Proposed Statement on Auditing Standards, Subsequent Events and Subsequently Discovered Facts

The AICPA Auditing Standards Board (ASB) has issued an exposure draft, Proposed Statement on Auditing Standards, Subsequent Events and Subsequently Discovered Facts, that supersedes SAS No. 1, Codification of Auditing Standards and Procedures, AU section 530, Dating of the Independent Auditor’s Report, as amended; AU section 560, Subsequent Events, as amended; AU section 561, Subsequent Discovery of Facts Existing at the Date of the Auditor’s Report, as amended; and SAS No. 58, Reports on Audited Financial Statements, paragraphs .71–.73, as amended, [AICPA, Professional Standards, vol. 1]).

This proposed SAS was issued April 10, 2009 with a comment period that ends July 15, 2009. It will be effective for audits of financial statements for periods beginning on or after December 15, 2010. This effective date is provisional but will not be earlier than December 15, 2010.

This proposed SAS is part of the ASB’s strategy to its standards with those of the International Auditing and Assurance Standards Board (IAASB). It converges with ISA no. 560, Subsequent Events.

In addition to converging with ISA No. 560, the proposed SAS also combines elements of existing standards and considers the impact of accounting guidance related to subsequent events.

Changes From Existing Standards
The proposed SAS does not change or expand SAS No. 39 in any significant respect.

You should be aware that the proposed SAS eliminates the accounting guidance related to subsequent events from the auditing literature. The Financial Accounting Standards Board (FASB) concluded that accounting guidance related to subsequent events should reside in the accounting literature established by FASB and decided to include that guidance in its Accounting Standards Codification.

The complete exposure draft is available for download at www.aicpa.org.

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ASB and the Clarity Project

ASB and the Clarity Project

The AICPA Auditing Standards Board (ASB) has undertaken a “Clarity Project,” This project has as its objective to make U.S. generally accepted auditing standards (GAAS) easier to read, understand, and apply. The ASB first considered this project in 2004 given the creation of the Public Company Accounting Oversight Board (PCAOB) and the increasingly widespread acceptance of International Standards on Auditing (ISAs).

Subsequently the ASB developed a plan to converge U.S. GAAS with the ISAs while at the same time avoiding unnecessary conflict with PCAOB standards. You’ve no doubt noticed that recent exposure drafts of the ASB are redrafts of existing SASs and contain references to ISAs, which in many cases are used as a basis for the proposed auditing standard.

As a result of feedback received from its discussion paper, “Improving the Clarity of ASB Standards” the ASB established clarity drafting conventions. This list of drafting conventions may help you understand how the auditing standards are structured.

Clarity Drafting Conventions

The clarity drafting conventions will be applied to all standards issued by the ASB after January 2008. They are:

Establishing objectives for each of the standards.
Including a definitions section, where relevant, in each standard.
Separating requirements from application and other explanatory material.
Numbering application and other explanatory material paragraphs using an A prefix and presenting them in a separate section (following the requirements section).
Using formatting techniques, such as bulleted lists, to enhance readability.
Special considerations relevant to audits of smaller, less complex entities.
Special considerations relevant to audits of governmental audits.

Effective date

The effective date is expected to apply to audits of financial statements for periods beginning no earlier than December 15, 2010. This date will be amended to a later date if necessary.

Upon the issuance of all clarified SASs, one SAS will be issued containing all clarified SASs in codified format.

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