Clarified Auditing Standards: The Quiet Revolution: Redrafting Brings Both Significant and Subtle Changes

Since 2004, the AICPA’s Auditing Standards Board (ASB) has aligned its agenda with that of the International Auditing and Assurance Standards Board, Each group has undertaken a project to simplify, standardize and recodify its auditing standards to be easier to understand and more consistently applicable on a global basis. * The ASB will complete its Clarity Project in 2011, and its new standards are expected to be effective for periods ending on or after Dec. 15, 2012. * The Clarity Project will result in the first complete recodification of U.S. GAAS since 1972. The new revised format for all existing auditing (AU) sections of AICPA Professional Standards includes an introduction, objective, definitions, requirements, and application and other explanatory material. * Wording will be clearer, easier to understand, and consis tent across international borders. * Some existing AU sections will be redrafted “one for one,” while others will be regrouped and clarified into one or more newly numbered standards. * Among the more substantive changes will be the change in status of the 10 generally accepted auditing standards, the wording of the auditor’s standard report and standards for group audits. ********** Over the past few years, much attention has been paid to the issue of global harmonization of generally accepted accounting principles while, at the same time, a much quieter revolution has been taking place in generally accepted auditing standards (GAAS). Over the past seven years (see sidebar, “Timeline of Clarification Project Events”) the AICPA Auditing Standards Board (ASB) has aligned its agenda with the International Auditing and Assurance Standards Board (IAASB) in the Clarity Project, with a goal to converge U.S. GAAS and international standards on auditing (ISAs) by December 2012. The result will make GAAS for nonpublic companies easier to understand and apply, as well as more consistent across international borders, while avoiding unnecessary conflict with auditing standards for public companies issued by the PCAOB. [ILLUSTRATION OMITTED] The Clarity Project will result in the first complete redrafting and recodification of U.S. GAAS since 1972. While the practical implications of many of these changes to auditing standards may be subtle, some others will significantly affect audit practice as well as audit education. In addition, the organization and wording changes are significant, and the project itself is immense. Practitioners and auditing educators should familiarize themselves with the Clarity Project and the impact that recodification and reformatting of the standards will have for training and research purposes. The Clarity Project is more than a simple reshuffling and redrafting of auditing standards; it is an important move toward the globalization of auditing standards. This article summarizes the project’s nature and a few of the more important details of the clarified standards and implications for practitioners and educators. Among the most significant changes are: * A change to a consistent and more readable format for all standards; * A change in the authoritative status of the traditional 10 generally accepted auditing standards; * Changes in the wording of the auditor’s report; and * Changes in standards for group audits. CHANGES EXPECTED IN CLARIFIED AND REVISED SASs The ASB’s plan for the Clarity Project is to completely revise and recodify all existing auditing (AU) sections of AICPA Professional Standards. In some cases, individual Aid sections are being clarified “one for one” into individual clarified standards. In other cases, existing AU sections are being regrouped and clarified into one or more newly numbered standards. As a result, almost all topics currently associated with certain existing AU section numbers will be retried and assigned AU section numbers different from those in the existing standards.