CONVERGENCE OF AUDIT AND ATTEST STANDARDS
AICPA Communications | April 24, 2008
Background
- As international standards in audit and attest services become accepted worldwide, CPAs in the United States, including smaller firm practitioners, will need to be familiar with these international standards on auditing (“ISAs”) and may be required to perform engagements in accordance with these international standards (or equivalent national standards) in order to serve international businesses.
- The Auditing Standards Board (ASB) has contributed to the creation of ISAs through task forces or subcommittees in the appointment of representatives on the International Auditing and Assurance Standards Board (IAASB).
- Around the world, these international auditing standards are being used by auditors from firms of all sizes. In many parts of the world, as in the United States, the vast majority of audits are of nonpublic entities, and these standards have served the public, management and the auditor very well.
- As a result, the ASB more formally aligns its standard-setting process and body of knowledge with international auditing standards and the international standards-setting process. Given the ASB’s charge and responsibility to serve the needs of users of audited nonissuer financial statements, it is prudent for the ASB to leverage its resources with the IAASB while still retaining its ability and flexibility to develop auditing, attestation and quality control standards that serve U.S. auditors of nonpublic entities and inspire public trust.
- The ASB has worked closely with the IAASB for the last several years to achieve consistent interpretation and implementation of the more recent SASs and ISAs, specifically, auditing standards SAS 99, Consideration of Fraud in a Financial Statement Audit, SAS 101, Auditing Fair Value Measurements and Disclosures, and SASs 104–111, the Risk Assessment Standards.
- The ASB’s plan for convergence complements and builds on the AICPA’s International Strategy Special Committee’s vision of converging AICPA auditing standards with International Standards of Auditing (ISAs) and with the AICPA’s international strategy approved by the AICPA’s Board of Directors in February 2002.
ASB Plan
- The ASB, as a consequence of its leadership role, has adopted an official position of ISA Base. ISA Base means:
- The ASB will harmonize its agenda with the IAASB. ASB standard (SAS) projects will be developed concurrently with new ISAs. Exceptions would be made in situations where national standards for nonissuers should be created or amended as a result of national circumstances.
- New SASs will use the ISA, including the international convention for wording, as the base standard. The ASB will modify the base standard only where modifications are deemed necessary to better serve the needs of U.S. users of audited financial statements of nonissuers or where modifications are appropriate for U.S. legal and regulatory reasons.
- The ASB provides considerable support and resources, from both volunteer members and staff, for developing new and revised ISAs.
- ASB members work directly with IAASB task forces on the development of the ISA to serve as the basis for a SAS. The ASB attempts to have its members directly involved on IAASB task forces and creates its own task forces to help support IAASB task forces or where U.S. modifications are being considered.
- The AICPA Audit and Attest Standards staff has increased its participation in IAASB projects by providing technical support to the IAASB. AICPA staff now staff ISA projects or support IFAC in staffing ISA task forces.
- The AICPA Audit and Attest Standards staff assists in or develops supporting auditing practice guidance for practical application of ISAs and SASs and the application of ISAs and SASs in specific industries.
- To better leverage ASB volunteer member time, smaller ASB task forces have been organized. Task forces generally consist of two to three ASB members or other subject-matter experts, supported by an audit and attest technical manager. These small teams are responsible for following the progress of the IAASB task force (with one of the members of the IAASB task force) and for developing and leading the ASB’s position and debate on the project.
- The ASB has reorganized its standing International Auditing Standards subcommittee to manage and oversee the internationalization of audit and attest standards. The Audit Issues Task Force (AITF) of the ASB, along with the members of the ASB, are more involved with IAASB audit standard setting projects. Among other things, AITF or other ASB members serve as leaders in issues identification and project participation in the setting of ISAs.
AICPA Staff Contacts
- Chuck Landes, Vice-President, Professional Standards and Services, clandes@aicpa.org, 202/434-9211
- Hiram Hasty, Technical Manager, Audit and Attest Standards, hhastey@aicpa.org, 212/596-6011
