INTERNATIONAL AND U.S. AUDITING STANDARDS
Auditing standards provide requirements and application and other explanatory
material to aid auditors in fulfilling their professional responsibilities in the audit of
historical financial statements. They include consideration of professional qualities such
as competence and independence, reporting requirements, and evidence. The three
main sets of auditing standards are International Standards on Auditing, AICPA auditing
standards for entities other than public companies, and PCAOB Auditing Standards.
International Standards on Auditing (ISAs) are issued by the International Auditing
and Assurance Standards Board (IAASB) of the International Federation of Accountants
(IFAC). IFAC is the worldwide organization for the accountancy profession, with over 175
member organizations in 130 countries, representing more than 2.5 million accountants
throughout the world. The IAASB works to improve the uniformity of auditing practices
and related services throughout the world by issuing pronouncements on a variety of
audit and attest functions and by promoting their acceptance worldwide.
ISAs do not override a country’s regulations governing the audit of financial or other
information, as each country’s own regulations generally govern audit practices. These
regulations may be either government statutes or statements issued by regulatory or
professional bodies, such as the Australian Auditing & Assurance Standards Board or
Spain’s Instituto de Contabilidad y Auditoría de Cuentas. Most countries, including the
United States, base their auditing standards on ISAs, modified as appropriate for each
country’s regulatory environment and statutory requirements.
The Auditing Standards Board in the U.S. has revised its audit standards to converge
with the international standards. In addition, the PCAOB considers existing international
standards in developing its standards. As a result, U.S. standards are mostly consistent
with international standards, except for certain requirements that reflect unique
characteristics of the U.S. environment, such as legal and regulatory requirements. For
example, PCAOB Standard 5 (AS 5) addresses audits of internal control over financial
reporting required by the Sarbanes–Oxley Act
Auditing standards for private companies and other entities in the United States are
established by the Auditing Standards Board (ASB) of the AICPA. These standards are
referred to as Statements on Auditing Standards (SASs). Because the ASB has
harmonized its agenda with the IAASB, the AICPA auditing standards are similar to the
ISAs, although there are some differences. When developing a new SAS, the ASB uses the
ISA as the base standard and then modifies that base standard only when modifications
are appropriate for the U.S. environment. If an auditor in the United States is auditing
historical financial statements in accordance with ISAs, the auditor must meet any ISA
requirements that extend beyond the requirements in the AICPA standards.
Prior to passage of the Sarbanes–Oxley Act, the ASB established auditing standards
in the U.S. for private and public companies. The PCAOB now has responsibility for
auditing standards for U.S. public companies and broker-dealers registered with the SEC,
while the ASB continues to provide auditing standards for private companies and other
entities. The AICPA auditing standards are also referred to as U.S. generally accepted
auditing standards (GAAS).
The PCAOB initially adopted existing auditing standards established by the ASB as
interim audit standards. In addition, the PCAOB considers international auditing
standards when developing new standards. As a result, auditing standards for U.S. public
and private companies are mostly similar. Standards issued by the PCAOB apply only to
the audits of U.S. public companies and other SEC registrants including brokers and
dealers and are referred to as “the standards of the Public Company Accounting
Oversight Board (United States)” in the audit reports of public companies. When
referenced in this text, we refer to these standards as PCAOB Auditing Standards.
