Wiley Practitioner's Guide to GAAS 2023
Description
The American Institute of Certified Public Accountants (AICPA) sets the Generally Accepted Auditing Standards--or GAAS--under which U. S. audits are conducted. Auditors must comply with and understand every aspect of GAAS to comply with AICPA standards. As a result, it is crucial for CPAs to be up to date on all applicable guidelines, rules, and regulations.
Wiley Practitioner's Guide to GAAS 2023 delivers a thorough description and analysis of not only auditing standards--SASs--but also SSAEs, SSARSs, and the Interpretations necessary to fully understand all the latest professional standards. The 2023 Guide offers the most recent revisions to the standards, including those on:
* Audit evidence
* Auditing accounting estimates
* Use of pricing evidence
* Inquiries of predecessor auditors
* Quality management
* Materiality,
* SSAE direct examination engagements, and
* Practitioner's review reports.
* Practical direction on the steps necessary to help you comply with GAAS
* Comprehensive guidance on the entire auditing process, from start to finish
* Explanations of all attestation and review, compilation, and preparation standards
* A glossary of relevant terminology for each subject
It explains the standards clearly and accurately, providing explicit information on how to conduct your engagements efficiently, effectively, and properly--all in one resource.
In addition, Wiley Practitioner's Guide to GAAS 2023 provides readers with:
A crucial resource for accountants and auditors who are looking for a comprehensive explanation of the information used daily, Wiley Practitioner's Guide to GAAS 2023 is an invaluable resource written to save you time and simplify your compliance with professional standards.
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Joanne M. Flood, MBA, CPA, has worked with small business and large enterprise clients. She has worked for a Big 4 international firm and a small firm. Formerly, a senior manager in the AICPA's Professional Development Group, Joanne has produced training materials on auditing and accounting in a wide variety of media.
Content
Preface-Organization and Key Changes ix
About the Author xv
1 AU-C 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Generally Accepted Auditing Standards 1
2 AU-C 210 Terms of Engagement 7
3 AU-C 220 Quality Control for an Engagement Conducted in Accordance with Generally Accepted Auditing Standards 17
4 AU-C 230 Audit Documentation 25
5 AU-C 240 Consideration of Fraud in a Financial Statement Audit 37
6 AU-C 250 Consideration of Laws and Regulations in an Audit of Financial Statements 67
7 AU-C 260 The Auditor's Communication with Those Charged with Governance 73
8 AU-C 265 Communicating Internal Control Related Matters Identified in an Audit 81
9 AU-C 300 Planning an Audit 91
10 AU-C 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement 99
11 AU-C 320 Materiality in Planning and Performing an Audit 129
12 AU-C 330 Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained 135
13 AU-C 402 Audit Considerations Relating to an Entity Using a Service Organization 165
14 AU-C 450 Evaluation of Misstatements Identified during the Audit 173
15 AU-C 500 Audit Evidence 179
16 AU-C 501 Audit Evidence-Specific Considerations for Selected Items 185
17 AU-C 505 External Confirmations 211
18 AU-C 510 Opening Balances-Initial Audit Engagements, Including Reaudit Engagements 227
19 AU-C 520 Analytical Procedures 235
20 AU-C 530 Audit Sampling 249
21 AU-C 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures 275
22 AU-C 550 Related Parties 293
23 AU-C 560 Subsequent Events and Subsequently Discovered Facts 307
24 AU-C 570 The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern 321
25 AU-C 580 Written Representations 337
26 AU-C 585 Consideration of Omitted Procedures after the Report Release Date 351
27 AU-C 600 Special Considerations-Audits of Group Financial Statements (Including the Work of Component Auditors) 357
28 AU-C 610 Using the Work of Internal Auditors 381
29 AU-C 620 Using the Work of an Auditor's Specialist 395
30 AU-C 700 Forming an Opinion and Reporting on Financial Statements 405
31 AU-C 701 Communicating Key Audit Matters in the Independent Auditor's Report 431
32 AU-C 703 Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA 439
33 AU-C 705 Modifications to the Opinion in the Independent Auditor's Report 475
34 AU-C 706 Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs in the Independent Auditor's Report 499
35 AU-C 708 Consistency of Financial Statements 513
36 AU-C 720 Other Information in Documents Containing Audited Financial Statements 517
37 AU-C 725 Supplementary Information in Relation to the Financial Statements as a Whole 523
38 AU-C 730 Required Supplementary Information 531
39 AU-C 800 Special Considerations-Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks 537
40 AU-C 805 Special Considerations-Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement 551
41 AU-C 806 Reporting on Compliance with Aspects of Contractual Agreements or Regulatory Requirements in Connection with Audited Financial Statements 565
42 AU-C 810 Engagements to Report on Summary Financial Statements 573
43 AU-C 905 Alert That Restricts the Use of the Auditor's Written Communication 583
44 AU-C 910 Financial Statements Prepared in Accordance with a Financial Reporting Framework Generally Accepted in Another Country 591
45 AU-C 915 Reports on Application of Requirements of an Applicable Financial Reporting Framework 597
46 AU-C 920 Letters for Underwriters and Certain Other Requesting Parties 603
47 AU-C 925 Filings with the U.S. Securities and Exchange Commission under the Securities Act of 1933 643
48 AU-C 930 Interim Financial Information 649
49 AU-C 935 Compliance Audits 677
50 AU-C 940 An Audit of Internal Control over Financial Reporting That Is Integrated with an Audit of Financial Statements 687
51 AU-C 945 Auditor Involvement with Exempt Offering Documents 713
52 AT-C Preface 717
53 AT-C 105 Concepts Common to All Attestation Engagements 721
54 AT-C 205 Assertion-Based Examination Engagements 735
55 AT-C 206 Direct Examination Engagements 759
56 AT-C 210 Review Engagements 769
57 AT-C 215 Agreed-Upon Procedures Engagements 787
58 AT-C 305 Prospective Financial Information 805
59 AT-C 310 Reporting on Pro Forma Financial Information 819
60 AT-C 315 Compliance Attestation 833
61 AT-C 320 Reporting on an Examination of Controls at a Service Organization Relevant to User Entities' Internal Control Over Financial Reporting 845
62 AT-C 395 Management's Discussion and Analysis 861
63 AR-C 60 General Principles for Engagements Performed in Accordance with Statements on Standards for Accounting and Review Services 869
64 AR-C 70 Preparation of Financial Statements 875
65 AR-C 80 Compilation Engagements 883
66 AR-C 90 Review of Financial Statements 907
67 AR-C 100 Special Considerations-International Reporting Issues 949
68 AR-C 120 Compilation of Pro Forma Financial Information 959
Appendix A Definitions of Terms-AU-C Standards 965
Appendix B Definitions of Terms-AT-C Standards 987
Appendix C Definitions of Terms-AR-C Standards 997
Appendix D Interpretive Publications and Other Auditing Publications 1003
Index 1005
PREFACE-ORGANIZATION AND KEY CHANGES
This book translates the official language of Statements on Auditing Standards (SASs), Statements on Standards for Attestation Engagements (SSAEs), Statements on Standards for Accounting and Review Services (SSARSs), and the interpretations of those standards into easy-to-read and understandable advice. We designed it to help CPAs in the application of, and compliance with, authoritative standards.
RESOURCES
Wiley Practitioner's Guide to GAAS 2023 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 summary of each interpretation.
- Illustrations. Sample reports and checklists.
RECENT AUDITING STANDARDS
Audit Evidence-SAS 142
In July 2020, the ASB issued SAS 142, Audit Evidence. This SAS supersedes AU-C 500 and amends other sections. The SAS is effective for audits of financial statements for periods ending on or after December 15, 2022, and its changes are included in this volume.
SAS 142 defines what constitutes audit evidence and lays out the attributes of information that auditors should factor into their evaluation of whether to use that information as audit evidence. Having those attributes in GAAS should also help the auditors maintain professional skepticism. Attributes of audit evidence include:
- Accuracy,
- Completeness,
- Authenticity, and
- Susceptibility to bias.
The SAS provides examples of the use of automated tools and techniques and allows their use in both risk assessment and substantive procedures concurrently. SAS 142 also moves the guidance on management's specialists from AU-C 500 to AU-C 501.
Auditing Accounting Estimates and Related Disclosures-SAS 143
SAS 143 enables auditors to address appropriately complex scenarios from accounting standards that include estimates and related disclosures and to enhance the auditor's focus on factors that drive estimation uncertainty and management biases. Particularly important are estimates related to asset impairments during the current environment of economic uncertainty and volatility.
SAS 143 is effective for audits of financial statements for periods ending on or after December 15, 2023, and its changes are referenced in the appropriate chapters.
Amendments to AU-C Sections 501, 540, and 620 Related to the Use of Specialists and the Use of Pricing Information Obtained From External Information Sources-SAS 144
In June 2021, the AICPA Auditing Standards Board (ASB) issued Statement on Auditing Standards 144, Amendments to AU-C Sections 501, 540, and 620 Related to the Use of Specialists and the Use of Pricing Information Obtained From External Information Sources. SAS 144 amends AU-C 501, Audit Evidence-Specific Considerations for Selected Items, AU-C 540, Auditing Accounting Estimates and Related Disclosures, and AU-C 620, Using the Work of an Auditor's Specialist.
The AU-C 501 amendments offer guidance on applying AU-C 540 when management has used the work of a specialist in developing accounting estimates. These changes:
- Enhance guidance about evaluating the work of the management's specialist and
- Eliminate the reference to using the work of an external inventory-taking firm as using the work of a management's specialist.
The amendments are not expected to change existing practice.
The Standard adds to AU-C 540 a new appendix, "Use of Pricing Information From Third Parties as Audit Evidence." This appendix provides guidance on using such information as audit evidence for estimates related to the fair value of financial instruments. The appendix is based on Appendix A, "Special Topics," of PCAOB Auditing Standard 2501, Auditing Accounting Estimates, Including Fair Value Measurements, which contains requirements for auditors of issuers.
Amendments to AU-C 620 enhance the guidance related to using the work of an auditor's specialist.
SAS No. 144 is effective for audits of financial statements for periods ending on or after December 15, 2023. Early implementation is permitted. The changes are referenced in the applicable chapters.
Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement-SAS 145
Practice monitoring programs commonly identify deficiencies in auditor risk assessment procedures. In 2020 U.S. peer reviews, the currently effective AU-C 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, was the leading source of matters for further consideration. To address those deficiencies, in October 2021, the ASB issued Statement on Auditing Standards 145, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement. SAS No. 145:
- Supersedes SAS No. 122, as amended,
- Supersedes section 315 of the same title, and
- Amends various AU-C sections in AICPA Professional Standards.
SAS 145, for example, enhances:
- Requirements and guidance related to getting an understanding of the entity's system of internal control and assessing control risk; and
- Guidance that addresses the economic, technological, and regulatory aspects of the markets and environment in which entities and audit firms operate.
SAS 145 includes revised and new requirements and guidance, including:
- A revised definition of significant risk;
- Revised requirements to evaluate the design of certain controls within the control activities component, including general information technology (IT) controls, and to determine whether such controls have been implemented;
- A new requirement to assess separately inherent risk and control risk; a new requirement to assess control risk at the maximum level such that, if the auditor does not plan to test the operating effectiveness of controls, the assessment of the risk of material misstatement is the same as the assessment of inherent risk;A new "stand-back" requirement intended to drive an evaluation of the completeness of the auditor's identification of significant classes of transactions, account balances, and disclosures;
- Revised requirements relating to audit documentation;
- New guidance on scalability; and
- New guidance on maintaining professional skepticism.
SAS 145 is effective for audits of financial statements for periods ending on or after December 15, 2023. Early implementation is permitted. Changes are referenced in the relevant chapters.
Quality Management for an Engagement Conducted in Accordance with Generally Accepted Auditing Standards-SAS 146
SAS No. 146, Quality Management for an Engagement Conducted in Accordance With Generally Accepted Auditing Standards, issued in June 2022, addresses
- Public interest considerations by encouraging proactive management of quality at the engagement level, emphasizing the importance of the exercise of professional skepticism, enhancing the documentation of the auditor's judgments, and reinforcing the need for robust communications during the audit.
- How the engagement partner leverages the firm's system and manages quality at the engagement level. The SAS makes clear that the engagement partner has overall responsibility for managing and achieving quality.
SAS No. 146 becomes effective for audits of financial statements for periods beginning on or after December 15, 2025.
Inquiries of the Predecessor Auditor Regarding Fraud and Noncompliance With Laws and Regulations-SAS 147
In June 2022, the ASB issued SAS 147, Inquiries of the Predecessor Auditor Regarding Fraud and Noncompliance With Laws and Regulations. The SAS clarifies the guidance related to the inquiries of a predecessor auditor about matters that will help the auditor decide whether to take the engagement. After management authorizes the predecessor auditor to respond to inquiries, the auditor must inquire about identified or suspected fraud and matters involving noncompliance. Once the auditor accepts the engagement, the auditor must document the inquiries and their results.
SAS 147 is effective for audits of financial statements beginning on or after June 30, 2023.
ATTESTATION STANDARDS
SSAE 21
In September 2020, the ASB issued Statement on Standards for Attestation Engagements (SSAE) No. 21,...
