ASB changes align GAAS with PCAOB standards

The AICPA’s Auditing Standards Board (ASB) voted to issue a new auditing standard, Omnibus Statement on Auditing Standards — 2019, that will more closely align standards for auditors of nonpublic clients to the auditing standards of the PCAOB, in order to enhance audit quality in an effective and efficient manner.

The sections the ASB standard will amend include:

• AU-C Section 260, The Auditor’s Communication With Those Charged With Governance: Additional communications are required on the auditor’s views relating to the entity’s significant unusual transactions and on the potential effects of uncorrected misstatements on future-period financial statements.
• AU-C Section 240, Consideration of Fraud in a Financial Statement Audit: The term “significant unusual transactions” is introduced and defined. Requirements are established for basic procedures for obtaining information and evaluating significant unusual transactions. Guidance and conforming changes related to significant unusual transactions also are included.
• AU-C Section 550, Related Parties: Requirements are enhanced for identifying previously unidentified or undisclosed related parties or significant related-party transactions. Also enhanced is the auditor’s response to the risks of material misstatement associated with related-party relationships and transactions. New procedures are required to test the accuracy and completeness of the related-party relationships and transactions identified by the entity, taking into account the information gathered during the audit.

The standard is expected to be issued in conjunction with a suite of standards on auditor reporting that the ASB is expected to vote to issue as final at its January meeting. The effective date of these new standards is expected to be no earlier than for audits of financial statements for periods ending on or after Dec. 15, 2020.