AICPA Proposes New Auditing Standards

 The AICPA’s Auditing Standards Board (ASB) has issued exposure drafts (EDs) of new Proposed Statements on Auditing Standards (SASs) and proposed amendments to other SASs.

Exposure Drafts

  • Proposed SASs, Auditor Reporting and Proposed Amendments―Addressing Disclosures in the Audit of Financial Statements;
  • Proposed SAS, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports; and
  • Proposed SAS, Omnibus Statement on Auditing Standards – 2018.

Summary of Proposed Standards

Auditor Reporting and Amendments Addressing Disclosures in the Audit of Financial Statements

The Exposure Draft, Proposed Statements on Auditing Standards, Auditor Reporting and Proposed Amendments―Addressing Disclosures in the Audit of Financial Statements (Auditor Reporting), proposes four new SASs and amendments to several others. The proposed SASs would generally converge the AICPA auditor reporting standards with those of the International Standard on Auditing (ISA) by the International Auditing and Assurance Standards Board (IAASB).

The four proposed auditor reporting SASs include:

  • Forming an Opinion and Reporting on Financial Statements;
  • Communicating Key Audit Matters in the Independent Auditor’s Report;
  • Modifications to the Opinion in the Independent Auditor’s Report; and
  • Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs in the Independent Auditor’s Report.

If adopted as proposed, the proposed auditor reporting SASs also would supersede certain sections of SAS No. 122, Statements on Auditing Standards: Clarification and Recodification, as amended. The exposure draft also proposes amendments relating to disclosures in the audit of financial statements with the proposed changes to auditor reporting.

If adopted as proposed the standard and related proposed amendments would be effective no earlier than for audits of financial statements for periods ending on or after June 15, 2019, depending on the timing of finalizing the proposed standards and amendments. Because the proposed standards and amendments are interrelated, all of them would be required to be adopted concurrently. It is anticipated that early implementation will not be permitted.

The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports

The Exposure Draft, Proposed SAS, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports (Other Information), if adopted as proposed, would supersede AU-C section 720, Other Information in Documents Containing Audited Financial Statements. This proposed SAS would generally converge the AICPA other information standard with that of the IAASB’s ISA 720 (Revised), The Auditor’s Responsibilities Relating to Other Information.

The ASB provided input to the IAASB in the latter’s project to clarify the requirements applicable to an auditor’s use of other information.

Under the proposal, “other information” includes financial or nonfinancial information (other than financial statements and the auditor’s report thereon) included in an entity’s annual report. The new standard, if adopted as proposed, would require the auditor to:

  • Read the other information;
  • Consider whether there are material inconsistencies between the other information and the financial statements or material misstatements;
  • Identify such inconsistencies and misstatements; and
  • Take certain actions with respect to identified inconsistencies and misstatements.

If adopted as proposed, the standard will be effective for audits of financial statements for periods ending on or after June 15, 2019. This date is provisional but will not be earlier than June 15, 2019. Early implementation would not be permitted.

Omnibus Statement On Auditing Standards 2018

The Exposure Draft, Proposed SAS, Omnibus Statement on Auditing Standards – 2018, proposes amendments to SAS No. 122, Statements on Auditing Standards: Clarification and Recodification, and SAS No. 130, An Audit of Internal Control Over Financial Reporting That Is Integrated With an Audit of Financial Statements (AU-C sec. 940) including the following sections:Section 210, Terms of Engagement (AU-C sec. 210)

  • Section 260, The Auditor’s Communication With Those Charged With Governance (AU-C sec. 260)
  • Section 240, Consideration of Fraud in a Financial Statement Audit, as amended (AU-C sec. 240)
  • Section 265, Communicating Internal Control Deficiencies Identified in an Audit (AU-C sec. 265)
  • Section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, as amended (AU-C sec. 315)
  • Section 330, Performing Audit Procedures in Responses to Assessed Risks and Evaluating the Audit Evidence Obtained (AU-C sec. 330)
  • Section 510, Opening Balances—Initial Audit Engagements, Including Reaudit Engagements AU-C sec. 510)
  • Section 550, Related Parties, as amended (AU-C sec. 550)
  • Section 560, Subsequent Events and Subsequently Discovered Facts (AU-C sec. 560)
  • Section 580, Written Representations (AU-C sec. 550)
  • Section 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors), as amended (AU-C sec. 600)
  • Section 930, Interim Financial Information (AU-C sec. 930)
  • Section 940, An Audit of Internal Control Over Financial Reporting That Is Integrated With an Audit of Financial Statements (AU-C sec. 940)

If adopted as proposed, the standard will be effective for audits of financial statements for periods ending on or after June 15, 2019. This date is provisional but will not be earlier than June 15, 2019.

Comment Deadline

The comment deadline for all three exposure drafts is May 15, 2018.

 

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CCH ARM Editorial

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