The Long Winding Road of Professional A & A Standards

By Pat Patterson

Professionals will need to stay current on the fast developing standards and issues from new FASB Pronouncements for 2014 and 2015. The changes will come from the FASB and the Private Companies Council as well. Revenue Recognition (ASU 2014-9) is currently being considered for a delayed effective date; however, early implementation may be allowed. Are you ready? Leases and Financial Instruments are on the verge of being issued which will have an instant impact. Revenue Recognition, Leases, and Financial Instruments will change the way every professional has to handle the related issues.

The AICPA’s Clarity Project is essentially complete and has totally revised all AICPA Auditing Standards. Some have very little change, but there are many new requirements that include:

  • A new audit report
  • Issues with legal and regulatory agencies
  • Communicating Internal Control Related Matters Identified in an Audit
  • Forming an Opinion and Reporting on Financial Statements
  • Modifications to the Opinion in the Independent Auditor’s Report
  • Emphasis of Matter Paragraphs and Other matter Paragraphs in the Independent Auditor’s Report
  • Special Considerations-Audits of Group Financial Statements
  • Special Considerations-Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks
  • Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Generally Accepted Auditing Standards
  • Terms of Engagement
  • Quality Control for an Engagement Conducted
  • Opening Balances-Initial Audit Engagements, Including Re-audit Engagements
  • Written Representations
  • Special Considerations-Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement

But whether there is some, little, or even no change, you still need to go through all of the new clarified AU-C sections because with clarity . . .You may find that you need to change or tweak how you do things!

For Compilation and Review Engagements, professionals are entering into new territory with Section 70 of SSARS 21, Preparation of Financial Statements. This new standard will change the way many professionals look at a set of financials. There are new standards for the engagement letters and signatures, the reporting (or no reporting), legends on financial statements, and the new Compilation report. Additionally, there are some changes to the documentation issues with Compilation and Review engagements.

Are you familiar with the “RED Zone” for Comp and Review? In this case, RED stands for Reporting, Engagement Letters, and Documentation. While standards in SSARS 19 are still in play until periods ending after December 15, 2015, the provisions of SSARS 21 may be early implemented; and even both standards may be used until December 15, 2015.

Other matters that involve professional standards also are affected by the new FASB, Clarified Auditing Standards, and revisions to Preparation, Compilation, and Review engagements. These include:

  • Personal Financial Statements
  • Special Purpose Formats
  • Disclosures like “going concern”
  • Quality Control
  • International Standards from the IASB
  • Other standards and issues