CCH has released a guide and toolset for auditors using the American Institute of CPAs’ newly clarified auditing standards.
Like what you see? Click here to sign up for Accounting Today's daily newsletter to get the latest news and behind the scenes commentary you won't find anywhere else.
The AICPA’s Auditing Standards Board has redrafted nearly all of the AICPA’s professional auditing standards in a multi-year effort known as the Clarity Project to make the standards easier to read, understand, and apply. In line with that effort, CCH has revised its own guidance using the newly clarified standards in a new publication, Knowledge-Based Audits of Commercial Entities, with an accompanying toolset, Knowledge-Based Audit Methodology: Commercial Entities. The new publications are based on CCH’s Knowledge-Based Audit methodology and are available via ProSystem fx Knowledge Coach, and on the Accounting Research Manager research service.
“One of the primary objectives of the Clarity Project is to make auditing standards easier to understand, but there’s still confusion over how exactly it will impact the audit process,” said Sam High, CCH vice president and general manager of accounting, audit and workflow. “Clarity changes the rules when it comes to performing audit engagements in accordance with Generally Accepted Audit Standards, and CCH’s Commercial title helps firms and individual audit professionals ensure they comply with the new clarified standards.”
CCH’s Knowledge-Based Audits of Commercial Entities covers all of the clarified standards, including the recently issued Statement on Auditing Standard No. 126, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern (Redrafted). The toolset allows auditors to leverage their previous efforts by retaining the audit work they have already tailored for each client while rolling forward their old files to conduct engagements and issue reports that comply with all of the new requirements.
The commercial title offers guidance on the requirements of the new Clarity Project standards and provides additional information on changes to data flow and where significant audit information is entered. It includes simpler documentation options for certain workpapers, where the engagement or client is considered to be non-complex; and removal of certain workpapers where appropriate.
The AICPA’s Clarity Project discontinues terms such as “principal auditor,” “illegal acts,” “OCBOA,” “explanatory paragraph” and others.
The new Clarity Project auditing requirements include performing audit procedures designed to identify noncompliance with laws and regulations; verifying the propriety of opening balances on every engagement; and determining whether the financial reporting framework is acceptable in the circumstances. Other requirements include determining the newly introduced “performance materiality”; applying the risk-based approach to audits of group financial statements and related party transactions; and complying with the differing documentation requirements for the use of “auditor’s specialists” and “management’s specialists.”
Auditors will also be required to communicate the potential effects of the material weaknesses and significant deficiencies they have identified, and in certain circumstances, the control deficiencies they have identified other than material weaknesses and significant deficiencies. New requirements have also been established for reporting on single and summary financial statements, and financial statements prepared in accordance with a special purpose framework.
The new auditing standards are effective for audits of financial statements for periods ending on or after Dec. 15, 2012. In the next few months, CCH plans to issue additional titles, guidance and tools covering other industries affect by the AICPA clarity standards.
For more information on Knowledge-Based Audits of Commercial Entities and the accompanying toolset, Knowledge-Based Audit Methodology: Commercial Entities for ProSystem fx Knowledge Coach and Accounting Research Manager, call 1-(800) 739-9998 or visit www.CCHGroup.com.