Presenting a live 110 ‐ minute teleconference with interactive Q&A The ASB's Audit Standards Clarity Project: h d d d l Prepare Now to Comply Meeting the Challenges of International Convergence, New Objectives M ti th Ch ll f I t ti l C N Obj ti and Special Considerations in the Revised Standards WEDNES DAY, JUNE 29, 2011 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Andy Mintzer Director Hemming Morse Inc. Los Angeles Andy Mintzer, Director, Hemming Morse Inc. , Los Angeles Ahava Goldman, S enior Technical Manager, AICPA , New Y ork For this program, attendees must listen to the audio over the telephone. Please refer to the instructions emailed to the registrant for the dial-in information. Attendees can still view the presentation slides online. If you have any questions, please contact Customer Service at1-800-926-7926 ext. 10 .
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The ASB Audit Standards Clarity P Project: Prepare Now To Comply j t P N T C l Seminar June 29, 2011 Andy Mintzer, Hemming Morse Inc. Ahava Goldman, AICP A andy@ mintzercpa.com agoldman@ aicpa.org
Today’s Program Convergence And Timetable S lide 7 – S lide 12 [Andy Mint zer] Clarity Drafting Conventions S lide 13 – S lide 20 [Ahava Goldman [Ah G ld Impacts Of Clarity, Conventions On S pecific S tandards, Part I S lide 21 – S lide 26 [Andy Mint zer] Impacts Of Clarity, Conventions On S pecific S tandards, Part II S lide 27 – S lide 33 [Ahava Goldman] Impacts Of Clarity, Conventions On S pecific S tandards, Part III S lide 34 – S lide 38 [Andy Mint zer] Planning And Training S Planning And Training S teps teps S S lide 39 – S lide 39 S lide 44 lide 44 [Ahava Goldman]
Andy Mintzer, Hemming Morse Inc. CONVERGENCE AND CONVERGENCE AND TIMETABLE
Clarity Background • Discussion paper issued March 2007 • ASB considered comments received and approved direction pp going forward August 2007 Goals Goals • Address concerns over length and complexity of standards • Make standards easier to read, understand and implement • Will l Will lead to enhancements in audit quality d t h t i dit lit 8
Clarity And Convergence C a ty d Co e ge ce Convergence? • IAASB, ASB, GAO, PCAOB S S G O C O Convergence with ISAs • Harmonize, not adopt • Most audits performed internationally are of non-public entities; therefore, ASB and IAASB have a similar focus. • Avoid unnecessary differences with PCAOB y • ASB standards: More “shoulds” than ISAs, but less than existing SASs American Institute of CPAs 9
Clarity Project 58 AU sections • Three withdrawn • 37 redrafted to corresponding SAS • 7 combined into one new SAS 7 combined into one new SAS • 11 combined/split into 9 SASs Will be replaced by 47 new SASs Will b l d b 47 SAS • AU section numbers will be changed to converge with ISA numbering Effective for audits of periods ending on or after 12/15/2012 10
Current Status Of Projects (As Of 5/23/11) j ( ) Final Fi l E Exposed d D Draft ft F/S for SASs Internal Another Auditors 117 120 117 ‐ 120 Country C t Alert to Alert to SAS 122 SAS 122 Going Intended Concern (39 SASs) Use American Institute of CPAs 11
Codification Two volumes – extant and clarified • Codification numbers set by SAS No. 122 “Extras” • Preface • • Cross reference old AU numbers to new AU numbers Cross-reference old AU numbers to new AU numbers • Summary of differences between SASs and ISAs • Glossary 12
Ahava Goldman, AICPA CLARITY DRAFTING CLARITY DRAFTING CONVENTIONS
Clarity Drafting Conventions y g Introduction Objective D fi i i Definitions Requirements Application material • Integral part of standard – auditors required to read and understand d t d Appendices and exhibits 14
Common Misconceptions Difference between must and should Difference between must and should • Must = is required to do action - (always do action, exactly as prescribed) • Sh Should = is required to do [action] ld i i d t d [ ti ] - (always do action, but on rare occasions not exactly as prescribed) Application material is integral part of standard; auditor is required to understand it 15
Geographical Change Geog ap ca C a ge Example of material moved out of an AU section E l f t i l d t f AU ti Extant Clarified AU 329 ‐ Analytical Procedures AU 315 ‐ Understanding the Entity and Its Environment ‐ Planning the audit g ‐ Planning the audit g ‐ Substantive tests AU 520 ‐ Analytical Procedures ‐ Substantive tests American Institute of CPAs 16
Geographical Change (Cont.) Geog ap ca C a ge (Co t ) Example of additional material now found elsewhere Understanding the entity and Its environment (new AU 315) will now contain this material previously found in other AU sections t i l i l f d i th AU ti AU 326 ‐ Audit Evidence ‐ Auditor’s use of assertions in obtaining evidence AU 329 A AU 329 ‐ Analytical Procedures l i l P d ‐ Analytical procedures used in planning American Institute of CPAs 17
Clarity Format Clarity Format Example of clarity changes : The Auditor’s Communication With Those Charged With Communication With Those Charged With Governance Extant Extant New And Clarified New And Clarified 65 paragraphs 14 paragraphs of “requirements” 45 paragraphs of “application guidance” Auditor actions: Auditor actions: Auditor actions: Auditor actions: One “must” 34 “shoulds” 21 “shoulds” American Institute of CPAs 18
Changes From Extant Standards C a ges o ta t Sta da ds No substantive changes to requirements for: • Audit documentation • Auditor’s communication with those charged with governance • Risk assessment standards • External confirmations • Analytical procedures • Audit sampling • • Auditing accounting estimates Auditing accounting estimates • Written representations • Subsequent events • Consideration of omitted procedures after the report release date American Institute of CPAs 19
Changes From Extant Standards (Cont.) g ( ) Primary difference relates to group audit standard • More specific as to what group engagement partner is responsible for Additional QC guidance • QC responsibilities for the audit more specifically described • Overall QC function remains “firm” responsibility, but Overall QC function remains firm responsibility, but responsibilities are engagement partner’s and engagement team’s Some changes in audit report to more clearly describe management’s responsibility • • New format to use report headings New format to use report headings American Institute of CPAs 20
Andy Mintzer, Hemming Morse Inc. IMPACTS OF CLARITY, , CONVENTIONS ON SPECIFIC STANDARDS PART I STANDARDS, PART I
Impact Of Selected Standards: Group Audits p p OLD NEW OLD “Principal Group audit Part of the audit auditor” performed by Component other auditors “Other auditor” auditor American Institute of CPAs 22
Impact Of Selected Standards: G Group Audits (Cont.) A dit (C t ) Materiality • Group and • Significant component component components components • Group • Make reference or • Individual significant • Component take responsibility RMM • Not significant g Levels of Focus Evidence Evidence American Institute of CPAs 23
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