Multiple Auditing Standards Intensify the Dilemma of What to Teach

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Diverging Guidance Presents Challenges for Educators

While the gap between standards issued by the International Auditing and Assurance Standards Board (IAASB) - the auditing standards-setting committee of the International Federation of Accountants (IFAC) - and those issued by the Auditing Standards Board (ASB) has been minimized, auditing standards within the United States for audits of publicly traded companies and private companies have grown even further apart - and indications are that they will continue to do so. At present, there seems to be little hope for the convergence of the ASB' s auditing standards and those of the Public Company Accounting Oversight Board (PCAOB), which regulates the activities of auditors of public companies in the United States. Thus, educators who teach courses on auditing are faced with the dilemma of how to present multiple standards, as well as explain the differences that exist between codified ethical standards in the United States and international standards.

Convergence with International Standards

In 2007, the ASB initiated the Clarity Project to address the clarity, length, and complexity of its auditing standards. It decided to redraft the standards and converge the Statements on Auditing Standards (SAS) with International Standards on Auditing (ISA) issued by the IAASB. The ASB established a Clarity Task Force to clarify and converge the SASs and the ISAs. The clarified standards were restructured, and objectives were established for each clarified SAS, including a definition section and a separation of requirements from application material.

In October 201 1, after an extensive fouryear project, the ASB issued new standards in a format that essentially converged with ISAs. For example, the new SAS 122, Statements on Auditing Standards: Clarification and Recodification, is an 805page pronouncement that supersedes AU section 110, ''Responsibilities and Functions of the Independent Auditor"; AU section 120, ''Defining Professional Requirements in Statements on Auditing Standards"; AU section 150, "Generally Accepted Auditing Standards"; AU section 201, "Nature of the General Standards"; AU section 210, 'Training and Proficiency of the Independent Auditor"; AU section 220, 'Independence"; and AU section 230, "Due Professional Care in the Performance of Work."

On September 1, 2011, the AICPA issued a report, "Substantive Differences Between the International Standards on Auditing and Generally Accepted Auditing Standards [GAAS]," that analyzed the differences, labeled as "Requirements in the ISAs not in GAAS." It concluded that almost all of the differences are due to laws and regulations or accounting frameworks that are not applicable in the United States. Only two exceptions were cited:

* ISA 600, The Work of Related Auditors and Other Auditors in the Audit of Group Financial Statements, does not allow the audit report on group financial statements to make reference to a component auditor unless required by law; GAAS does.

* ISA 810, Engagements to Report on Summary Financial Statements, allows two different phrases in opining on summary financial statements; GAAS only uses one.

The new pronouncements are effective for audits of financial statements for periods ending on or after December 15, 2012. Although the CPA Exam Content Specification Outline lists international auditing standards, the questions on the exam will include the new GAAS standards and will probably eliminate the international standards because they have almost all converged into GAAS.

Two Sets of U.S. Auditing Standards

In April 2003, the PCAOB adopted certain preexisting standards as its interim standards, including GAAS, as described in 43 sections of the ASB's SASs. Essentially, because the PCAOB did not adopt the revisions to GAAS, its standards are based on the superseded SASs and are no longer identical to the ASB's standards^ - that is, many of the 49 AU sections still used by the PCAOB have been superseded by the ASB, the original author. …