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The Aicpa's Clarity Projects

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 the ARSC decided not to include application guidance for governmental and smaller, less complex entities. Otherwise, the formats are similar and include:

● Objectives– define the context in which the requirements are set

● Definitions– explain, 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, 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, in October 2014 the AICPA released SSARS No. 21. This standard significantly affects public practitioners who prepare financial statements and is effective for reviews, compilations, and presentations of financial statements for periods ending on or after December 15, 2015.

SSARS No. 21 supersedes all extant AR sections, except for AR Section 120, which 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 into 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

In September 2016, the AICPA completed the clarity project with the issuance of SSARS no. 22, Compilation of Pro Forma Financial Information. The guidance is included in the chapter on AR-C 120.

Attestation Standards

In April 2016, the ASB issued SSAE 18, Attestation Standards: Clarification and Recodification. The standards are effective in May 2017 and are included in this publication.

Resources

Wiley Practitioner's Guide to GAAS 2017 contains robust tools to help practitioners 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 into 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.

Other New Projects

To clarify jurisdictional issues, in January 2016, the ASB issued SAS No. 131, Amendment to Auditing Standards No. 122 Section 700, Forming an Opinion and Reporting on Financial Statements. The amendment clarifies the format of the auditor's report when conducting an audit in accordance with PCAOB standards and in accordance with GAAS. SAS No. 131 is effective for audits of financial statements for periods ending on or after June 15, 2016.

In October 2015, the ASB issued SAS No. 130, An Audit of Internal Control over Financial Reporting That Is Integrated with an Audit of Financial Statements. SAS No. 130 moves the guidance in AT 501 and related Interpretation No. 1, Reporting under Section 112 of the Federal Deposit Insurance Corporation Improvement Act (AT 9501) to the guidance for generally accepted auditing standards. SAS No. 130 creates a new AU-C section – 940.

Guidance from both of these documents is incorporated into this volume.