Wiley Practitioner's Guide to GAAS 2020. Joanne M. Flood

Review Services (SSARSs), and the interpretations of those standards into easy-to-read and understandable advice. It is designed to help CPAs in the application of, and compliance with, authoritative standards.

      RESOURCES

      Wiley Practitioner’s Guide to GAAS 2020 contains robust tools to help practitioners implement the standards. This book follows the sequence of sections of the AICPA Codification of Statements on Auditing Standards, the Codification of Statements on Standards for Attestation Engagements, and the Codification of Statements on Standards for Accounting and Review Services. Sections are divided into the following easy-to-understand parts:

       Scope. A handy brief identification of the original standard for the section.

       Definitions of Terms. A list of official definitions that refers readers to one of the appendices to find explanations of terms that are ordinarily scattered throughout the standards.

       Objectives. An explanation of the reasons for the section.

       Requirements. Concise listing and descriptions of those things specifically mandated by the section, and helpful techniques for complying with the fundamental requirements of the section.

       Interpretations. A brief summary of each interpretation.

       Illustrations. Sample reports and checklists.

      ON THE HORIZON

      Exposure Drafts and Projects

      The Auditing Standards Board (ASB) has projects on the following topics:

      Audit Evidence. In August 2019, the ASB issued an exposure draft intended to provide auditors with enhanced guidance on audit evidence by:

       Providing risk assessment requirements for estimates and

       Further procedures that:are more specific to estimates,address today’s complex business environment and the complexity of financial reporting frameworks,highlight the causes of uncertainty, andfocus on the risk of management bias

      The proposal would amend primarily AU-C 540 and provide additional guidance on the importance of professional skepticism.

       Materiality. The ASB issued an exposure draft of a proposed SAS and a proposed SSAE titled Description of the Concept of Materiality. The amendments are intended to eliminate inconsistencies in the description of materiality in the professional standards with definitions used by the U.S. judicial system and other standards setters and regulators.

       The ARSC is working on projects related to reviews and materiality, adverse conclusions, and special purpose frameworks.

      New Auditing Standards Not Yet Effective

      Effective Dates

      The four new standards discussed below are effective for audits of financial statements ending on or after December 15, 2020, and early implementation is not permitted.

      Enhanced Communication in Auditors’ Reports—SASs 134 and 135

      In May 2019, the ASB issued two standards designed to improve the communication value of the auditor’s report. The standards are also geared to better align GAAS with the PCAOB and IAASB standards. The two standards issued are:

       SAS 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, and

       SAS 135, Omnibus Statement on Auditing Standards—2019.

       The new standards put the auditor’s opinion at the beginning of the auditor’s report to give it more prominence.

       SAS 134 amends reporting requirements for communication of audit matters in the auditor’s report. It also discusses the auditor’s responsibility to form an opinion on the financial statements and provides new guidelines for the form and content of the auditor’s report. The new guidance includes requirements for when the auditor concludes that a modification to the report is necessary.

      The new standards add AU-C section 701, Communicating Key Audit Matters in the Independent Auditor’s Report and replaces the current guidance in AU-C 700, 705, and 706. SAS 135 aligns ASB guidance more closely with that of the PCAOB. It amends AU-C 260, 550, and 240.

      In addition to requiring that the opinion section precede the basis of opinion section in the auditor’s report, SAS 135 requires a basis of opinion section for all reports, not just those with modified opinions. Also, new requirements for inadequacy of going concern disclosures are included in the standard.

      ERISA Audit Reports

      In July 2019, the ASB released SAS 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. This new standard addresses the auditor’s responsibility to form an opinion and report on the audit of financial statements of employee benefit plans subject to ERISA. The standard has new requirements for engagement acceptance, audit risk assessment and response, communications with those charged with governance, procedures for ERISA section 103 (a)(3)(C) audit, and considerations relating to Form 5500. It also contains a new report format for these audits. This standard would be applied in place of AU-C 700 for ERISA audits.

Other Information Included in Annual Reports

      In July 2019, the ASB issued SAS 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports. The new SAS is designed to enhance transparency relating to the auditor’s responsibilities for other information included in annual reports and to reduce diversity in practice. SAS No. 137 clarifies the scope of documents that the auditor is required to subject to the procedures and states that though a document may be referred to as an annual report, such document may not meet the definition of annual report for purposes of the SAS. The determination as to which documents constitute the entity’s annual report is often difficult when the entity does not have a regulatory requirement to prepare an annual report or a framework that dictates what that annual report should contain. The new SAS includes a requirement for the auditor to obtain management’s written acknowledgment regarding which document or documents comprise the annual report.

      ATTESTATION STANDARDS

      The ASB has a project to develop a guide for an examination engagement on internal controls, other than an audit of ICFR that is integrated with a financial statement audit.

      Accounting and Review Standards

      In May 2018 the ARSC issued SSARS 24, Omnibus Statement on Standards for Accounting and Review Services—2018. SSARS No. 24 creates a new AR-C section—100, Special Considerations—International Reporting Issues. This new section applies when:

      The financial statements have been prepared in accordance with a financial reporting framework generally accepted in another country, or

      The compilation or review is to be performed in accordance with both the SSARS and another set of compilation or review standards.

      SSARS No. 24 also amends AR-C 60 and AR-C 90 to harmonize the SSARS with AR-C 930 on auditing international financial information for going concerns.

      SSARS No. 24 amends AR-C 90.39 to make the content of the review report consistent with the examples in Exhibit C of AR-C 90. Note that practitioners who have not been reporting in accordance with the illustrative reports should update their report templates.

      Except for the revision to AR-C 90.39, which is effective immediately, SSARS 24 is effective for compilations and reviews of financial statements for periods ending on or after