While we've all been focused on the desperate tactics of the IASB to shove IFRS down everyone's throats and make it seem way cooler than lame old GAAP, the AICPA Auditing Standards Board (ASB) has been quietly aligning its agenda with that of the International Auditing and Assurance Standard Board (IAASB). Dubbed The Clarity Project, the goal was to converge U.S. GAAS and international standards on auditing (ISAs) in the first total recodification of GAAS since 1972.
The ASB's clarified auditing standards are effective for periods beginning after December 15, 2012 which means they will be eligible to be tested on the CPA exam as early as July 2013.
What this means for current and soon-to-be CPA exam candidates is that you should probably aim to get Audit out of the way before the new standards show up just to save yourself some study time.
According to Dr. Bill Hillison, Professor Emeritus of Accounting at Florida State University and co-author of Gleim CPA Review Auditing materials, “The AICPA’s Auditing Standards Board redrafted its standards into a new Codification of Statements on Auditing Standards to make U.S. Generally Accepted Auditing Standards (GAAS) easier to read, understand, and apply. A goal of the ASB was to converge the standards with the International Standards of Auditing (ISA) and to eliminate the duplication that existed in the current standards.”
“It's not as bad as it looks,” says Dr. Hillison. “While there are some areas that dramatically changed, many of the standards remain basically the same conceptually.”
Hillison says the biggest change is to the auditor's report, which will now have headings for each section and be more explicit in defining the responsibilities for the financial statements and for the audit, presumably because "These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit" doesn't make it explicit enough, obvs.
If we pull up Autonomy's latest annual report (you've heard what happened there by now, surely), we get a taste of the new finger-waving auditor's report may look like:
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
We see how that turned out for Autonomy's auditors, huh?!
Anyhoo, one other big change is that the term "unqualified opinion" is out the window, replaced by the term "unmodified opinion." Additionally, "explanatory paragraph" is replaced with either an "emphasis-of-matter" or "other-matter" paragraph, with no reference to "special reports."
The changes are not likely to be huge but if you are sitting for the CPA exam between now and July 2013, you may want to take this into account when planning your exams and purchasing new materials. If you have nothing to do for the next few weeks, you're welcome to read through the AICPA's explanation of changes.