The AICPA’s Auditing Standards Board released a proposal redrafting Statement on Auditing Standards (SAS) no. 39, Audit Sampling (AICPA, Professional Standards, vol. 1, AU sec. 350), according to the board’s clarity drafting conventions and to converge with International Standard on Auditing (ISA) no. 530 (Redrafted), Audit Sampling. While the proposal
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TOPICS / AUDIT & ASSURANCE
Audit
ASB Issues Proposed Standard on Subsequent Events
The Auditing Standards Board has issued Proposed Statement on Auditing Standards, Subsequent Events and Subsequently Discovered Facts. The proposal would supersede AU sections 530, Dating of the Independent Auditor’s Report, 560, Subsequent Events, 561, Subsequent Discovery of Facts Existing at the Date of the Auditor’s Report, and paragraphs .71–.73 of
GASB, CAQ Offer Research Grants
GASB and the Center for Audit Quality (CAQ) are each reaching out to the academic community with grant proposals. GASB is offering a $5,000 research grant to encourage academic support for its standard-setting activities, while the CAQ separately plans to give out a combined $200,000 in grants for multiple research
Auditing
To help auditors, management and others involved with gauging the effects of the economic crisis on an entity’s viability and whether these effects should be described in the financial statements, the International Auditing and Assurance Standards Board (IAASB) released the practice alert Audit Considerations in Respect of Going Concern
Effort to Simplify International Audit Standards Completed
The International Auditing and Assurance Standards Board (IAASB) has completed its clarity project, an initiative to update and reposition auditing standards in a form that is easier to understand, implement and translate. The clarified standards are effective for audits of financial statements for periods beginning on or after Dec. 15,
Clarified Risk Standard Proposals Available
The AICPA released for exposure certain risk assessment standards rewritten as part of its clarity project. The proposed risk assessment standards have been redrafted into a format that clearly identifies objectives, relevant definitions, requirements, and application and other explanatory material. Comments on the exposure drafts are due April 30.
Auditing
The Center for Audit Quality issued a practice aid on testing journal entries. The nonauthoritative document is designed to be a reference for auditors of public companies when applying certain sections of AU section 316, Consideration of Fraud in a Financial Statement Audit, of the PCAOB’s interim auditing standards. It
ASB Issues Audit Documentation Guidance, Internal Control Standards
The Auditing Standards Board (ASB) issued the second clarified auditing standard resulting from its clarity project, which aims to make U.S. GAAP easier to understand and apply and gives each standard a principles-based objective. Statement on Auditing Standards Audit Documentation (Redrafted) supersedes AU section 339, Audit Documentation. The standard
CAQ Issues Aid on Testing Journal Entries
The Center for Audit Quality issued a practice aid on testing journal entries. The nonauthoritative document is designed to be a reference for auditors of public companies when applying certain sections of AU section 316, Consideration of Fraud in a Financial Statement Audit, of the PCAOB’s interim auditing standards. It
Uniting the Global Profession
Robert Bunting became president of the International Federation of Accountants (IFAC) in November, beginning a two-year term. Prior to this, he was deputy president of IFAC for two years and has been a member of the IFAC Board since 2005. Bunting is a partner in Seattle-based Moss Adams LLP, where
Auditing
The AICPA’s Auditing Standards Board issued two exposure drafts related to service organizations. Proposed Statement on Auditing Standards, Audit Considerations Relating to an Entity Using a Service Organization (Redrafted), is for auditors of entities that use a service organization. The redrafted SAS would supersede AU section 324, Service Organizations. Proposed
New Statement on Quality Control Standards Effective as of Jan. 1
Statement on Quality Control Standards (SQCS) no. 7, A Firm’s System of Quality Control, applies as of Jan. 1, 2009, to a CPA firm’s system of quality control for its accounting and auditing practice. The statement describes elements of quality control and other matters essential to the effective design and
Auditing
The AICPA’s Auditing Standards Board issued two final standards on internal control. Statement on Standards for Attestation Engagements (SSAE) no. 15, An Examination of an Entity’s Internal Control Over Financial Reporting That Is Integrated With an Audit of Its Financial Statements, converges the standards practitioners use for reporting on a
Component Materiality for Group Audits: Probabilistic Model
To determine maximum aggregate component materiality levels, we first use the cumulative binomial distribution to derive the maximum number of components that can be allowed to simultaneously contain undetected misstatements that are material at the component level. The maximum allowable number of misstated components takes into account the number of
Component Materiality for Group Audits
Determining overall group materiality and materiality levels for individual components is becoming more of a hot-button issue as the number and complexity of large and international group audits increases. Auditing standards and other professional materials offer little practical guidance on the topic. Internal and peer reviews and regulatory inspections have
AICPA Issues Two Final Standards on Internal Control
The AICPA’s Auditing Standards Board issued two final standards on internal control. Statement on Standards for Attestation Engagements (SSAE) no. 15, An Examination of an Entity’s Internal Control Over Financial Reporting That Is Integrated With an Audit of Its Financial Statements, converges the standards practitioners use for reporting on a
PCAOB Proposes Seven Auditing Standards Related to Risk Assessment
The PCAOB voted to propose a slate of seven auditing standards related to risk assessment and response. The standards would supersede the board’s interim auditing standards related to audit risk and materiality, audit planning and supervision, consideration of internal control in an audit of financial statements, audit evidence, and performing
Guidance for Dealing With Electronic Confirmations
The AICPA’s Auditing Standards Board has revised Auditing Interpretation no. 1, Use of Electronic Confirmations, of SAS no. 67, The Confirmation Process (AU section 330). The interpretation has been revised to provide guidance on the use of electronic confirmations and their reliability in the confirmation process. Auditors are likely to
Auditing Clarity Projects Advancing
The International Auditing and Assurance Standards Board released an update on its work to improve the clarity of its standards. The seven-page Clarity Project Update details the status of the 18-month program, which is slated for completion in December. The report also provides an overview of the main changes to
Better Brainstorming
EXECUTIVE SUMMARY The PCAOB in 2007 raised concerns about accounting firms meeting the brainstorming mandates of SAS no. 99, which requires auditors to brainstorm to determine possible fraud risks, and SAS no. 109, which requires auditors to brainstorm to identify additional causes of potential material misstatements in financial statements. Given
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