Prepared for The Auditor's Report (Spring 2008)
By Doug Prawitt, Brigham Young University
Member of the AICPA Auditing Standards Board
The Auditing Standards Board is moving forward with a full agenda, in addition to making preparations to redraft existing standards in conformance with clarity guidelines, which will soon be finalized in detail. This update is intended to give readers a broad overview of the board's active projects through a description of current task forces. I encourage you to make your voice heard on the topics being addressed by the board through its task forces. Additional information about the ASB's task forces and the agenda of the board's most recent meeting is available on the AICPA Web site.
Analytical Procedures Task Force (Staff Liaison: Andy Mrakovcic; Task Force Chair: Walt Conn). This task force is revising AU Section 329, Analytical Procedures, with the objective of converging that standard with an exposure draft of International Standard on Auditing (ISA) 520 (Redrafted), "Analytical Procedures," issued by the International Auditing and Assurance Standards Board (IAASB) in December 2007.
Auditing Accounting Estimates Task Force (Staff Liaison: Hiram Hasty; Task Force Chair: Megan Zietsman). The task force is revising AU Section 342, Auditing Accounting Estimates, with the objective of converging that standard with an exposure draft of ISA 540, "Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures," issued by the IAASB in December 2006. The exposure draft includes changes to ISA 540 to reflect, among other things, the combination of ISA 540 with ISA 545, Auditing Fair Value Measurements and Disclosures.
Auditing Related Party Transactions Task Force (Staff Liaison: Mike Glynn; Task Force Chair: George P. Fritz). In February 2007 the IAASB issued an exposure draft revising ISA 550, Related Parties. The task force will be revising AU Section 334, Related Parties, to achieve convergence with the related ISA being developed by the IAASB.
Audit Issues Task Force (Staff Liaison: Sharon Walker; Task Force Chair: Harold L. Monk). This task force (1) oversees the ASB's planning process, (2) evaluates technical issues raised by various constituencies and determines their appropriate disposition, including referral to an ASB task force or development of guidance, (3) addresses emerging audit and attestation practice issues, (4) provides advice on ASB task force objectives and composition, (5) monitors the progress of task forces, and (6) assists the chair of the ASB and the Audit and Attest Standards staff in carrying out their functions.
Auditors' Reports Task Force (Staff Liaison: Sharon Walker; Task Force Chair: Harold L. Monk). This task force is revising AU Section 508, Reports on Audited Financial Statements. The ASB believes that it is appropriate and timely to revisit the required reporting elements and the language in the auditor's report for audits of nonissuers. The task force is considering how best to proceed in light of the research being undertaken by the Auditor's Report Research Task Force and the ASB's clarity project.
Auditor's Report Research Task Force (Staff Liaison: Sharon Walker; Task Force Chair: Doug Prawitt). This task force is charged with sponsoring research related to the expectation gap and how the audit report might be revised to better address this gap. At its May 2007 meeting, the ASB approved four projects, which are now underway. The first phase involves identifying misconceptions users have regarding an unqualified auditor's report. A second phase will explore ways in which the auditor's report might be revised to address user misconceptions.
Clarity Task Force (Staff Liaison: Sharon Walker; Task Force Chair: John Fogarty). The objective of this task force is to address concerns about the clarity, length, and complexity of the ASB's standards. The ASB issued a discussion paper in March 2007 seeking reactions to proposals to revise the format, structure, and style of the ASB's standards. The task force also is charged with revising the 10 GAAS and proposing amendments so that these standards are consistent with the current auditing model.
Compliance Auditing Task Force (Staff Liaison: Judith Sherinsky; Task Force Chair: George Rippey). The task force is revising the guidance in AU Section 801, Compliance Auditing Considerations in Audits of Governmental Entities and Recipients of Governmental Financial Assistance, in response to recommendations in the June 2007 "Report on National Single Audit Sampling Project" issued by the President's Council on Integrity and Efficiency.
Confirmations Task Force (Staff Liaison: Ahava Goldman; Task Force Chair: Megan Zietsman). The task force is considering revisions to AU Section 330, The Confirmation Process, to achieve convergence with a proposed revision of ISA 505, External Confirmations. In July 2007, the IAASB issued an exposure draft of proposed redrafted ISA 505.
Going Concern Task Force (Staff Liaison: Judith M. Sherinsky; Chair: Jorge Milo). This task force is revising AU Section 341, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern, based on the IAASB's exposure draft of ISA 570. The auditing guidance in ISA 570 is predicated on IAS 1, which requires management to assess the entity's ability to continue as a going concern. Currently, a parallel accounting requirement does not exist in U.S. GAAP and the auditor, rather than management, is responsible for assessing going concern. As part of its Codification project, the FASB plans to add (1) a requirement for management to assess the entity's ability to continue as a going concern and (2) disclosure requirements that are currently in AU Section 341.
Interim Reviews Task Force (Staff Liaison: Mike Glynn; Task Force Chair: Jorge Milo). The task force is considering the development of guidance for reviews of the condensed interim financial information of nonissuers, including nonissuers that prepare (in a manner similar to issuers) quarterly condensed financial information based on contractual, indenture, or other third-party requirements.
Internal Control Task Force (Staff Liaison: Judith M. Sherinsky; Task Force Chair: Keith O. Newton). The task force is developing a replacement for AT Section 501, Reporting on an Entity's Internal Control Over Financial Reporting and revising AU Section 325, Communicating Internal Control Related Matters Identified in an Audit, in response to the PCAOB's AS No. 5 and the IAASB's proposed ISA, Communicating Deficiencies in Internal Control.
International Auditing Standards Subcommittee (Staff Liaison: Sharon Walker; Subcommittee Chair: Susan S. Jones). This subcommittee supports the development of international auditing standards. Subcommittee activities include providing advice and support to the AICPA representative to the IAASB, commenting on exposure drafts of IASs, participating in and identifying U.S. volunteer participants for international standard-setting projects, and identifying opportunities for establishing joint standards with other standard setters.
Management Representations Task Force (Staff Liaison: Ahava Goldman; Task Force Chair: Keith O. Newton). The task force is considering revisions to AU Section 333, Management Representations, to achieve convergence with newly revised and redrafted ISA 580, Written Representations. At its December 2007 meeting, the IAASB voted to issue revised and redrafted ISA 580 as a final standard. The task force expects to present a draft of a proposed SAS at the May 2008 ASB meeting.
Quality Control Standards Task Force (Staff Liaison: Ahava Goldman; Task Force Chair: David Brumbeloe). In December 2007, the ASB issued Statement on Quality Control Standard No. 7, A Firm's System of Quality Control. To assist practitioners in implementing the new standard, a practice aid, Establishing and Maintaining A System of Quality Control for a CPA Firm's Accounting and Auditing Practice, has been developed and is available at:
Risk Assessments Task Force (Staff Liaison: Hiram Hasty; Task Force Chair; Darrel Schubert). The task force is charged with redrafting SAS Nos. 106 -111 to reflect the clarity conventions approved by the ASB at its August 2007 meeting. The task force has begun redrafting the SASs, and presented a revised draft of SAS No. 108, Planning and Supervision, at the January 2008 ASB meeting.
Service Organizations Task Force: (Staff Liaison: Judith Sherinsky; Task Force Chair: George Tucker.) This task force is revising the guidance in AU Section 324, which currently provides guidance to auditors of the financial statements of entities that use service organizations (user auditors) and also to auditors reporting on controls at service organizations (service auditors).
Supplementary Information Task Force (Staff Liaison: Mike Glynn; Task Force Chair: Jeffery N. Markert). This task force is charged with considering current reporting standards that address supplementary information and required supplementary information and determining whether revisions to these standards should be made.
Using the Work of a Specialist Task Force (Staff Liaison: Hiram Hasty; Task Force Chair: Darrel Schubert). The objective of the task force is to revise AU Section 336, Using the Work of a Specialist. The task force will begin a project to revise AU Section 336 and replace it with two standards. One of the proposed standards will address situations in which an auditor engages an outside (non-firm) specialist. The other proposed standard will focus on situations in which an auditor uses as audit evidence the work product of a nonemployee specialist hired by management.
To view a projected timetable of ASB projects through 2009, see the AICPA Web site.