The AICPA has adopted a new standard that tightens ethics requirements on the use of indemnification and limitation of liability provisions. Many regulators now prohibit entering into certain types of indemnification and limitation of liability provisions in agreements for the performance of audit or other attest services, and an interpretation by the Professional Ethics Executive Committee (PEEC) of the AICPA prohibits members from using their provisions when contracting for audit and other attest services when their employer or client is subject to the requirements of one of these regulators. The standard is at www.aicpa.org/download/ethics/EDITED-Adopted-501-8-final.pdf.
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The AICPA has issued a proposed Statement on Auditing Standards (SAS) to conform the definitions in AU section 325, “Communicating Internal Control Related Matters Identified in an Audit.” of the various kinds of deficiencies in internal control and the related guidance for evaluating such deficiencies with the definitions and guidance in the proposed Statement on Standards for Attestation Engagements (SSAE), “An Examination of an Entity’s Internal Control Over Financial Reporting That Is Integrated With an Audit of Its Financial Statements.”
In addition to eliminating differences within the AICPA’s Audit and Attest Standards, the amendment also would align these definitions with those used by the PCAOB, and the definitions in an exposure draft of a proposed International Standard on Auditing 265, “Communicating Deficiencies in Internal Control,” currently being exposed for comment by the International Auditing and Assurance Standards Board.
A second proposed SSAE aims to converge the standards practitioners use for reporting on a nonissuer’s internal control over financial reporting (internal control) with the PCAOB’s Auditing Standard No. 5, “An Audit of Internal Control That is Integrated with an Audit of Financial Statements.” The proposed SSAE diverges from PCAOB Auditing Standard No. 5 primarily in the terminology used for non-issuers, and would supersede extant AT Section 501, “Reporting on an Entity’s Internal Control Over Financial Reporting.” The proposed SSAE makes AT section 501 applicable only to examinations of the design and operating effectiveness of an entity’s internal control over financial reporting (examination of internal control) that is integrated with an audit of the entity’s financial statements (integrated audit).