Wiley Practitioner's Guide to GAAS 2016 E-Book

Joanne M. Flood

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Regulatory Reporting
• Sprache: Englisch

Seitenzahl: 1921

Veröffentlichungsjahr: 2016

Beschreibung

Plain-English interpretations and applications of the latest GAAS

Wiley Practitioner's Guide to GAAS 2016 provides full guidance toward the latest guidelines and applications of Generally Accepted Auditing Standards. With detailed coverage of the newest releases, this helpful reference explains each standard in clear, accessible language and highlights the ways in which the standards are related. Organized for easy navigation, each statement is presented individually along with explanation, practice notes, practical illustrations, checklists and questionnaires to guide you through the auditing process. The book is written to align with the Statements on Auditing Standards, and includes updates and interpretations of all new Statements for Accounting and Review Services Compilation and Review statements to help you ensure a complete and fully compliant audit.

Accounting standards are critical to the auditing process, but frequent revisions and new releases add a layer of complexity to compliance. This book provides interpretation and application notes for all GAAS standards, including all SASs, SSAEs, SSARSs and PCAOB.

• Get up to speed on the latest GAAS standards
• Walk through each statement step-by-step
• Utilize helpful tools to ensure full compliance
• Gain a deeper understanding of each standard's applications

Identifying, interpreting, and applying the many standards relevant to a particular engagement can be the most difficult part of the auditor's job. This guide simplifies the process by combining the standards, explanations, tools, and expert advice into a single, easily navigated volume. For the auditor who needs to be up to date, Wiley Practitioner's Guide to GAAS 2016 presents clear, plain-language guidance toward the most recent GAAS standards, to help you find —and understand — the answers you need quickly.

Leseprobe

CONTENTS

Cover

Series Page

Title Page

Copyright

Preface

About the Author

Organization and Key Changes

AU-C 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Generally Accepted Auditing Standards

AU-C Original Pronouncements

AU-C 200 Definitions of Terms

Objectives of AU-C Section 200

Fundamental Requirements

Management Responsibilities

Defining Professional Requirements in Statements on Auditing Standards

Interpretations

Techniques for Application

AU-C 210 Terms of Engagement

AU-C Original Pronouncement

Applicability

Definitions of Terms

Objectives

Fundamental Requirements

Interpretations

Techniques for Application

Illustration

AU-C 220 Quality Control for an Engagement Conducted in Accordance with Generally Accepted Auditing Standards

AU-C Original Pronouncement

Introduction

AU 220 Definitions of Terms

Objectives of AU-C Section 220

Fundamental Requirements

Interpretations

Techniques for Application

AU-C 230 Audit Documentation

AU-C Original Pronouncements

Au-C Definitions of Terms

Objectives of AU-C Section 230

Fundamental Requirements

Interpretations

Techniques for Application

AU-C Illustrations

AU-C 240 Consideration of Fraud in a Financial Statement Audit

AU-C Original Pronouncement

AU-C Definitions of Terms

Objectives of AU-C Section 240

Fundamental Requirements

Interpretations

Techniques for Application

AU-C Illustrations

AU-C 250 Consideration of Laws and Regulations in an Audit of Financial Statements

AU-C Original Pronouncement

AU-C 250 Definition of Term

Objectives of AU Section 250

Fundamental Requirements

Interpretations

Techniques for Application

AU-C 260 The Auditor's Communication with Those Charged with Governance

AU-C Original Pronouncements

AU-C Definitions of Terms

Objectives of AU-C Section 260

Fundamental Requirements

Interpretations

Techniques for Application

AU-C 265 Communicating Internal Control Related Matters Identified in an Audit

AU-C Original Pronouncements

AU-C Definitions of Terms

Objectives

Fundamental Requirements

Interpretations

Techniques for Application

AU-C 265 Illustrations

AU-C 300 Planning an Audit

AU-C Original Pronouncement

Objectives of AU-C Section 300

Fundamental Requirements

Interpretations

Techniques for Application

AU-C 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement

AU-C Original Pronouncement

Definitions of Terms

Objectives of AU-C Section 315

Fundamental Requirements

Interpretations

Techniques for Application

Illustrations

AU-C 320 Materiality in Planning and Performing an Audit

AU-C Pronouncement

Definition of Term

Objective of AU-C Section 320

Fundamental Requirements

Audit Risk and Materiality Considerations—Financial Statement Level

Interpretations

Techniques for Application

AU-C 330 Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained

AU-C Original Pronouncement

AU-C 330 Definitions of Terms

Objective of AU-C Section 330

Fundamental Requirements

Interpretations

Techniques for Application

Source List of Procedures or Evidential Matter

AU-C 402 Audit Considerations Relating to an Entity Using a Service Organization

AU-C Original Pronouncement

Definitions of Terms

Objectives of AU-C Section 402

Fundamental Requirements

Techniques for Application

AU-C 450 Evaluation of Misstatements Identified During the Audit

AU-C Original Pronouncement

Definitions of Terms

Objectives of AU-C Section 450

Fundamental Requirements

Interpretations

Techniques for Application

AU-C 500 Audit Evidence

AU-C Original Pronouncement

Definitions of Terms

Objective

Fundamental Requirements

Techniques for Application

Interpretations

AU-C 501 Audit Evidence—Specific Considerations for Selected Items

AU-C Original Pronouncement

Definitions of Terms

Objectives of AU Section 501

Fundamental Requirements—Investments in Securities and Derivative Instruments

Techniques for Application—Investments in Securities and Derivative Instruments

Illustrations—Investments in Securities and Derivative Instruments

Fundamental Requirements—Inventory Observation

Techniques for Application—Inventory Observation

AU-C Illustrations—Inventory Observation

Fundamental Requirements—Litigation, Claims, and Assessments Involving the Entity

Techniques for Application—Litigation, Claims, and Assessments

AU-C Illustrations

Fundamental Requirements—Segment Reporting

AU-C 505 External Confirmations

AU-C Original Pronouncement

Definitions of Terms

Objective of AU-C Section 505

Fundamental Requirements

Techniques for Application

AU-C Illustrations

AU-C 510 Opening Balances—Initial Audit Engagements, Including Reaudit Engagements

AU-C Original Pronouncement

Applicability

Definitions of Terms

Objectives of AU-C Section 510

Fundamental Requirements

Interpretations

Illustrations

AU-C 520 Analytical Procedures

AU-C Original Pronouncement

AU-C Definition of Term

Objectives of AU-C Section 520

Fundamental Requirements

Techniques for Application

AU-C Illustrations

AU-C 530 Audit Sampling

AU-C Original Pronouncement

AU-C Definitions of Terms

Objectives of AU-C Section 530

Fundamental Requirements

Interpretations

Techniques for Application: Nonsampling

Techniques for Application: Nonstatistical Audit Sampling

Techniques for Application: Statistical Audit Sampling

AU-C 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates and Related Disclosures

AU-C Original Pronouncement

Definitions of Terms

Objective of AU-C Section 540

Fundamental Requirements

AU-C Interpretation

Techniques for Application

Illustration

AU-C 550 Related Parties

AU-C Original Pronouncements

Definitions of Terms

Objectives of AU Section 550

Fundamental Requirements

Interpretations

Techniques for Application

Illustration

AU-C 560 Subsequent Events and Subsequently Discovered Facts

AU-C Original Pronouncement

Definitions of Terms

Objectives of AU-C Section 560

Fundamental Requirements

Interpretations

Techniques for Application

Illustration

AU-C 570 The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern

AU-C Original Pronouncement

AU-C Definition of Term

Objectives of AU-C Section 570

Fundamental Requirements

Interpretations

Techniques for Application

Illustration

AU-C 580 Written Representations

AU-C Original Pronouncement

AU-C Definition of Term

Objectives of AU-C Section 580

Fundamental Requirements

Interpretations

Techniques for Application

AU-C 580 Illustrations2

AU-C 585 Consideration of Omitted Procedures After the Report Release Date

AU-C Original Pronouncement

Definition of Term

Objectives of AU Section 585

Fundamental Requirements

Interpretations

Techniques for Application

Illustration

AU-C 600 Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors)

AU-C Original Pronouncements

AU-C 600 Definitions of Terms

Objectives of AU-C Section 600

Fundamental Requirements

Interpretations

Illustrations

AU-C 610 Using the Work of Internal Auditors

AU-C Original Pronuncement

Definitions of Terms

Objectives of AU-C Section 610

Fundamental Requirements

Interpretations

Techniques for Application

Illustration

AU-C 620 Using the Work of an Auditor's Specialist

AU-C Original Pronouncement

AU-C Definitions of Terms

Objectives of AU-C Section 620

Fundamental Requirements

AU-C Interpretations

Techniques for Application

Illustrations

AU-C 700 Forming an Opinion and Reporting on Financial Statements

AU-C Original Pronouncement

AU-C Definitions of Terms

Objectives of AU-C Section 700

Fundamental Requirements: Forming an Opinon

Fundamental Requirements: Auditor's Standard Report

Fundamental Requirements: Reports on Comparative Financial Statements

Interpretations

Techniques for Application

AU-C 700 Illustrations (Source: AU-C 700.58)

AU-C 705 Modifications to the Opinion in the Independent Auditor's Report

AU-C Original Pronouncements

AU-C Definitions of Terms

Objective of AU-C Section 705

Fundamental Requirements

Interpretations

Techniques for Application

AU-C 705 Illustrations (Source: AU-C 705.A32)

AU-C 706 Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs in the Independent Auditor's Report

AU-C Original Pronouncement

AU-C Definitions of Terms

Objectives of AU-C Section 706.04

Fundamental Requirements

Interpretations

AU-C 706 Illustrations

AU-C708 Consistency of Financial Statements

AU-C Original Pronouncement

AU-C Definition of Term

Objectives of AU-C Section 708

Fundamental Requirements

AU-C 720 Other Information in Documents Containing Audited Financial Statements

AU-C Original Pronouncements

AU-C Effective Date and Summary of Changes

AU-C Definitions of Terms

Objective of AU-C Section 720

Fundamental Requirements

Interpretations

Illustration

AU-C 725 Supplementary Information in Relation to Financial Statements as a Whole

AU-C Original Pronouncements

AU-C Definition of Term

Objective of AU-C Section 725

Fundamental Requirements

Interpretation

AU-C 725 Illustrations

AU-C 730 Required Supplementary Information

AU-C Originial Pronouncement

AU-C Definitions of Terms

Objectives of AU-C Section 730

Fundamental Requirements

Interpretations

Techniques for Application

AU-C 730 Illustrations

AU-C 800 Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks

AU-C Effective Date and Applicability

AU-C Definitions of Terms

Objectives of AU-C Section 800

fundamental requirements

AU-C 800 illustrations (Source: AU-C 800.A36)

AU-C 805 Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement

AU-C Original Pronouncement

AU-C Definitions of Terms

Objectives of AU-C Section 805

Scope

Fundamental Requirements

Intrepretations

Illustrations of Auditor's Reports on A Single Financial Statement and A Specific Element of A Financial Statement (Source: AU-C 805.25)

AU-C 806 Reporting on Compliance with Aspects of Contractual Agreements or Regulatory Requirements in Connection with Audited Financial Statements

AU-C Original Pronouncements

AU-C Definitions of Terms

Objective of AU-C Section 806

Scope

Fundamental Requirements

AU-C 806 Illustrations (Source AU-C 806.A8)

AU-C 810 Engagements to Report on Summary Financial Statements

AU-C Original Pronouncement

Definitions of Terms

Objectives of AU-C Section 810

SCope

Fundamental Requirements

Interpretations

AU-C 810 Illustrations (Source: AU-C 810.a22)

AU-C 905 Alert That Restricts the Use of the Auditor's Written Communication

AU-C Original Pronuncement

AU-C Definition of Term

Objectives of AU-C Section 905

Fundamental Requirements

Interpretations

Techniques for Application

AU-C 905 Illustrations

AU-C 910 Financial Statements Prepared in Accordance with a Financial Reporting Framework Generally Accepted in Another Country

AU-C Original Pronouncement

AU-C Definitions of Terms

Objectives of AU-C Section 910

Scope

Fundamental Requirements

Techniques for Application

AU-C 910 Illustrations (Source 910.A11)

AU-C 915 Reports on Application of Requirements of an Applicable Financial Reporting Framework

AU-C Original Pronouncements

Applicability

AU-C Definitions of Terms

Objective of AU-C Section 915

Fundamental Requirements

Techniques for Application

AU-C 915 Illustration (Source 915.A8)

AU-C 920 Letters for Underwriters and Certain Other Requesting Parties

AU-C Original Pronouncements

Applicability

AU-C Definitions of Terms

Objectives of AU-C Section 920

Scope

Fundamental Requirements: General

Fundamental Requirements: Format and Contents of Comfort Letters

Fundamental Requirements: Commenting in a Comfort Letter on Information Other Than Audited Financial Statements

Techniques For Application

AU-C 920 Illustrations

AU-C 925 Filings with the US Securities and Exchange Commission Under the Securities Act of 1933

AU-C Original Pronouncement

AU-C Definitions of Terms

Objectives of AU-C Section 925

Fundamental Requirements

Techniques for Application

AU-C 925 Illustration

AU-C 930 Interim Financial Information

AU-C Original Pronouncement

AU-C Definition of Term

Objective of AU-C Section 930

Scope

Fundamental Requirements: Review Procedures

Fundamental Requirements: Communication with Management and Those Charged With Governance

Fundamental Requirements: Auditor's Report

Fundamental Requirements: Interim Financial Information Accompanying Audited Financial Statements

Interpretations

Techniques for Application

AU-C 930 Illustrations

AU-C 935 Compliance Audits

AU-C Original Pronouncements

AU-C 935 Definitions of Terms

Objectives of AU-C Section 935

Scope

Fundamental Requirements

Interpretations

Techniques for Application

AU-C Illustrations

AT 20 Defining Professional Requirements in Statements on Standards for Attest Engagements

Original Pronouncement

Defining Professional Requirements in Statements on Standards for Attestation Engagements

AT 50 SSAE Hierarchy

Original Pronouncement

Attestation Standards

Attestation Interpretations

Other Attestation Publications

AT 101 Attest Engagements

Original Pronouncements

Applicability

Definitions of Terms

Objectives of Section 101

Fundamental Requirements

Interpretations

Illustrations: Examination Reports

Illustrations: Review Reports

AT 201 Agreed-Upon Procedures Engagements

Original Pronouncement

Applicability

Definitions of Terms

Objectives of at Section 201

Fundamental Requirements

Interpretations

Techniques for Application

Illustrations

AT 301 Financial Forecasts and Projections

Original Pronouncement

Applicability

Definitions of Terms

Objectives of at Section 301

Fundamental Requirements: General

Fundamental Requirements: Compilation of Prospective Financial Statements

Fundamental Requirements: Examination of Prospective Financial Statements

Fundamental Requirements: Applying Agreed-Upon Procedures to Prospective Financial Statements (See Also at Section 201)

Fundamental Requirements: Other

Interpretations

Illustrations

Appendices

AT 401 Reporting on Pro Forma Financial Information

Original Pronouncement

Applicability

Definition of Term

Objectives of at Section 401

Fundamental Requirements

Interpretations

Techniques for Application

Illustrations

AT 501 An Examination of an Entity's Internal Control Over Financial Reporting That Is Integrated with an Audit of Its Financial Statements

Original Pronouncement

Applicability

Definitions of Terms

Objectives of At Section 501

Fundamental Requirements

Reporting Requirements

Interpretations

Illustrations

AT 601 Compliance Attestation

Original Pronouncement

Applicability

Definitions of Terms

Objectives of At Section 601

Fundamental Requirements: General (Applicable to Both Agreed-Upon Procedures and Examination Engagements)

Fundamental Requirements: Agreed-Upon Procedures Engagement

Fundamental Requirements: Examination Engagement

Interpretations

Techniques for Application

Illustrations

AT 701 Management's Discussion and Analysis (MD&A)—A Summary1,2

Original Pronouncement

Applicability

Definition of Term

Objectives of At Section 701

Fundamental Requirements: Examination

Fundamental Requirements: Review

Interpretations

Illustrations

AT 801 Reporting on Controls at a Service Organization

Original Pronouncement

Applicability

Definitions of Terms

Objectives of At Section 801

Fundamental Requirements

Illustrations

AR-C 60 General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services

Original Pronouncements

Technical Alert

Objectives and Limitations of SSARS Engagements

Fundamental Requirements

Appendix - Definitions of Terms for AR-C Sections 60 Through 90

AR-C 70 Preparation of Financial Statements

Original Pronouncements

Objectives and Limitations of Preparation Engagements

Technical Alert

Definitions of Terms

Determining the Type of Engagement

Requirements

Illustration (AR-C 70.A20)

AR-C 80 Compilation Engagements

Original Pronouncements

Objectives and Limitations of Preparation Engagements

Technical Alert

Definitions of Terms

Fundamental Requirements

Illustrations

AR-C 90 Review of Financial Statements

Objectives and Limitations of Review Engagements

Technical Alert

Definitions of Terms

Fundamental Requirements

Illustrations: Review Engagement

AR 120 Compilation of Pro Forma Financial Information

Original Pronouncements

Applicability

Technical Alert

Objectives of ar Section 120

Fundamental Requirements

Illustrations

PCAOB 1 References in Auditors' Reports to the Standards of the Public Company Accounting Oversight Board

Applicability

Definition of Term

Fundamental Requirements

Other Pcaob Guidance

Interpretation: Commission Guidance Regarding The Public Company Accounting Oversight Board'S Auditing and Related Professional Practice Standard No. 1

Illustrations

PCAOB 3 Audit Documentation

Applicability

Definitions of Terms

Objectives of Pcaob Standard 3

Fundamental Requirements

PCAOB 4 Reporting on Whether a Previously Reported Material Weakness Continues to Exist

Applicability

Definitions of Terms

Objectives of Pcaob Standard 4

Fundamental Requirements

Techniques for Application

Illustrations

PCAOB 5 An Audit of Internal Control Over Financial Reporting That Is Integrated with an Audit of Financial Statements

Applicability

Definitions of Terms

Objectives of Pcaob Standard 5

Fundamental Requirements

Illustrations

PCAOB 6 Evaluating Consistency of Financial Statements

Applicability

Definitions of Terms

Objectives of Pcaob Standard 6

Fundamental Requirements

PCAOB 7 Engagement Quality Review

Applicability

Definitions of Terms

Objectives of Pcaob Standard 7

Fundamental Requirements

PCAOB 8 Audit Risk

Applicability

Definitions of Terms

Objectives of Pcaob Standard 8

Fundamental Requirements

PCAOB 9 Audit Planning

Applicability

Definition of Term

Objectives of Pcaob Standard 9

Fundamental Requirements

PCAOB 10 Supervision of the Audit Engagement

Applicability

Objectives of Pcaob Standard 10

Fundamental Requirements

PCAOB 11 Consideration of Materiality in Planning and Performing an Audit

Applicability

Objectives of Pcaob Standard 11

Fundamental Requirements

PCAOB 12 Identifying and Assessing Risks of Material Misstatement

Applicabiliy

Definition of Term

Objectives of Pcaob Standard 12

Fundamental Requirements

PCAOB 13 The Auditor's Responses to the Risks of Material Misstatement

Applicability

Definitions of Terms

Objectives Of PCAOB Standard 13

Fundamental Requirements

PCAOB 14 Evaluating Audit Results

Applicability

Objectives of PCAOB Standard 14

Fundamental Requirements

PCAOB 15 Audit Evidence

Applicability

Definitions of Terms

Objectives of PCAOB Standard 15

Fundamental Requirements

PCAOB 16 Communicating with Audit Committees

Applicability

Overview

Definitions

Objectives of PCAOB Standard 16

Fundamental Requirements

PCAOB 17 Auditing Supplemental Information Accompanying Audited Financial Statements

Applicability

Background

Definition of Term

Objective of PCAOB Standard 17

Fundamental Requirements

PCAOB 18 Related Parties

Applicability

Technical Alert

Definition Of Terms

Objective of PCAOB Standard 18

Fundamental Requirements

Appendix A: Cross-References to SASs, SSAEs, AND SSARSs

Appendix B: List of AICPA Audit and Accounting Guides and AICPA Statements of Position—Auditing and Attestation

Appendix C: Other Auditing Publications

Index

End User License Agreement

List of Tables

Table 1

Table 2

List of Illustrations

Exhibit 1

Exhibit 2

Guide

Cover

Table of Contents

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Practitioner's Guide to GAAS 2016

Covering all SASs, SSAEs, SSARSs, PCAOB Auditing Standards, and Interpretations

Joanne M. Flood

Copyright © 1992 through 2015 by the American Institute of Certified Public Accountants, Inc. Reprinted with permission.

The book contains numerous excerpts taken from the Statements on Auditing Standards, the Statements on Standards for Attestation Engagements, and the Statements on Standards for Accounting and Review Services, and interpretations of these statements. These are noted by reference to the specific standard or AICPA Codification section, except for definitions which appear under a separate heading at the beginning of each section. These standards are copyrighted by the American Institute of Certified Public Accountants, Inc. and reprinted with permission of the AICPA.

This book contains definitions taken from Statement of Financial Accounting Concepts 2, Qualitative Characteristics of Accounting Information; and Statement of Financial Accounting Concepts 7, Using Cash Flow Information and Present Value in Accounting Measurements, are copyrighted by the Financial Accounting Standards Board, 401 Merritt 7, PO Box 5116, Norwalk, Connecticut 06856-5116, USA. Portions are reprinted with permission. Complete copies of these documents are available from the FASB.

This book is printed on acid-free paper.

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Published simultaneously in Canada.

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Preface

The AICPA's Clarity Project

Auditing Standards

Following the creation of the Public Company Accounting Oversight Board (PCAOB), the AICPA's Auditing Standards Board (ASB) reassessed its mission. The ASB developed a plan to converge US generally accepted auditing standards (GAAS) with the International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board (IAASB). Thus, the ASB's Clarity Project began work to:

Redraft the auditing standards for clarity—to make the standards easier to read, understand, and apply

Converge US standards with the ISAs

The ASB has completed its project. While clarity and convergence, not change, were the goals of the Clarity Project, the Project did create some changes that require auditors to make changes in practice. For ease of use, this book arranges information according to the sections of the AICPA's auditing standards codification.

Preparation, Compilation, and Review Standards

In May 2010, the AICPA's Accounting and Review Services committee (ARSC) approved a clarity project with the purpose of aligning the conventions of its standards with the ASB standards and making the compilation and review standards easier to read, understand, and apply. One divergence from the ASB approach is that ARSC decided not to include application guidance for governmental and smaller, less complex entities. Otherwise, the formats are similar and include:

Objectives

—defines the context in which the requirements are set

Definitions

—explains, where relevant, specific terms

Requirements

—what the practitioners must do to meet the objectives of the standard

Application and Other Explanatory Matters

—provide further guidance for carrying out the requirements of the standard. These paragraphs use an “A” prefix and are in a separate section that follows the requirements section.

As a result of the ARSC clarity project, a new section identifier, “AR-C,” was established for the clarified standards in order to avoid confusion with references to the extant “AR” sections.

SSARS No. 21

Statement on Standards for Accounting and Review Services (SSARS) No. 21, Statements on Standards for Accounting and Review Services: Clarification and Recodification, is a product of the SSARS clarity project. There have long been practice problems around when an accountant is associated with or involved in the preparation of financial statements. Questions circled around the accountant's responsibilities and the users' perceptions of the meaning of the accountant's involvement. With the advent first of computers and then the cloud, these issues became even more complex.

In an effort to clarify the accountant's role under various scenarios, the AICPA's Accounting and Review Services Committee (ARSC) undertook a project and in June 2012 issued three proposed SSARS meant to clarify and communicate the accountant's responsibility regarding compilation engagements and association with unaudited financial statements. Later that year, in November, SSARS issued two proposals on review engagements.

During 2012, 2013, and 2014, ARSC solicited comments and met with constituencies. It issued revised proposals and a rigorous process to ensure the integrity and acceptance of the final product. In August 2014, ARSC voted to issue the final standard.

In October 2014, the AICPA released statement on SSARS No. 21. This new standard significantly affects public practitioners who prepared financial statements and is effective for reviews, compilations, and presentation of financial statements for periods ending on or after December 15, 2015, with early implementation allowed.

SSARS No. 21 supersedes all extant AR sections, except for AR section 120. The last will be the subject of a future clarified standard. SSARS No. 21 eliminates all existing SSARS interpretations and incorporates them into the clarified guidance. SSARS No. 21 contains substantive changes to standards for compilations and engagements to prepare financial statements. Those changes are highlighted in the Technical Alert sections and incorporated in the relevant chapters of this book.

SSARS No. 21 results in the following structure:

Section 60,

General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services

Section 70,

Preparation of Financial Statements

Section 80,

Compilation Engagements

Section 90,

Review of Financial Statements

Next Steps

The ARSC is working on clarified standards on prospective and pro forma financial information. Exposure drafts are expected in 2015 with final standards in 2016. That will complete the clarity project for SSARS engagements.

Resources

Wiley GAAS contains robust tools to help auditors implement the clarified standards. Each chapter begins with the source of the code section, the clarified objectives, and definitions, followed by practice guidance. Exhibits and illustrations are integrated in the chapter and clearly identified. Clarified standard references are preceded by “AR-C.”

The AICPA has dedicated a page on its site to the SSARS clarity project, with links to additional resources that may be helpful in implementing the changes:

http://www.aicpa.org/SSARSClarity

PCAOB

The PCAOB issued a new accounting standard, AS No. 18, Related Parties. The chapter on PCAOB 18 details the standard's requirements.

About the Author

Joanne M. Flood, CPA, is an author and independent consultant on accounting and auditing technical topics and e-learning. She has experience as an auditor in both an international firm and a local firm and worked as a senior manager in the AICPA's Professional Development group. She received her MBA Summa Cum Laude in Accounting from Adelphi University and her Bachelor's degree in English from Molloy College.

While in public accounting, Joanne worked on major clients in retail, manufacturing, and finance and on small business clients in construction, manufacturing, and professional services. At the AICPA, Joanne developed and wrote e-learning, text, and instructor-led training courses on US and International Standards. She also produced training materials in a wide variety of media, including print, video, and audio, and pioneered the AICPA's e-learning product line. Joanne resides on Long Island, New York with her daughter, Elizabeth. Joanne is the author of several articles for and contributor to Wiley Insight IFRS and the following Wiley publications:

Financial Disclosure Checklist

Wiley GAAP 2016: Interpretation and Application of Generally Accepted Accounting Principles

Wiley Practitioner's Guide to GAAS 2016: Covering all SASs, SSAEs, SSARSs, and Interpretations

Wiley GAAP: Financial Statement Disclosures Manual (Wiley Regulatory Reporting), coming soon

Wiley Revenue Recognition, coming soon

And the following AICPA online and live CPE programs:

Audit Staff Essentials, Level 1—New Hire

Audit Staff Essentials, Level 2—Experienced Staff

Audit Staff Essentials, Level 3—Audit Senior/In-Charge

Organization and Key Changes

This book reduces the official language of Statements on Auditing Standards (SASs), Statements on Standards for Attestation Engagements (SSAEs), Statements on Standards for Accounting and Review Services (SSARSs), Public Company Accounting Oversight Board (PCAOB) Auditing Standards, and the interpretations of those standards into easy-to-read and understandable advice. It is designed to help CPAs in the application of, and compliance with, authoritative standards. This year marks the full implementation of the clarified standards resulting from the AICPA's Clarity Project. The Preface contains additional information on the Clarity Project.

This book follows the sequence of sections of the AICPA Codification of Statements on Auditing Standards, the Codification of Statements on Standards for Attestation Engagements, and the Codification of Statements on Standards for Accounting and Review Services. Sections are divided into the following easy-to-understand parts:

Original Pronouncement.

A handy, brief identification of the original standard for the section.

Definitions of Terms.

A glossary of official definitions that gathers in one place explanations of terms that are ordinarily scattered throughout a standard.

Objectives of Section.

A behind-the-scenes explanation of the reasons for the pronouncement and a capsule explanation of the most basic ideas of the section.

Fundamental Requirements.

Concise listing and descriptions of those things specifically mandated by the section.

Interpretations.

A brief summary of each interpretation.

Techniques for Application.

Helpful techniques for complying with the fundamental requirements of the section.

Illustrations.

Examples of the application of the fundamental requirements of the section.

AICPA Auditing Standards

The AICPA's Auditing Standards Board (ASB) establishes standards for nonissuers. The ASB issues Statements on Auditing Standards (SASs) and interpretative publications for audits of nonissuers. Interpretative publication includes:

Auditing interpretations and

Auditing guidance in AICPA Audit and Accounting Guides and in Statements of Position (SOPs)

AU-C 200 requires the auditor to consider interpretative guidance in planning and performing the audit.

PCAOB Standards and Relationship to AICPA Standards

Following the passage of the Sarbanes-Oxley Act of 2002, auditors of public companies must follow the PCAOB standards. The PCAOB establishes standards on auditing and related attestation, quality control, and ethics and independence for use by registered public accounting firms in the preparation and issuance of audit reports for issuers.

Initially in 2003, the PCAOB adopted on an interim basis the AICPA's auditing, attestation, and quality control standards. In the ensuing years, the PCAOB has issued some of its own standards. Those standards are described in this volume.

As with all accounting and auditing publications, this book is merely a guide. It is not a substitute for professional judgment. It can, however, be a valuable reference tool.

The 2016 edition of this book is current through SAS 129, Amendment to SAS No. 122 Section 920, Letters for Underwriters and Certain Other Requesting Parties, as Amended; SSAE 17, Reporting on Compiled Prospective Financial Statements When the Practitioner's Independence is Impaired; SSARS 21, Statements on Standards for Accounting and Review Services: Clarification and Recodification; and PCAOB Auditing Standard 1, Related Parties.

On the Horizon

SSARS No. 21 supersedes all existing AR sections except for AR Section 120, Compilation of Pro Forma Financial Information, which is expected to be exposed for public comment in clarified format in 2015

The Auditing Standards Board is working on a project to clarify the Attestation Standards. The clarification is expected to be released as SSAE 18. No definitive date for issuance has been released.

The PCAOB has issued a proposal to reorganize the PCAOB auditing standards and related amendments to the PCAOB Auditing Standards and Rules. The proposal is to reorganize the standards, but the PCAOB has stated that the proposed amendment will not include substantive changes.

Joanne M. Flood

August 2015

AU-C 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Generally Accepted Auditing Standards

AU-C Original Pronouncements

Original Pronouncements

Statements on Auditing Standards (SASs) 122, 123, and 128.

AU-C 200 Definitions of Terms

Source: AU-C 200.14

Applicable financial reporting framework. The financial reporting framework adopted by management and, when appropriate, those charged with governance in the preparation and fair presentation of the financial statements, that is acceptable in view of the nature of the entity and the objective of the financial statements, or that is required by law or regulation.

Audit evidence. Information used by the auditor in arriving at the conclusions on which the auditor's opinion is based. Audit evidence includes both information contained in the accounting records underlying the financial statements and other information. Sufficiency of audit evidence is the measure of the quantity of audit evidence. The quantity of the audit evidence needed is affected by the auditor's assessment of the risks of material misstatement and also by the quality of such audit evidence. Appropriateness of audit evidence is the measure of the quality of audit evidence; that is, its relevance and its reliability in providing support for the conclusions on which the auditor's opinion is based.

Audit risk. The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. Audit risk is a function of the risk of material misstatement and detection risk.

Auditor. The term used to refer to the person or persons conducting the audit, usually the engagement partner or other members of the engagement team, or, as applicable, the firm. When an AU-C section expressly intends that a requirement or responsibility be fulfilled by the engagement partner, the term engagement partner rather than auditor is used. Engagement partner and firm are to be read as referring to their governmental equivalents when relevant.

Detection risk. The risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material, either individually or when aggregated with other misstatements.

Financial reporting framework. A set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the financial statements; for example, U.S. generally accepted accounting principles, International Financial Reporting Standards (IFRSs) promulgated by the International Accounting Standards Board (IASB), or a special purpose framework.

The term fair presentation framework is used to refer to a financial reporting framework that requires compliance with the requirements of the framework and:

Acknowledges explicitly or implicitly that, to achieve fair presentation of the financial statements, it may be necessary for management to provide disclosures beyond those specifically required by the framework; or

Acknowledges explicitly that it may be necessary for management to depart from a requirement of the framework to achieve fair presentation of the financial statements. Such departures are expected to be necessary only in extremely rare circumstances.

A financial reporting framework that requires compliance with the requirements of the framework but does not contain the acknowledgments in 1 or 2 is not a fair presentation framework.

Financial statements. A structured representation of historical financial information, including related notes, intended to communicate an entity's economic resources and obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework. The related notes ordinarily comprise a summary of significant accounting policies and other explanatory information. The term financial statements ordinarily refers to a complete set of financial statements as determined by the requirements of the applicable financial reporting framework, but can also refer to a single financial statement.

Historical financial information. Information expressed in financial terms regarding a particular entity, derived primarily from that entity's accounting system, about economic events occurring in past time periods or about economic conditions or circumstances at points in time in the past.

Interpretive publications. Auditing interpretations of generally accepted accounting standards (GAAS), exhibits to GAAS, auditing guidance included in the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guides, and the AICPA Auditing Statements of Position (SOPs).

Management. The person(s) with executive responsibility for the conduct of the entity's operations. For some entities, management includes some or all of those charged with governance; for example, executive members of a governance board or an owner-manager.

Misstatement. A difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be presented fairly in accordance with the applicable financial reporting framework. Misstatements can arise from fraud or error.

Other auditing publications. Publications other than interpretive publications; these include AICPA auditing publications not defined as interpretive publications; auditing articles in the Journal of Accountancy and other professional journals; continuing professional education programs and other instruction materials, textbooks, guide books, audit programs, and checklists; and other auditing publications from state certified public accountant (CPA) societies, other organizations, and individuals.

Premise, relating to the responsibilities of management and, when appropriate, those charged with governance, on which an audit is conducted (the premise). Management and, when appropriate, those charged with governance have acknowledged and understand that they have the following responsibilities that are fundamental to the conduct of an audit in accordance with GAAS; that is, responsibility:

For the preparation and fair presentation of the financial statements in accordance with the applicable financial reporting framework;

For the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; and

To provide the auditor with

Access to all information of which management and, when appropriate, those charged with governance are aware that is relevant to the preparation and fair presentation of the financial statements, such as records, documentation, and other matters;

Additional information that the auditor may request from management and, when appropriate, those charged with governance for the purpose of the audit; and

Unrestricted access to persons within the entity from whom the auditor determines it necessary to obtain audit evidence.

The premise, relating to the responsibilities of management and, when appropriate, those charged with governance, on which an audit is conducted may also be referred to as the premise.

Professional judgment. The application of relevant training, knowledge, and experience within the context provided by auditing, accounting, and ethical standards, in making informed decisions about the courses of action that are appropriate in the circumstances of the audit engagement.

Professional skepticism. An attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to fraud or error, and a critical assessment of audit evidence.

Reasonable assurance. In the context of an audit of financial statements, a high, but not absolute, level of assurance.

Risk of material misstatement. The risk that the financial statements are materially misstated prior to the audit. This consists of two components, described as follows at the assertion level:

Inherent risk.

The susceptibility of an assertion about a class of transaction, account balance, or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls.

Control risk.

The risk that a misstatement that could occur in an assertion about a class of transaction, account balance, or disclosure and that could be material, either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on a timely basis by the entity's internal control.

Those charged with governance. The person(s) or organization(s) (for example, a corporate trustee) with responsibility for overseeing the strategic direction of the entity and the obligations related to the accountability of the entity. This includes overseeing the financial reporting process. Those charged with governance may include management personnel; for example, executive members of a governance board or an owner-manager.

Objectives of AU-C Section 200

AU-C Section 200.12 states that:

… The overall objectives of the auditor, in conducting an audit of financial statements, are to

obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with an applicable financial reporting framework; and

report on the financial statements, and communicate as required by GAAS, in accordance with the auditor's findings.

Fundamental Requirements

Objective of Ordinary Audit

The purpose of an audit is to provide users with an opinion by the auditor on the fairness, in all material respects, with which the financial statements present financial position, results of operations, and cash flows in conformity with the applicable financial reporting framework. (AU-C 200.04)

Auditor Responsibilities

In every audit, the auditor has to obtain reasonable assurance1 about whether the financial statements are free of material misstatement, whether due to errors or fraud. (AU-C 200.06)

Materiality is taken into account when planning and performing the audit. Misstatements are considered material when they influence economic decisions by financial statement users. Materiality considers qualitative and quantitative elements and should be viewed in context. (AU-C 200.07)

The auditor's overall objectives are not only to obtain reasonable assurance about whether the financial statements are free of material misstatement in order to form an option, but to issue a report and communicate as required by GAAS. (AU-C 200.12) If reasonable assurance cannot be obtained, the auditor must either disclaim an opinion or withdraw, when possible. (AU-C 200.13)

Independence

The auditor must be independent. If not independent, the auditor cannot issue a report under GAAS. The only exception is if GAAS provides otherwise or law or regulation requires the auditor to accept the engagement and report on the financial statements. (AU-C 200.15)

Professional Skepticism and Judgment

The auditor must perform the audit with professional skepticism and exercise professional judgment in planning and performing an audit of financial statements. (AU-C 200.17-18)

Management Responsibilities

Financial statements are prepared by management with oversight from those charged with governance. GAAS do not impose requirements on management or those charged with governance. However, an audit is conducted on the premise that management and those charged with governance understand their responsibilities. (AU-C 200.05)

Defining Professional Requirements in Statements on Auditing Standards

Auditors must comply with and understand AU-C sections. AU-C Section 200.25-26 clarifies that the SASs use two categories of professional requirements to describe the degree of responsibility the standards impose on auditors.

Unconditional requirements.

The auditor is required to comply with an unconditional requirement in all cases in which the circumstances exist to which the unconditional requirement applies. SASs use the words

must

to indicate an unconditional requirement.

Presumptively mandatory requirements.

The auditor is also required to comply with a presumptively mandatory requirement in all circumstances where the presumptively mandatory requirement exists and applies. However, in rare circumstances, the auditor may depart from a presumptively mandatory requirement. The departure should only relate to a specific procedure when the auditors determine that the procedure would be ineffective in the specific circumstances. The auditors must document their justification for the departure and how the alternative procedures performed in the circumstances were sufficient to achieve the objectives of the presumptively mandatory requirement. GAAS use the word

should

to indicate a presumptively mandatory requirement.

(AU-C 200.25-.26)

The term “should consider” means that the consideration of the procedure or action is presumptively required, whereas carrying out the procedure or action is not.

AU-C Section 200 also clarifies that explanatory material is intended to explain the objective of the professional requirements, rather than imposing a professional requirement for the auditor to perform.

GAAS and the GAAS Hierarchy

The auditor is responsible for planning, conducting, and reporting the results of an audit according to GAAS.2

Auditors are required to comply with GAAS. Each AU-C section contains objectives that provide a link between the requirements and the overall objectives of the auditors. GAAS provide the standards for the auditors' work in fulfilling their objectives. Auditors should have sufficient knowledge of the AU-C sections to determine when they apply and should be prepared to justify departures from them.

Interpretive Publications

Interpretive publications are not auditing standards, but are recommendations, issued under the authority of the ASB, on how to apply the SASs in specific circumstances, including engagements for entities in specialized industries. Interpretive publications are not auditing standards. They consist of the following:

Auditing Interpretations of SASs, listed in each chapter of this book that has a related Interpretation.

AICPA Audit and Accounting Guides and Statements of Position, listed in Appendix C of this book.

(AU-C 200.A81)

Auditors should be aware of and consider interpretive publications that apply to their audits.

Other Auditing Publications

Other auditing publications are not authoritative but may help auditors to understand and apply SASs. An auditor should evaluate such guidance to determine whether it is both (1) relevant for a particular engagement and (2) appropriate for the particular situation. When evaluating whether the guidance is appropriate, the auditor should consider whether the publication is recognized as helpful in understanding and applying SASs, and whether the author is recognized as an auditing authority. (AICPA auditing publications that have been reviewed by the AICPA Audit and Attest Standards staff are presumed to be appropriate.) (AU-C 200.A84)

Independence

To be independent, the auditor must be intellectually honest; to be recognized as independent, he or she must be free from any obligation to or interest in the client, its management, or its owners. For specific guidance, the auditor should look to AICPA and the state society codes of conduct and, if relevant, the requirements of the Securities and Exchange Commission (SEC).3

Professional Skepticism

The auditor should observe GAAS, possess the degree of skill commonly possessed by other auditors, and should exercise that skill with reasonable care and diligence. The auditor should also exercise professional skepticism, that is, an attitude that includes a questioning mind and a critical assessment of audit evidence. Auditors should be alert for contradictory evidence, indications of fraud, unusual circumstances, and evidence that calls into question the reliability of documents, and responses to inquiries. (AU-C 200.A22-A23) However, the auditor is not an insurer, and the audit report does not constitute a guarantee because it is based on reasonable assurance. Thus, an audit conducted in accordance with GAAS may not detect a material misstatement. The auditor should be alert to the possibility of collusion when performing the audit and how management may override controls in a way that would make the fraud particularly difficult to detect.

Interpretations

There are no interpretations for this section.

Techniques for Application

Management's Responsibilities

Many times, clients do not understand their responsibilities for the audited financial statements. The financial statements are management's. They contain management's representations. The form and content of the financial statements are management's responsibility, even though the auditor may have prepared them or participated in their preparation. The SEC has stated:

The fundamental and primary responsibility for the accuracy of information filed with the Commission and disseminated among the investors rests upon management. Management does not discharge its obligations in this respect by the employment of independent accountants, however reputable. (Accounting Series Release No. 62; emphasis added)

Management also is responsible for implementing and maintaining an effective system of internal control.

Auditor's Responsibilities

The auditor's responsibility for the financial statements he or she audits is confined to the expression of an opinion on those statements. In performing the audit, the auditor is responsible for compliance with GAAS, including the SASs.

Under GAAS, the auditor has a responsibility to consider AU-C sections and interpretive publications in all audits. If such guidance is not followed, an auditor must be prepared:

For AU-C sections, to justify a departure from GAAS

For interpretive publications, to explain that an alternative approach achieved the objectives of GAAS