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Copyright © 1992 through 2015 by the American Institute of Certified Public Accountants, Inc. Reprinted with permission.
The book contains numerous excerpts taken from the Statements on Auditing Standards, the Statements on Standards for Attestation Engagements, and the Statements on Standards for Accounting and Review Services, and interpretations of these statements. These are noted by reference to the specific standard or AICPA Codification section, except for definitions which appear under a separate heading at the beginning of each section. These standards are copyrighted by the American Institute of Certified Public Accountants, Inc. and reprinted with permission of the AICPA.
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Following the creation of the Public Company Accounting Oversight Board (PCAOB), the AICPA's Auditing Standards Board (ASB) reassessed its mission. The ASB developed a plan to converge US generally accepted auditing standards (GAAS) with the International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board (IAASB). Thus, the ASB's Clarity Project began work to:
The ASB has completed its project. While clarity and convergence, not change, were the goals of the Clarity Project, the Project did create some changes that require auditors to make changes in practice. For ease of use, this book arranges information according to the sections of the AICPA's auditing standards codification.
In May 2010, the AICPA's Accounting and Review Services committee (ARSC) approved a clarity project with the purpose of aligning the conventions of its standards with the ASB standards and making the compilation and review standards easier to read, understand, and apply. One divergence from the ASB approach is that ARSC decided not to include application guidance for governmental and smaller, less complex entities. Otherwise, the formats are similar and include:
As a result of the ARSC clarity project, a new section identifier, “AR-C,” was established for the clarified standards in order to avoid confusion with references to the extant “AR” sections.
Statement on Standards for Accounting and Review Services (SSARS) No. 21, Statements on Standards for Accounting and Review Services: Clarification and Recodification, is a product of the SSARS clarity project. There have long been practice problems around when an accountant is associated with or involved in the preparation of financial statements. Questions circled around the accountant's responsibilities and the users' perceptions of the meaning of the accountant's involvement. With the advent first of computers and then the cloud, these issues became even more complex.
In an effort to clarify the accountant's role under various scenarios, the AICPA's Accounting and Review Services Committee (ARSC) undertook a project and in June 2012 issued three proposed SSARS meant to clarify and communicate the accountant's responsibility regarding compilation engagements and association with unaudited financial statements. Later that year, in November, SSARS issued two proposals on review engagements.
During 2012, 2013, and 2014, ARSC solicited comments and met with constituencies. It issued revised proposals and a rigorous process to ensure the integrity and acceptance of the final product. In August 2014, ARSC voted to issue the final standard.
In October 2014, the AICPA released statement on SSARS No. 21. This new standard significantly affects public practitioners who prepared financial statements and is effective for reviews, compilations, and presentation of financial statements for periods ending on or after December 15, 2015, with early implementation allowed.
SSARS No. 21 supersedes all extant AR sections, except for AR section 120. The last will be the subject of a future clarified standard. SSARS No. 21 eliminates all existing SSARS interpretations and incorporates them into the clarified guidance. SSARS No. 21 contains substantive changes to standards for compilations and engagements to prepare financial statements. Those changes are highlighted in the Technical Alert sections and incorporated in the relevant chapters of this book.
SSARS No. 21 results in the following structure:
The ARSC is working on clarified standards on prospective and pro forma financial information. Exposure drafts are expected in 2015 with final standards in 2016. That will complete the clarity project for SSARS engagements.
Wiley GAAS contains robust tools to help auditors implement the clarified standards. Each chapter begins with the source of the code section, the clarified objectives, and definitions, followed by practice guidance. Exhibits and illustrations are integrated in the chapter and clearly identified. Clarified standard references are preceded by “AR-C.”
The AICPA has dedicated a page on its site to the SSARS clarity project, with links to additional resources that may be helpful in implementing the changes:
The PCAOB issued a new accounting standard, AS No. 18, Related Parties. The chapter on PCAOB 18 details the standard's requirements.
Joanne M. Flood, CPA, is an author and independent consultant on accounting and auditing technical topics and e-learning. She has experience as an auditor in both an international firm and a local firm and worked as a senior manager in the AICPA's Professional Development group. She received her MBA Summa Cum Laude in Accounting from Adelphi University and her Bachelor's degree in English from Molloy College.
While in public accounting, Joanne worked on major clients in retail, manufacturing, and finance and on small business clients in construction, manufacturing, and professional services. At the AICPA, Joanne developed and wrote e-learning, text, and instructor-led training courses on US and International Standards. She also produced training materials in a wide variety of media, including print, video, and audio, and pioneered the AICPA's e-learning product line. Joanne resides on Long Island, New York with her daughter, Elizabeth. Joanne is the author of several articles for and contributor to Wiley Insight IFRS and the following Wiley publications:
And the following AICPA online and live CPE programs:
This book reduces the official language of Statements on Auditing Standards (SASs), Statements on Standards for Attestation Engagements (SSAEs), Statements on Standards for Accounting and Review Services (SSARSs), Public Company Accounting Oversight Board (PCAOB) Auditing Standards, and the interpretations of those standards into easy-to-read and understandable advice. It is designed to help CPAs in the application of, and compliance with, authoritative standards. This year marks the full implementation of the clarified standards resulting from the AICPA's Clarity Project. The Preface contains additional information on the Clarity Project.
This book follows the sequence of sections of the AICPA Codification of Statements on Auditing Standards, the Codification of Statements on Standards for Attestation Engagements, and the Codification of Statements on Standards for Accounting and Review Services. Sections are divided into the following easy-to-understand parts:
The AICPA's Auditing Standards Board (ASB) establishes standards for nonissuers. The ASB issues Statements on Auditing Standards (SASs) and interpretative publications for audits of nonissuers. Interpretative publication includes:
AU-C 200 requires the auditor to consider interpretative guidance in planning and performing the audit.
Following the passage of the Sarbanes-Oxley Act of 2002, auditors of public companies must follow the PCAOB standards. The PCAOB establishes standards on auditing and related attestation, quality control, and ethics and independence for use by registered public accounting firms in the preparation and issuance of audit reports for issuers.
Initially in 2003, the PCAOB adopted on an interim basis the AICPA's auditing, attestation, and quality control standards. In the ensuing years, the PCAOB has issued some of its own standards. Those standards are described in this volume.
As with all accounting and auditing publications, this book is merely a guide. It is not a substitute for professional judgment. It can, however, be a valuable reference tool.
The 2016 edition of this book is current through SAS 129, Amendment to SAS No. 122 Section 920, Letters for Underwriters and Certain Other Requesting Parties, as Amended; SSAE 17, Reporting on Compiled Prospective Financial Statements When the Practitioner's Independence is Impaired; SSARS 21, Statements on Standards for Accounting and Review Services: Clarification and Recodification; and PCAOB Auditing Standard 1, Related Parties.
SSARS No. 21 supersedes all existing AR sections except for AR Section 120, Compilation of Pro Forma Financial Information, which is expected to be exposed for public comment in clarified format in 2015
The Auditing Standards Board is working on a project to clarify the Attestation Standards. The clarification is expected to be released as SSAE 18. No definitive date for issuance has been released.
The PCAOB has issued a proposal to reorganize the PCAOB auditing standards and related amendments to the PCAOB Auditing Standards and Rules. The proposal is to reorganize the standards, but the PCAOB has stated that the proposed amendment will not include substantive changes.
Joanne M. Flood
August 2015