January 3, 2012
AICPA Clarity Project
January 3, 2012
In 2004, the Auditing Standards Board (ASB) undertook its Clarity Project. The project's objective is two fold:
- Simplify existing U.S. auditing standards, and
- Converge U.S. generally accepted auditing standards (GAAS) with International Standards on Auditing (ISAs).
During October 2011, the ASB finalized the Clarity Project by issuing the new Codification Standards which are applicable for periods ending on or after December 15, 2012. Even though the majority of the auditing standards have not changed, there are a few modifications which are relevant—most notably:
AU-C Section 510 "Opening Balances-Initial Audit Engagements, Including Reaudit Engagements"
This standard addresses the auditors' responsibilities relating to opening balances in an initial audit engagement, including a reaudit engagement. While the auditor is still required to evaluate the sufficiency of audit procedures applied by predecessor auditors in order to place reliance on opening balances, the new standard also requires auditors to perform certain substantive testing procedures on the opening balances.
How will this affect you: This will increase the amount of audit time with respect to a new engagement and will increase your involvement with assisting the new auditor in performing the additional procedures.
AU-C Section 600 "Using the Work of Others"
This standard is applicable when an audit report is issued which makes reference to the audit of a component auditor. A component auditor, for example, may be engaged to audit a subsidiary of a parent company while that parent is audited by another firm (typically referred to as the "lead audit firm"). This standard requires the lead auditor to perform additional procedures which were not required in the previous auditing standards. The additional procedures would require the lead auditor to read the component auditors financial statements, evaluate the component auditors' findings, have various discussions with the component auditors and assess their audits in addition to the application of specific procedures which serve to satisfy the lead auditor as to the sufficiency of the work performed by the component auditor and its team.
How will this affect you: This will increase the amount of time spent by the group auditor and would require additional involvement by you with assisting the group auditor with obtaining the required information requested by the group auditor.