TOP AUDITING ISSUES FOR 2013 - CCH

MODULE 4 — CHAPTER 12 — Working with the New Codification of Statements on Auditing Standards (Clarified) 137
Audit Conclusions and Reporting (AU-C Sections 700–799)
These sections introduce significant changes to previous reporting practices
and requirements that will affect all firms.
700 Forming an Opinion and Reporting on Financial Statements. The form
of the new audit report is greatly different from the familiar report under
previous standards. It contains significantly expanded discussion of the auditor’s
responsibility as contrasted with management’s. There are paragraph
headings for:
Management’s responsibility for the financial statements
The auditor’s responsibility
The auditor’s opinion
The paragraph covering management’s responsibility is standardized language.
It is important to note that the new standard prohibits any elaboration
in the auditor’s report about management’s responsibility, or any reference
to another document that does so. This might lead users of the report to
the erroneous conclusion that the auditor is expressing assurances about any
representations made by management about its responsibilities.
When the auditor’s report also covers other legal or regulatory requirements,
it contains headings that separate the report on the financial statements
from the report on the other requirements.
OBSERVATION
If the reception by the profession of the reporting requirements of Statement of Standards
on Accounting and Review Services No. 19 (SSARS 19) for compilations and reviews is any
indication, the profession is likely to be in for some difficulty in implementing the new form
and content of the auditor’s report. In spite of extensive advance publicity from the AICPA,
a significant number of practitioners failed to implement these changes. Peer reviews have
detected these failures into the second year after the effective date of SSARS 19. This will
be an even more crucial failure in an audit engagement, because auditors’ reports typically
receive wider distribution to more sophisticated users than do compilation reports. Such
a failure might cause users of the report to question the auditor’s competence.
706 Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs in the Independent
Auditor’s Report. This section introduces the terms emphasis-of-matter
and other-matter paragraphs.
An emphasis-of-matter paragraph refers to a matter that is appropriately
presented or disclosed in the financial statements.
An other-matter paragraph refers to a matter that is not presented or
disclosed in the financial statements that in the auditor’s judgment is