In conjunction with its efforts to clarify generally accepted auditing standards for audits of nonpublic companies and to converge such standards with International Standards on Auditing (ISAs), the Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA) recently issued:
- A proposed Statement on Quality Control Standards (SQCS), A Firm’s System of Quality Control (Redrafted), which addresses a CPA firm’s responsibilities for its system of quality control for its accounting and auditing practice; and
- A proposed Statement on Auditing Standards (SAS), Quality Control for an Audit of Financial Statements, which specifies quality control procedures at the engagement level that assist the auditor in achieving the objectives of the quality control standards.
The proposed SQCS has been drafted using International Standards on Quality Control (ISQC) No. 1, Quality Control For Firms That Perform Audits And Reviews Of Financial Statements, And Other Assurance And Related Services Engagements, as a base. The proposed SQCS would supersede SQCS No. 7, A Firm’s System of Quality Control. To reflect a more principles-based approach to standard setting, certain requirements that are duplicative of broader requirements in SQCS No. 7 have been moved to application and other explanatory material; however, the proposed SQCS does not change or expand SQCS No. 7 in any significant respect.
The proposed SAS has been drafted using ISA No. 220, Quality Control for an Audit of Financial Statements, as a base. The proposed SAS would supersede SAS No. 25, The Relationship of Generally Accepted Auditing Standards to Quality Control Standards, which currently contains no specific requirements. The proposed SAS contains requirements and application material that address specific responsibilities of the auditor regarding quality control procedures for an audit of financial statements. As these procedures are required to be established by SQCS No. 7, the proposed SAS should not result in a change to existing practice; however, the proposed SAS would strengthen existing standards by making it easier for auditors to understand and apply those quality control procedures that apply to an audit of financial statements.
It should be noted that the Public Company Accounting Oversight Board has issued a proposed auditing standard, Engagement Quality Review, which contains requirements relating to engagement quality control reviews that apply only to audits of issuers. Certain of these requirements are not included in the proposed SQCS or the proposed SAS.
If finalized, the proposed SQCS and the proposed SAS would be effective for audits of nonpublic financial statements for periods beginning on or after December 15, 2010. This effective date is provisional but will not be earlier than December 15, 2010.
The proposed SQCS and proposed SAS are available for comment until August 31, 2009.
Bob Dohrer, National Director of Assurance Services for McGladrey & Pullen, is a member of the AICPA’s Quality Control Task Force, which was responsible for redrafting the SQCS and SAS. |
