Question

Read “A Comparison of U.S. Auditing Standards” (found in this week’s readings in the DeVry library).

In 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?

Answer 1

Auditing Standards Board (ASB) and Public Company Accounting Oversight Board (PCAOB) issue rules that become generally accepted auditing standards (GAAS). International Standards on Auditing (ISA) are issued by International Auditing and Assurance Standards Board (IAASB).

Point no 1) The Auditing Standards Board of US (ASB) has redrafted all of the auditing sections in the Codification of Statements on Auditing Standards (contained in AICPA Professional Standards) now reflecting the ASB’s established clarity drafting conventions designed to make the standards easier to read, understand, and apply.

The vast majority of the clarified standards were issued in 2011 and became effective for calendar year 2012 audits. The clarified standards have been codified as AU-C sections in AICPA . Among other improvements, generally accepted auditing standards now more clearly states the objectives of the auditor and the requirements with which the auditor has to comply when conducting an audit

As the US board redrafted the standards for clarity, it also converged the standards with the International Standards on Auditing (ISAs), issued by the International Auditing and Assurance Standards Board

the areas of the Clarity Standards are -

1) Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards

2) Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures

3) Using the Work of Others etc.

Point no 2) There are five major differences between US and ISA's auditing standard

1)   Going concern considerations is one of the other differences between US auditing standards and international auditing standards. PCAOB defines going concern period as one year from the date of fiscal year being audited. ISA’s going concern period is at least one year but not limited only to one year.

2) Documentation of audit procedures is one of the differences between US and ISA's audit standard. US standards are more prescriptive compared to that of international standards.

3) US auditing standards require for auditors to obtain engagement letter before they start audit work. There is no such requirement under ISA.

4) Risk assessment is other important audit procedures where ASB, ISA and PCAOB standards differ. ISA specifically mentions to obtain understanding of entities business risks including operating and strategic risks .Auditors under ISA should also assess how companies respond to these risks. Whereas US auditors are required to assess material misstatement based on companies and its operating environment

5) Under US standard standards auditors has option to not mention the use of other auditor or clearly mention the division of responsibilities . ISA on the other hand does not allow the main auditor to mention the other auditors . This means under ISA, auditor must take full responsibilities even though they might have used other auditor for part of the audit.

Point no.3) 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 as US audit standard board tries to match thier policies with intrenational auditing board similarly US accounting standard board tries to made policies similar to international accounting standard board so as their are no more conflicts berween these two & their policies can work internationally.

Auditing board tries to give better auditing & assurance services whereas financial accounting board tries to give better accounting services