LUTZ BUSINESS INSIGHTS
AICPA to Align its Auditing Standards With Public Company Standards
The AICPA’s Auditing Standards Board (ASB) is taking steps to enhance the consistency of financial reporting between public and private companies. A new omnibus auditing standard will cover standards on related parties, communications with audit committees, and consideration of fraud in a financial statement audit.
Syncing the standards
Auditors of public companies are required to follow the standards set by the Public Company Accounting Oversight Board (PCAOB). But auditors of private companies generally adhere to the ASB guidance. In some cases, the existing auditing standards may differ.
In January, the ASB voted to issue a final standard to more closely align its guidance with the PCAOB’s standards. Statement on Auditing Standards (SAS) Omnibus Statement on Auditing Standards — 2019 will primarily amend:
- AU-C Section 550, Related Parties,
- Clarified Statement on Auditing Standards (AU-C) Section 260, The Auditor’s Communication With Those Charged With Governance, and
- AU-C Section 240, Consideration of Fraud in a Financial Statement Audit.
The final standard is based on Proposed SAS Omnibus Statement on Auditing Standards — 2018, which the AICPA published in November 2017. The proposal was issued after the AICPA completed its Clarity Project in 2012. The Clarity Project was carried out to make the AICPA’s audit guidance easier to understand and use.
Promoting audit consistency
The ASB believes that the amendments will improve the quality of private company audits. The PCAOB originally based its standards on ASB guidance. However, in recent years, the PCAOB has enhanced its rules to help prevent and detect accounting scandals like Enron and WorldCom.
Specifically, the PCAOB’s Auditing Standard (AS) 2410, Related Parties, toughened the requirements for auditors when they review the business deals of a company’s officers and directors for conflicts of interest. And AS 1301, Communications with Audit Committees, strengthened communications that auditors have with audit committees.
The ASB’s omnibus standard adds communication requirements regarding the auditor’s views about a company’s significant unusual transactions. The changes will require auditors to communicate the potential effect of uncorrected misstatements on future financial statements.
In addition, the new ASB standard adds a requirement to look for previously unidentified or undisclosed related parties or significant related-party transactions. The requirement is intended to enhance the auditor’s response to the risks of material misstatement associated with related-party transactions, taking into account the information gathered during an audit.
A final standard will be issued early in the year in conjunction with an updated standard on auditor reporting. The ASB wants the standards to have the same effective dates to improve their implementation. That date is expected to be no earlier than for financial statement audits of periods ending on or after December 15, 2020.
©2019 THOMSON REUTERS
LUTZ BUSINESS INSIGHTS running a smarter business + simple steps to start using analytics ryan wade, software solutions manager Small business managers wear many hats throughout the day: sales, operations, service, and support. Often, the days feel like a...
Lutz, a Nebraska-based business solutions firm, recently added Tyler Hinrichs and Brenden Sheridan to its Tech division in its Central Nebraska offices…
Technology has made accounting more approachable. Or at least more accessible. Software allows time to be spent figuring out how to accomplish business goals, not on calculating if you have the finances to do it…
SIGN UP FOR OUR NEWSLETTERS!
We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.
13616 California Street, Suite 300
Omaha, NE 68154
747 N Burlington Avenue, Suite 401
Hastings, NE 68901