The American Institute of CPAs has issued an exposure draft resulting from its Attestation Clarity Project in an effort to clarify and toughen the professional standards for attestation engagements.
Among other items, the proposed clarified Statement on Standards for Attestation Engagements, or SSAEs, Attestation Standards: Clarification and Recodification, would restructure the content of AT section 20, Defining Professional Requirements in Statements on Standards for Attestation Engagements, AT section 50, SSAE Hierarchy, AT section 101, Attest Engagements, and AT section 201, Agreed-Upon Procedures Engagements (AICPA, Professional Standards).
The exposure draft specifically requests readers to indicate whether they support the proposed restructuring. The proposed SSAE would supersede those AT sections.
Many of the changes involve restructuring and reorganizing the older standards for greater clarity. But there are also some substantive changes. Among the significant changes proposed in the exposure draft, for all examination and review engagements, the proposed SSAE would require a practitioner to obtain from the responsible party a written assertion about the measurement or evaluation of the subject matter against the applicable criteria. The existing standards indicate that a practitioner should ordinarily obtain a written assertion from the responsible party in an examination or review engagement, but it allows for certain exceptions when the engaging party is not the responsible party. In those circumstances, the practitioner may perform the examination or review without obtaining a written assertion but is required to restrict the use of the report. This alternative would no longer be permitted for examinations and reviews under the proposal.
In addition, the existing standards discuss representation letters but in most sections do not require them. The proposed standards would require a representation letter in all examination and review engagements. However, if a responsible party who is not the engaging party refuses to provide the practitioner with a representation letter, the practitioner would not necessarily be required to conclude that a scope limitation exists if the practitioner is able to obtain satisfactory oral responses from the responsible party to the matters ordinarily included in the representation letter. Under these circumstances, use of the examination or review report would be restricted to the engaging party.
The proposed SSAE also would require practitioners to obtain a more in-depth understanding of the development of the subject matter than is currently required in order to better identify the risks of a material misstatement in an examination engagement. “This, in turn, should lead to an improved linkage between assessed risks and the nature, timing, and extent of attestation procedures performed in response to those risks,” the AICPA noted.
There are also more detailed requirements in specific areas such as assurance engagements on greenhouse gas emissions.
For more details on the most significant changes to the existing standards, click here. To learn more about the Attestation Clarity Project, click here. Comments on the exposure draft are due October 24.