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). This is other area where US standards and international standards differ and is part of discussion on how these two standards can be aligned once the United States adopts International Financial Reporting Standards(IFRS). Show ASB auditing standards are for publicly traded companies and Clarity Project is an attempt to make GAAS easier to read, understand, and apply ( (Linberg & Seifert, 2011). One other objective of Clarity Project is to work towards convergence with ISAs. The convergence project aims for making auditing standards coordinated and comparable between two standards (Linberg & Seifert, 2011). The Clarity Project is an attempt to make US auditing standards more competitive, compliance and easier for its users. There are five major differences between GAAS and ISA (Linberg & Seifert, 2011). First differences are about the documentation of audit procedures. The other differences are going concern considerations, internal control over financial reporting, risk assessment and use of another auditor. The major differences are again like IFRS and GAAP, rules based standards against principle based standards. Documentation of audit procedures is one of the differences between GAAS and ISA. US standards are more prescriptive compared to that of international standards ( (Linberg & Seifert, 2011). PCAOB auditing standards require for auditors to obtain engagement letter before they start audit work. There is no such requirement under ISA. Other differences is regarding documentation retention policy. PCAOB standards requires the audit work to be retained for seven years whereas ASB only require for five years and ISA requires to retain for at least five years (Linberg & Seifert, 2011). These examples clearly demonstrate that US and international standards have major differences when it comes to engagement memo and document retention policy. 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. ASB is looking to see if going concern period should be limited to 12 months or should extend more than 12 months (Linberg & Seifert, 2011). It looks like all three boards have different standards. Bring all of these into one standards will make easier for its user but also for auditors. Internal control over financial reporting is another difference between PCAOB, ASB and ISA. When Congress in 2002 passed Sarbanes Oxley Act (SOX), it required that company management to put internal controls to make sure financial reporting is correct (Linberg & Seifert, 2011). Management must provide their assertion that they have effective internal controls in place over financial reporting and this should accompany audit report. ASB and ISA do not have these requirements explicitly expressed in their standards. ASB and ISA still require to test internal controls to make sure they are sufficient and functional (Linberg & Seifert, 2011). 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 (Linberg & Seifert, 2011). Auditors under ISA should also assess how companies respond to these risks. ASB auditors are required to assess material misstatement based on companies and its operating environment (Linberg & Seifert, 2011). Use of another auditor specially to audit foreign subsidiary, complex investments are another issue where PCAOB, ASB and ISA differ in their guidelines (Linberg & Seifert, 2011). Under ASB and PCAOB standards auditors has option to not mention the use of other auditor or clearly mention the division of responsibilities (Linberg & Seifert, 2011). ISA on the other hand does not allow the main auditor to mention the other auditors (Linberg & Seifert, 2011). This means under ISA, auditor must take full responsibilities even though they might have used other auditor for part of the audit. References: Linberg, D., & Seifert, D. (2011, Apr). A Comparison of U.S. Auditing Standards. Retrieved April 8, 2017, from ebscohost.com: http://web.a.ebscohost.com.proxy.devry.edu:5050/ehost/detail/detail?vid=2&sid=9f8046c9-7d95-4b8a-b98d-3ba47e6eb487%40sessionmgr4008&hid=4001&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#AN=65030854&db=bah What is the relationship between international standards on auditing and US auditing standards?US auditing standards are more binding than international auditing standards. Bothe audit standards provide some laws and regulations for the appropriate audit procedure. The auditors use these regulations for the accurate checking of financial statements.
Can auditing standards be different in different countries?“transparency”) is the establishment of a set of accounting principles and practices that can be accepted internationally. Accounting standards vary significantly from country to country, and in some jurisdictions the standards or rules constituting national GAAP are not oriented to the needs of investors.
What is the role of international standards on auditing?1. The purpose of this International Standard on Auditing (ISA) is to establish standards and provide guidance on the objective and general principles governing an audit of financial statements.
What are the internationally recognized audit standards?International Standards on Auditing (ISA) are professional standards for the auditing of financial information. These standards are issued by the International Auditing and Assurance Standards Board (IAASB).
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