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
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TOPICS / AUDIT & ASSURANCE
Audit
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
Auditing
The goal of the clarity project is to make auditing standards easier to read, understand and apply. Consistent with the ASB’s strategy to converge its standards with those of the International Auditing and Assurance Standards Board (IAASB), each proposed standard has been redrafted using the corresponding International Standards on Auditing
Obtaining Quality Employee Benefit Plan Audit Services – The Request for Proposal
Employee benefit plan sponsors and administrators can save time selecting an audit firm and evaluating the quality of its services by writing a thorough Request for Proposal (RFP). Consider these tips offered by the AICPA Employee Benefit Plan Audit Quality Center: P Provide a brief description of the engagement. Describe
A Global Standard for Professional Ethics
EXECUTIVE SUMMARY Standard setting organizations in more than 100 countries have adopted the International Federation of Accountants’ (IFAC) Code of Ethics for Professional Accountants, while others are in the process of converging with the code. The code applies to professionals in public practice, business, academia and government. The IFAC code’s
Better Evidence Gathering
Well-designed audit confirmation practices provide valuable third-party evidence that sheds light on financial statement assertions made by management. Confirmations can be an effective tool for auditors working with accounts including payables and receivables, inventory, investment securities, lines of credit and other actual or contingent liabilities. The procedures also can supply
Highlights
FASB issued Statement no. 141(R), Business Combinations , and Statement no. 160, Noncontrolling Interests in Consolidated Financial Statements . Effective for fiscal years beginning after Dec. 15, 2008, the standards are intended to improve, simplify and internationally converge accounting for business combinations and the reporting of noncontrolling interests
Deepening Insolvency: An Emerging Threat?
EXECUTIVE SUMMARY Deepening insolvency is a relatively new and developing legal theory. Courts have disagreed about whether deepening insolvency is a stand-alone tort claim or simply a basis for seeking damages related to fraud, professional malpractice or another claim. If an auditor is alleged to have “missed” an
Highlights
FASB tentatively approved a one-year delay in the effective date for FIN 48, Accounting for Uncertainty in Income Taxes, for private enterprises, including not-for-profit organizations. Acting on a request from the Private Company Financial Reporting Committee for a deferral, the FASB board is seeking public comment on a
CBT Too Easy? Think Again
The concerns about how easy the new CPA exam is, expressed in the letter “ CBT: Too Easy? ” ( JofA , Sept.05, page 12), are valid but unnecessary. I took the last paper and pencil exam in November 2003. The exam was very difficult, and I was able to
Risk Assessment Standards in Action
Eight standards rolled out in 2006 by the Auditing Standards Board are sparking a cultural shift for auditors. The standards—Statement on Auditing Standards nos. 104–111—are designed to enhance auditors’ responses to audit risk and materiality and encourage them to focus on areas with the greatest risk of
Opportunity Detected
EXECUTIVE SUMMARY The crux of the SEC’s interpretive guidance for management is a top-down, risk-based approach that puts risk first and foremost. Four key areas of opportunity can be used to reduce an organization’s overall SOX 404 compliance effort— risk assessment, entity-level controls, control selection and testing
A Man of Principles
Your interview with Robert Pozen (“Seeking Clarity,” Oct. 07, page 30) was intriguing. My first question is: Who on the JofA staff interviewed him, and why was the byline not disclosed? The most insightful question was, “How can more principles-based standards work in the U.S….?” His answer was, “No one
Highlights
The Center for Audit Quality issued a set of white papers to address issues practitioners may encounter as a result of the “liquidity crisis” spurred by deterioration in the markets for subprime mortgages and related securities. The CAQ Professional Practice Executive Committee said firms would benefit from the
Navigating the Crossroads of Control and Independence
EXECUTIVE SUMMARY Statement on Auditing Standards no. 112, Communicating Internal Control Related Matters Identified in an Audit , introduced terms, definitions and guidance for identifying and evaluating control deficiencies and communicating significant deficiencies and material weaknesses. It requires an auditor to communicate in writing to a client’s
Highlights
Japan and the International Accounting Standards Board (IASB) agreed to accelerate convergence between Japanese GAAP and International Financial Reporting Standards (IFRS). The two boards will seek to eliminate by 2008 major differences between Japanese GAAP and IFRS, with the remaining differences being removed on or before June 30,
Accounting for Uncertainty
EXECUTIVE SUMMARY FASB Interpretation no. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, sets the threshold for recognizing the benefits of tax return positions in financial statements as “more likely than not” (greater than 50%) to be sustained by a taxing authority. The effect is most
AICPA Urges Congress to Reconsider Preparer Standards
When Congress passed the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007, it contained one major tax policy change not reflected in the title. The law, which was enacted May 25, included a provision that raises the standards applicable to tax return
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