised draft of the proposed Statement on Standards for Attestation Engagements (SSAE),Reporting on Controls at a Service Organization, which is being redrafted for convergence with International Standard on Assurance Engagements (ISAE) 3402, Assurance Reports on Controls at a Service Organization. The ASB directed the task force to make a number of fairly minor changes to the proposed revision, and unanimously voted to ballot the draft for issuance as a final SSAE. 

Service Organizations SAS.  Walt Conn, also Chair of the Service Organizations Task Force, led the ASB in a discussion of a draft of a proposed SAS Audit Considerations Relating to an Entity Using a Service Organization, which willreplace the guidance in AU section 324, Service Organizations, foraudit of the financial statements of entities that use a service organization.  The proposed SAS is based on ISA 402, which bears the same title as the proposed SAS. The ASB directed the task force to make a few minor changes to the draft proposed by the Task Force and unanimously voted to ballot the draft SAS for issuance as a final SAS.

Omitted Procedures.  The Omitted Procedures task force is redrafting SAS No. 46, Consideration of Omitted Procedures After the Report Date, in accordance with the clarity drafting conventions. SAS No. 46 addresses the auditor’s responsibilities when after the date of the auditor’s report the auditor (1) becomes aware that one or more auditing procedures considered necessary in the circumstances existing at the time of the audit were omitted from the audit of the financial statements and (2) no indication exists that those financial statements are not fairly presented in conformity with the applicable financial reporting framework. Sheila Birch, chair of the task force, presented a draft of the proposed SAS that had been revised from the October 2009 draft. After recommending a few changes to the draft proposed by the Task Force, the ASB
unanimously to ballot the proposed SAS for issuance as an exposure draft.

Interim Financial Information.  Brian Croteau, Chair of the Interim Financial Information Task Force, led a discussion of the revisions to AU section 722, Interim Financial Information in accordance with the ASB clarity conventions.  The ASB directed the task force to retain the use of the term auditor, revise the applicability so that the auditor may perform the interim review under the SASs so long as the auditor is not aware that another auditor has been engaged to perform the year-end audit, require a written report unless the interim review is performed pursuant to the requirements of  a private equity exchange, and delete paragraphs 6-8 on auditor’s responsibilities since the review is performed under GAAS and therefore unnecessary to repeat the auditor’s responsibilities in this SAS.  That ASB requested the Task Force to return with a revised draft at a future ASB meeting. 

Audit Sampling.  Bob Dohrer, chair of the Audit Sampling Task Force, led a discussion of the proposed SAS Audit Sampling.  He explained that the objective of the presentation was to discuss the significant issues identified in the comment letters received in connection with the exposure draft issued in January 2009.  The issues discussed include: 

• The use of statistical sampling vs. nonstatistical sampling.  Commenters recommended a more strict, pure application of statistical sampling and curbing the use of nonstatistical sampling.  The Chair noted that although commenters’ responses have merit, they go beyond the clarity project scope.

• Mr. Dohrer pointed out that a reference to the AICPA Audit Guide is included in the proposed SAS (see A1) to provide a general linkage to the Audit Guide. He explained that the Task Force received numerous comments relating to definitions in the proposed SAS and their relationship to the Audit Guide and that a general reference to the Audit Guide may alleviate most of these concerns. He further explained that the Task Force included other references to the Audit Guide in other specific areas.

• Mr. Dohrer presented the issue of “containment” which a commenter raised. Although the responder supports the ASB decision to remove the concept of anomalies from the proposed standard, the responder noted that auditors will need to project all misstatements over the population from which the sample was selected. However, the responder does not believe that this is a practical approach because in some situations, the misstatement could be “contained” within a subpopulation of the audit sample population. The ASB expressed concern about introducing “containment” without appropriate guidance to explain it. The ASB reached a consensus that this matter would be better addressed in the Audit Guide.

The ASB requested the Task Force to return with a revised draft at a future ASB meeting. 

Consistency.  Dan Montgomery, Chair of the Auditor’s Report Task Force, led a discussion of Consistency of Financial Statements. Among other things, the ASB directed the task force to include application material to clarify that the proposed SAS Subsequent Events and Subsequently Discovered Facts address the auditor’s responsibilities when adjustments have been made to correct a material misstatement in previously issued financial statements, and to include application material to note that in some cases changes in classification in previously issued financial statements may result from changes in the entity’s business or operating structure. The ASB unanimously voted to ballot the proposed SAS for exposure.

Fraud.  Tom Stemlar, Chair of the Fraud Task Force, led the ASB in a discussion of a draft of proposed SAS, Consideration of Fraud in a Financial Statement Audit (Redrafted), which willreplace the guidance in AU section 316, Consideration of Fraud in a Financial Statement Audit.  The ASB issued an exposure draft (ED) of the proposed SAS in January 2009 based on ISA 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. The changes made to the ED included changes in response to comments well as changes to conform with revisions to the final version of ISA 240, which was issued in December 2008.  The ASB discussed that: 

• The PCAOB re-exposed its risk assessment standards (PCAOB Release No. 2009-007, Proposed Auditing Standards Related to the Auditor’s Assessment of and Response to Risk, and Related Amendments to PCAOB Standards) in December 2009, after the Fraud agenda items were sent to the ASB for discussion at the January meeting. With regard to this discussion, the ASB supported:  

• the Task Force request to review the PCAOB’s ED to determine where the fraud-related guidance in Release No. 2009-007 differs from the PCAOB’s initial ED PCAOB Release No. 2008-006, Proposed Auditing Standards Related to the Auditor's Assessment of and Response to Risk (October 21, 2008)), and whether (or how) the ASB ED should be revised as a result.

• retaining a separate fraud standard as opposed to the PCAOB’s integrated approach. The ASB believes that the stand back, focused approach to consider fraud is primarily why having a separate standard gives the consideration of fraud more prominence rather than integrating it into risk assessment standards.

• revising the ASB ED based on comments received, and monitoring PCAOB developments with regard to PCAOB Release No. 2009-007.

Additional discussion revolved around the definition of fraud.  The PCAOB’s interim auditing standard and extant SAS No. 99 use “material” misstatement in their definitions, whereas the ISA 240 definition does not use “material” but does use “unjust and illegal,” which gravitates toward a legal definition that the ASB does not believe is appropriate in the U.S. environment. The ASB agrees that the ED definition should remain unchanged.  The ASB expressed some confusion regarding what the differences in requirements are between performing analytical procedures related to revenue in paragraphs 22 and 34 of the ED. Although paragraph 22 is under the “Risk Assessment Procedures and Related Activities” heading, and paragraph 34 is under the “Evaluation of Audit Evidence” heading, the ASB directed the Task Force to consider the need to clarify paragraph 34.  Various other less significant changes were suggested. The Task Force was requested to return with a revised draft to the June 2010 meeting for a vote to ballot the ED for issuance as a final clarified standard.

Opening Balances—Initial Audit Engagements, Including Reaudit Engagements.  Andy Mintzer, Chair of the Initial Audits Task Force, led a discussion of the materials for proposed SAS Opening Balances—Initial Audit Engagements, Including Reaudit Engagements. The proposed SAS combines ISA 510 Initial Audit Engagements—Opening Balances and relevant content from AU 315 Communication Between Predecessor and Successor Auditors.
The ASB directed the Task Force to make a number of changes, including adding to paragraph 8(c) the option of reviewing the predecessor auditor's audit documentation to obtain evidence regarding the opening balances, but include a parenthetical statement that reviewing the predecessor auditor's audit documentation alone does not provide sufficient appropriate audit evidence and clarifying the requirements to permit disclaiming an opinion if withdrawal from the engagement is prohibited by law or regulation.  The ASB requested the Task Force to return with a revised draft at a future ASB meeting.

External Confirmations.  Megan Zietsman led the discussion of comments received on the ED of proposed SAS, External Confirmations. Overall the comments supported the changes made to clarify and converge the standard with ISA 505, External Confirmations. As a result of the comments received, the ASB:

• Reconfirmed that the presumptive requirement to perform external confirmation procedures for accounts receivable is appropriate and will be included as a conforming amendment in clarified SAS, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained (Redrafted).

• Added additional guidance to clarify when direct access to information held by a third party meets the definition of External Confirmation.

• Added additional guidance to further explain that the procedures used to determine whether requests are properly addressed depend on the risks associated with the confirmation or address.

• Added additional guidance on disclaimers and other restrictive language similar to the guidance in IAASB Staff Audit Practice Alert, Emerging Practice Issues Regarding the Use of External Confirmations in an Audit of Financial Statements, which was issued in November 2009.

The ASB requested the Task Force to return with a revised proposed SAS to the June 2010 meeting for vote for issuance.

Going Concern.  Brian Richson led a discussion of the agenda materials focusing on Going Concern.  This issue is challenging because the FASB is considering changing the accounting guidance on this issue, including possibly changing substantial doubt to more like probable, possible, etc.  Most of the discussion centered on potential changes associated with the FASB’s considerations.  The ASB requested the TF to bring a revised draft to the May 2010 meeting. 

AU Section 711.  John May, Chair of the AU Section 711 Task Force, led the discussion for a first read of proposed SAS Filings With the U.S. Securities and Exchange Commission Under the Securities Act of 1933.  The Task Force has been charged with redrafting AU Section 711, Filings Under Federal Securities Statutes (AICPA, Professional Standards, vol. 1),in accordance with the clarity conventions. There is no ISA that corresponds to AU Section 711.  The ASB directed the Task Force to consider revising the ED to add a reference to AT section 501, An Examination of an Entity’s Internal Control Over Financial Reporting That Is Integrated With an Audit of Its Financial Statements, so that it is clear that the standards is not referring to PCAOB Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements.  The ASB also directed the Task Force to consider whether the year of the effective date of the proposed SAS needs to change to 2011 to more closely align with the financial statements impacted by the effective date in the other clarified SASs. The provisional effective date for all but six clarified AU sections is expected to apply to audits of financial statements for periods beginning on or after December 15, 2010.  Other changes were also proposed.  The ASB requested the Task Force to return with a revised draft to the May 2010 meeting to vote to ballot for issuance as an exposure draft.

Auditor’s Report Research.  Mark Taylor, Chair of the Auditor’s Report Research Task Force, reviewed the history of the auditor’s report research project and the materials presented to the ASB, which are the materials presented to the IAASB at its December 2009 meeting and requested Dan Montgomery, who attended the IAASB meeting discussion, to report on that discussion.  The IAASB has asked its Auditor’s Report Working Group for a proposed plan for further actions

Concluding Comments

As is clear from this update, the agendas of the October 2009 and January 2010 meetings were full.  I reiterate that the members of the ASB are dedicated to making positive improvements in auditing standards with an aim to increase audit quality.  If you require additional information about the ASB and its activities, please contact me at mt@case.edu.