In pursuit of auditing standards that would be clear to auditors around the world, the International Auditing and Assurance Standards Board has issued exposure drafts of existing international standards that have been recast in a clearer form.While the changes do not affect auditors in the U.S., who audit under the standards of the Auditing Standards Board, that board may soon begin a similar clarification process, perhaps following the IAASB model, or perhaps devising its own.

The proposed ISAs were devised under new conventions that base standards on objectives, rather than procedures, and use the word "shall" to consistently identify requirements that auditors must follow. The new conventions also eliminate the use of the present tense to describe auditor actions. Structural improvements make the standards easier to read and understand.

IAASB deputy director James Gunn said that the biggest hurdle that the IAASB faces in the clarification process is determining which parts of the existing standards are requirements, and which are guidance. "The substantive decision is to make sure we have captured all of the right requirements and that there's no ambiguity about what is required of the auditor to fulfill the objectives of the standard, versus what is intended to be guidance for applying those requirements," Gunn said. "That's the biggest challenge and the principle goal."

Gunn said that the restructured standards would help small and midsized audit firms, and facilitate the convergence of international and national standards.

According to the chair of the IAASB, John Kellas, the three EDs deal with the most fundamental issues in auditing.

The proposed standards reflect substantial revisions from existing standards because the board was in the process of amending them when it began the clarification project. The main changes to the substance of the standards had previously been issued as exposure drafts and fully redeliberated.

The three statements are:

* ISA 320 (revised and redrafted), Materiality in the Identification and Evaluation of Misstatements;

* ISA 450 (redrafted), Evaluation of Misstatements Identified During the Audit; and,

* ISA 260 (revised and redrafted), Communication with Those Charged with Governance.

The IAASB expects to re-issue all of its international standards on auditing under the new drafting conventions by the end of 2008.


In the U.S., the ASB is watching the IAASB project closely. As a member of the IAASB, the ASB contributed to the clarification effort. The international board has asked various national auditing standard-setters to assist in preparing preliminary drafts of restructured standards, and the ASB will be taking the lead on a few of them.

The ASB is working toward convergence with international standards wherever feasible, and Chuck Landes, American Institute of CPAs' vice president of audit and assurance, said that the ASB will discuss a new clarification process at its meeting in January.

"What we're discussing is whether we're going to follow the IAASB's format exactly or take a little different format," Landes said. "Before we decide, we're going to issue a discussion memorandum on clarity and ask for comments from our members. We'll describe what's going on internationally and what we're considering doing here in the U.S. Then we'll present two formats to our membership and ask which they like. We're pretty sure we'll do something, unless the vast majority of our membership comes back and says they don't like either format and want to leave standards the way they are."

Landes said that the ASB has already been testing the idea with various constituents, and that members appear to think that a different format can make standards more user-friendly and understandable.

If the ASB issues a discussion memorandum in January, the comment period is likely to extend into the middle of May, Landes said.

Over the summer, the board will decide which way to go and which standards, if any, to start with. It would then take approximately two years to reformat all existing standards.

The IAASB requests comments by Feb. 15, 2007. The documents can be viewed online at

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