New Audit Clarity Standards: What is new & how they will affect you

By Patricia A. Yeager, CPA

March 27, 2013

What are clarity standards?

The clarity standards are simply new or modified standards from the Statements on Auditing Standards (SAS) which every auditor in public accounting has followed for years. The American Institute of Certified Public Accountants (AICPA) Accounting Standards Board established the new standards after completing a multi-year project to make the U.S. generally accepted auditing standards (GAAS) easier for its users to interpret, understand and apply both domestically and internationally. The clarity standards are applicable for those entities that have fiscal years ending on or after December 15, 2012.

How will the new standards affect you & your business?

The clarity standards are intended to provide additional transparency to the procedures auditors are required to undertake. What does this mean to business owners? The following are some of the new formats, additional procedures and titles that you may see as you work with your auditors in the coming months:

  • SAS/AU vs. AU-C: The new audit (AU) standards will continue to be organized as they have been in the SAS with virtually all the standards being revised and recoded. Any section that has been updated in the clarity framework will be given a “C” to denote the application under the new clarity standards. This will assist companies in understanding the auditing standards references auditors may provide.
  • Engagement letter: The format has been updated and will further outline and clarify the roles played by management and auditors in the financial reporting process. This will help clarify business owners’ responsibilities.
  • Audit opinion: The format has been revised, with the sections of the opinion organized into categories to enhance the readers’ understanding of management’s and the auditors’ responsibilities regarding the financial statements.
  • Opening balances: Additional procedures are now required upon a change in auditors to obtain assurance that opening balances are accurately stated and can be relied on by the new auditors. These procedures go beyond the previously existing requirements where auditors reviewed the prior auditors’ work, as applicable, in order to place reliance on such information in their current audit procedures. Business owners should be prepared for additional questions and potential requests for more supporting documentation.
  • OCBOA vs. special purpose framework: If your business reports using an “other comprehensive basis of accounting” or OCBOA, such as cash basis or tax basis, you will now use the terminology “special purpose framework.” Additionally, on the horizon are standards from the AICPA which are proposed to offer small to medium-sized entities reporting options beyond special purpose frameworks, which are anticipated to be more relevant, less complex and focus on a principles-based framework of reporting. Look for more guidance to be issued by the AICPA on this soon.
  • Group audits & components: Additional guidance has been provided to enhance analysis and auditing of parent companies and subsidiaries that may increase the scope of the audit. The additional procedures may impact planning and fieldwork for the audit and, potentially, additional fees may be required if your business is impacted by this increase in scope.
  • Convergence: The new clarity standards will assist businesses that utilize standards issued by the International Auditing and Assurance Standards Board (IAASB) by providing continuity and convergence with international standards of accounting for ease in application.


The new clarity standards will provide additional insight and increase understanding for both auditors and management in the financial reporting process. Some of the new standards may affect the scope of testing, require additional planning discussions with auditors and require changes to the audit reporting. Bring your questions to your auditors as you work together on your audit. The auditors at WBL encourage your questions and communications as we ring in the new year and the new clarity standards.



AICPA Clarity Standard Project

AICPA Financial Reporting Center

The AICPA’s Guide to Clarified and Converged Standards for Auditing and Quality Control


© 2011 American Institute of Certified Public Accountants, Inc.
© 2013 CCH

Accounting Research Manager
Clarity Project Index