A Comparison of U.S. Auditing Standards

Read “A Comparison of U.S. Auditing Standards” n 3-4 pages (12-pt type, double-spaced) answer the following questions:

1. What efforts is the Auditing Standards Board making to clarify auditing standards?

2. Describe the five key differences between ISA’s and US Auditing Standards.

3. How are the efforts of the Auditing Standards Board and the International Auditing and Assurance Board similar to the Financial Accounting Standards Board and the International Accounting Standards Board?

A Comparison of U.S. Auditing Standards

1. What efforts is the Auditing Standards Board making to clarify auditing standards?

The Auditing Standard Board (ASB) setup the “Clarity Project” to aid in the rewriting of its standards to make it easier to read their standards, easier to understand and to implement them. Charity Project was also set to help develop Generally Accepted Auditing Standards (GAAS) so as to improve compliance with standard’ requirements. The International Auditing Assurance Standards Board (IAASB) also established a clarity project to develop internal auditing professions’ standards in 2009. After the establishment of a clarity project by ASB and IAASB, it leads to the rewriting of their standards major changes being that each standard will contain an objective so as to help the auditor to know what it is meant to achieve. Also, requirements paragraphs to be separated from the application text to help the auditor to identify requirements easily and finally, all the clarified standards will be given enough duration by setting the implementation date far enough in the future so as to give the firm enough time to update their training programs and their methodologies.

2. Describe the five key differences between ISA’s and US Auditing Standards.

a) Difference in language

The Audit Standards Board is made various modification and changes to their language. This was done so as to make sure their standards are easier to read, understand and to implement in the United States.

b) Requirements in the ISAs not in GAAS

The International Standards on Auditing compliance framework does not necessarily require fair presentation, unlike Generally Accepted Auditing Standards which address reporting on financial statements which are prepared according to with fair framework presentation only. The accounting standards board believes that financial reporting framework should be fairly presented and implemented in the United States. The ISAs contain standards’ requirements related to the situations when regulations and law are prescribing management responsibilities. The ISAs 220 usually includes requirements that relating to the audits of listed entities. Such ISAs 220 requirements are not applicable to the audits of non-issuers in the U.S and. accordingly; such requirements are not included in Generally Accepted Auditing Standards (Lindberg, Seifert. 2011).

c) Requirements in GAAS not in ISAs

As described in the 23rd paragraph of section 200, GAAS contains two major categories of professional requirements: presumptively mandatory and unconditional requirement. The auditor’s obligation to comply with the unconditional requirements is in cases where all the cases where such requirements are all relevant. Auditors’ obligation to comply with the presumptively mandatory requirement is in cases where such requirements are relevant except in some rare situations.

The International Standards on Auditing contain only one category of professional requirements, with which paragraphs .22–.23 of ISA 200. It requires an auditor to comply with such requirements in cases where they are relevant except in rare circumstances (Lindberg, Seifert. 2011). During standards rewriting the ASB retained two categories of professional requirements to create differences that need not be with the application of auditing standards as promulgated by the Public Company Accounting Oversight Board (PCAOB), which contained two categories of professional requirements as explained in section 200.

d) Differences between Requirements

The ISAs requires the auditors to file documentation, and they should never disregard any of the documentation that is collected in their evaluation. The ASB continues to believe that a sixty day period is appropriate for Generally Accepted Auditing Standards as opposed to the 45 days duration in the PCAOB standards.

e) Differences between Requirements

The International Standards on Auditing 220 requires that the quality control review to be completed before partner dates and auditor’s report are engaged. The ASB still believes that quality control review engagement is an independent review of the engagement group’s significant judgments which include the selected date by the engagement team to the reporting date.

3. How are the efforts of the Auditing Standards Board and the International Auditing and Assurance Board similar to the Financial Accounting Standards Board and the International Accounting Standards Board?

The primary objective of the Clarity Project was to combine U.S. GAAS as well as the international standards on auditing (IAASB) by the year 2012. Its result was to make Generally Accepted Auditing Standards for private organization easier to read, understand and to apply as well as making the standards more consistent internationally and at the same time avoiding unnecessary conflict (Lindberg, Seifert. 2011). The Clarify Project will lead to the first completion in recodification and redrafting of the U.S. GAAS since 1972. Some of the most important changes that occurred are:

• The standards changed to a more consistent and readable format for all standards that are easier to implement

• Also, the authoritative status of the traditional 10 GAAS changed

• They were a change in the wording and presentation of the auditor’s report and

• Variations in the standards for group audits

References

Lindberg, Seifert. (2011) A Comparison of U.S. Auditing Standards. CPA Journal. Vol. 81 Issue 4, p16-21. 6p. https://www.homeworkmarket.com/sites/default/files/qx/16/08/15/05/contentserver.asp_.pdf