Agenda Item 7A

ARSC Clarity Project
May 2010
ARSC Clarity Project
• Background
– ASB approved its clarity project in August 2007
• Goals:
– Address concerns over length and complexity of
– Make standards easier to read, understand and
– Will lead to enhancements in audit quality
Convergence with International Standards
• As part of the ASB’s clarity project, it worked toward
convergence with International Standards on Auditing
(ISAs) issued by IAASB
– Clarity drafts use ISAs as base while avoiding
unnecessary differences with PCAOB standards.
– Most audits performed internationally are of
nonpublic entities – therefore, ASB and IAASB have
a similar focus
Clarity Drafting Conventions
• Introduction
• Objective
• Definitions
– Terms used in the SAS are defined
– Establish separate glossary of terms
• Requirements
• Application Material
• Create objectives for each standard
• Establish obligation relating to the objective
• Provide a framework for the application of
professional judgment
• Outcome based goal
• Difficult to achieve the overall objective of the audit
if individual objectives are not achieved
Requirements & Application Material
• Requirements expressed with must or should.
• Application and other explanatory material presented in
a separate section that follows the requirements
• Application material indicated with may
• Application and other explanatory material paragraphs
numbered using an A prefix
• Cross-referencing between requirements and related
application material
Common Misconception
• Application material is integral part of
standard – auditor is required to
understand it
• Special considerations sections
– for governmental entities
– for smaller, less complex entities
• Exhibit of substantive differences with ISA
Audit and Attest Update
Clarity Project
ASB has issued 4 clarified SASs – SAS Nos.
Finalized but not issued 11 SASs
Currently considering comments on 30 SASs
3 SASs in exposure
3 SASs not yet exposed
Audit and Attest Update
Clarity Project
It is expected that all but 6 clarified SASs will be
finalized by October 2010 – remaining SASs
finalized in January 2011
Once all clarified standards have been finalized,
most will be issued in one SAS (SAS No. 12X)
that will be codified in “AU section” format.
Clarity Project Effective Date
Exposure drafts stated effective for audits of
financial statements for periods beginning on or
after December 15, 2010 (2011 year-end audits)
Effective date will be delayed one year to
periods ending on or after December 15, 2012
(2012 year-end audits)
– Change makes effective for year-end but not interim
– Allow more time for updating firm methodologies
and training.
Audit and Attest Update
Clarity Project
• Clarity Project Explanatory Memorandum
• Clarity Project Questions and Answers
• Clarity Exposure Drafts
• Clarity Final Standards
Proposed ARSC Clarity Project
• Proposal to clarify the SSARSs in the same format as the
• Will consider the international compilation and review
literature but not converge at this time
– Convergence will be considered when the IAASB
issues revised compilation and review literature
• Will use the post SSARS 19 AR sections as a base
– Consider incorporating AR sections 110, 120, 200,
300, 400, and 600 into AR sections 80 and 90.
Proposed ARSC Clarity Project
• Will consider but does not appear that separate sections
for governmental entities and smaller, less complex
entities is needed.
Proposed ARSC Clarity Project
• Proposed timeline:
– November 2010 – First draft documents
– April/May 2011 – ARSC to consider voting
proposed SSARSs for exposure
– September 2011 – Exposure period ends
– November 2011 – ARSC to consider comment
letters received
– April/May 2012 – ARSC to consider voting for
Proposed ARSC Clarity Project
• Proposed effective date:
– Effective for periods ending on or after December
15, 2013 (calendar 2013 compilations and reviews)
– Early implementation would be permitted

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