the Horizon
Clarified Attestation Standards
SSAE 18 supersedes all existing AT sections and is effective for reports dated after April 30, 2017. The guidance from SSAE is codified in the AT-C sections of AICPA professional standards and appears in the AT-C chapters of this book.
Accounting and Review Standards
The AICPA has issued an exposure draft to amend AR-C 90 on review engagements. The exposure draft includes a technical correction for supplementary information that accompanies reviewed financial statements and the accountant's review report thereon. The proposed SSARS is expected to be effective upon issuance.
Auditing Standards
The Auditing Standards Board (ASB) has two exposure drafts. The first is on auditor involvement with exempt offering documents. If adopted and issued as a final standard, the proposed SAS will be codified in AU-C sec. 945 and will be effective for exempt offering documents with which the auditor is involved that are initially distributed, circulated, or submitted on or after June 15, 2018. Early application of the SAS will be permitted. The second exposure draft is on an auditor's consideration of an entity's ability to continue as a going concern. At the time the current auditing guidance on going concern was issued, the Financial Accounting Standards Board (FASB) had not issued its guidance on management's consideration of going concern. This proposed guidance would better align the AICPA with the FASB, the Governmental Accounting Standards Board (GASB), and International guidance. If adopted, the guidance will be effective for audits of financial statements for periods ending on or after December 15, 2017, and for interim periods beginning thereafter.
This publication is current through SAS No. 131, SSARS 22, and SSAE 18.
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
Technical Alert
In October 2015, the Auditing Standards Board (ASB) issued Statement on Auditing Standards (SAS) No. 130. SAS No. 130 contains amendments to this section. Any relevant changes are incorporated into the information that follows.
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, US 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:
1. 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
2. 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
