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CCH Releases New Commercial Title with Updated AICPA Clarity Standards

As public accounting firms and independent auditors get ready for converting to the AICPA’s new clarified standards, CCH is providing leading industry guidance to help professionals understand these significant changes by issuing the new clarified title, Knowledge-Based Audits of Commercial Entities and the accompanying toolset, Knowledge-Based Audit Methodology: Commercial Entities. These new publications, based on CCH’s Knowledge-Based Audit (KBA) methodology, are available via ProSystem fx® Knowledge Coach, and on the Accounting Research Manager (ARM) research platform. CCH, a Wolters Kluwer business is a leading global provider of tax, accounting and audit information, software and services.

“One of the primary objectives of the Clarity Project is to make auditing standards easier to understand, but there’s still confusion over how exactly it will impact the audit process,” said Sam High, CCH Vice President & General Manager of Accounting, Audit & Workflow. “Clarity changes the rules when it comes to performing audit engagements in accordance with Generally Accepted Audit Standards, and CCH’s Commercial title helps firms and individual audit professionals ensure they comply with the new clarified standards.”

CCH’s Knowledge-Based Audits of Commercial Entities is the most up-to-date guide available – covering all of the clarified standards, including the recently issued Statement on Auditing Standard (SAS) No. 126, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern (Redrafted). The toolset allows auditors to leverage previous engagement efforts by retaining audit work tailored for each client and seamlessly rolling forward pre-clarity engagement files to conduct engagements and issue reports that comply with all of the new requirements.

The commercial title offers clear, practical guidance on requirements of the new Clarity Project standards and also provides additional insight for:

  • Changes to data flow and where significant audit information is entered to facilitate greater understanding and efficiency of entry;
  • Simpler documentation options for certain workpapers, where the engagement or client is considered to be non-complex; and
  • Removal of certain workpapers where appropriate.

What’s Changing?

Auditors may be surprised at the extent of the changes resulting from the AICPA’s Clarity Project which include discontinuing terms such as “principal auditor,” “illegal acts,” “OCBOA,” “explanatory paragraph” and others.

New Clarity Project auditing requirements include:

  • Performing audit procedures designed to identify noncompliance with laws and regulations;
  • Verifying the propriety of opening balances on every engagement;
  • Determining whether the financial reporting framework is acceptable in the circumstances;
  • Determining the newly introduced “performance materiality”;
  • Applying the risk-based approach to audits of group financial statements and related party transactions; and
  • Complying with the differing documentation requirements for the use of “auditor’s specialists” and “management’s specialists.”

Auditors will also be required to communicate the potential effects of identified material weaknesses and significant deficiencies, and in certain circumstances, identified control deficiencies other than material weaknesses and significant deficiencies. New requirements have also been established for reporting on single and summary financial statements, and financial statements prepared in accordance with a special purpose framework.

Effective Date, Additional Clarified Titles

CCH is ready to help auditors in a variety of industries make a seamless transition to the new Clarity Project requirements. The new auditing standards are effective for audits of financial statements for periods ending on or after December 15, 2012. In the next few months, CCH plans to issue additional titles, guidance and tools covering other industries impacted by AICPA clarity standards.