ASB Clarity and Convergence Projects Produce 30+ New SASs

The AICPA Auditing Standards Board (ASB) is involved in a project that is designed to make U.S. generally accepted auditing standards (GAAS) easier to read, understand, and apply. Since the creation of the Public Company Accounting Oversight Board (PCAOB) in 2004 the ASB has gone through a reorganization and has considered how best to meet its mission. In addition it has been cognizant of the increasingly widespread acceptance of International Standards on Auditing (ISAs).

The Board subsequently developed a plan to converge U.S. GAAS with the ISAs while, at the same time, avoiding unnecessary conflict with PCAOB standards. In order to converge SASs with ISAs the Board aligned its agenda with that of the IAASB and began to develop its standards based on the ISAs. This allows the ASB to consider projects simultaneously with the IAASB.

Clarity Project

The foundation of the Clarity Project is the establishment of an objective for each auditing standard to better reflect a principles-based approach to standard-setting. In March 2007 the ASB issued a discussion paper, Improving the Clarity of ASB Standards. As a result of the feedback the Board received on this discussion paper, the ASB established “clarity drafting conventions” that will be applied to all standards issued by the ASB after January, 2008.

The clarity drafting conventions are:

a) Establishing objectives for each of the standards
b) Including a definitions section, where relevant, in each standard
c) Separating requirements from application and other explanatory material
d) Numbering application and other explanatory material paragraphs using an A prefix and presenting them in a separate section (following the requirements section)
e) Using formatting techniques, such as bulleted lists, to enhance readability
f) Special considerations relevant to audits of smaller, less complex entities
g) Special considerations relevant to audits of governmental audits

The ASB currently is in the process of:

a) Redrafting all of the auditing sections in Codification of Statements on Auditing Standards,
b) Applying the clarity drafting conventions, and
c) Converging the material with the international auditing standards.

This process includes exposing clarity redrafts, considering comments, making changes, and finalizing the standards. The ASB has directed that all clarified and redrafted standards will be effective on the same date, (Standards that address current issues will have earlier effective dates.), for audits of financial statements for periods ending on or after December 15, 2012.

Currently, there are more than 20 finalized standards plus other proposed standards. While changes in the standards are for most subjects not consequential, auditors will need an understanding of the new standards when auditing entities for the year ending December 31, 2012. In future blogs, we plan to discuss and dissect each of the new finalized standards that are posted on the ASB's Clarity Project page of the AICPA website.