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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 the 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, 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, in October 2014 the AICPA released SSARS No. 21. This standard significantly affects public practitioners who prepare financial statements and is effective for reviews, compilations, and presentations of financial statements for periods ending on or after December 15, 2015.
SSARS No. 21 supersedes all extant AR sections, except for AR Section 120, which 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 into the relevant chapters of this book.
SSARS No. 21 results in the following structure:
In September 2016, the AICPA completed the clarity project with the issuance of SSARS no. 22, Compilation of Pro Forma Financial Information. The guidance is included in the chapter on AR-C 120.
In April 2016, the ASB issued SSAE 18, Attestation Standards: Clarification and Recodification. The standards are effective in May 2017 and are included in this publication.
Wiley Practitioner's Guide to GAAS 2017 contains robust tools to help practitioners 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 into 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: http://www.aicpa.org/SSARSClarity.
To clarify jurisdictional issues, in January 2016, the ASB issued SAS No. 131, Amendment to Auditing Standards No. 122 Section 700, Forming an Opinion and Reporting on Financial Statements. The amendment clarifies the format of the auditor's report when conducting an audit in accordance with PCAOB standards and in accordance with GAAS. SAS No. 131 is effective for audits of financial statements for periods ending on or after June 15, 2016.
In October 2015, the ASB issued SAS No. 130, An Audit of Internal Control over Financial Reporting That Is Integrated with an Audit of Financial Statements. SAS No. 130 moves the guidance in AT 501 and related Interpretation No. 1, Reporting under Section 112 of the Federal Deposit Insurance Corporation Improvement Act (AT 9501) to the guidance for generally accepted auditing standards. SAS No. 130 creates a new AU-C section—940.
Guidance from both of these documents is incorporated into this volume.
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 a 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), 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.
The AICPA's clarified auditing standards are now fully implemented. 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:
Original Pronouncement. A handy, brief identification of the original standard for the Section.
Definitions of Terms. A glossary of official definitions that gathers in one place explanations of terms that are ordinarily scattered throughout a standard.
Objectives of Section. A behind-the-scenes explanation of the reasons for the pronouncement and a capsule explanation of the most basic ideas of the section.
Requirements. Concise listing and descriptions of those things specifically mandated by the section, and helpful techniques for complying with the fundamental requirements of the section.
Interpretations. A brief summary of each Interpretation.
SSAE 18 supersedes all existing AT sections and is effective for reports dated after April 30, 2017. The guidance from SSAE is codified in the AT-C sections of AICPA professional standards and appears in the AT-C chapters of this book.
The AICPA has issued an exposure draft to amend AR-C 90 on review engagements. The exposure draft includes a technical correction for supplementary information that accompanies reviewed financial statements and the accountant's review report thereon. The proposed SSARS is expected to be effective upon issuance.
The Auditing Standards Board (ASB) has two exposure drafts. The first is on auditor involvement with exempt offering documents. If adopted and issued as a final standard, the proposed SAS will be codified in AU-C sec. 945 and will be effective for exempt offering documents with which the auditor is involved that are initially distributed, circulated, or submitted on or after June 15, 2018. Early application of the SAS will be permitted. The second exposure draft is on an auditor's consideration of an entity's ability to continue as a going concern. At the time the current auditing guidance on going concern was issued, the Financial Accounting Standards Board (FASB) had not issued its guidance on management's consideration of going concern. This proposed guidance would better align the AICPA with the FASB, the Governmental Accounting Standards Board (GASB), and International guidance. If adopted, the guidance will be effective for audits of financial statements for periods ending on or after December 15, 2017, and for interim periods beginning thereafter.
This publication is current through SAS No. 131, SSARS 22, and SSAE 18.
Joanne M. Flood
September 2017