Key AICPA Professional Standards and PCAOB Auditing Standards: A.1 Overview

A.1 Overview

As the regulatory landscape for auditing in the United States continues to evolve, it is essential for practitioners—both aspiring and experienced—to have a strong command of key professional standards. Two major bodies provide authoritative literature in this realm:

• The American Institute of Certified Public Accountants (AICPA), through its Auditing Standards Board (ASB)
• The Public Company Accounting Oversight Board (PCAOB), established by the Sarbanes-Oxley Act (SOX) to oversee audits of public companies (issuers)

Understanding where each set of standards applies, how they are codified, and how to efficiently reference them is critical for exam preparation and practical auditing work.

The AICPA and Its Role

The AICPA is a voluntary membership organization but holds significant influence in the development of Generally Accepted Auditing Standards (GAAS). Its Auditing Standards Board (ASB) promulgates:

• Statements on Auditing Standards (SAS) • Clarified Statements on Auditing Standards (AU-C Sections)

Historically, nonpublic company audits in the United States are performed under the directives issued by the AICPA’s ASB. As the professional environment has evolved, the AICPA introduced the “Clarified Statements on Auditing Standards” (SASs) into the AU-C codification format to enhance clarity, structure, and alignment with the International Standards on Auditing (ISAs). Practitioners typically cite these standards as “AU-C 200,” “AU-C 315,” “AU-C 700,” and so forth.

PCAOB and Its Mandate

The PCAOB was created in response to high-profile corporate scandals in the early 2000s and derives its authority from the Sarbanes-Oxley Act of 2002. The PCAOB’s standards govern audits of public companies (issuers) and certain broker-dealers. Distinct features of PCAOB oversight include:

• Registration and inspection of public accounting firms conducting issuer audits
• Enforcement actions against firms or individuals violating PCAOB standards or rules
• Issuance of Auditing Standards (AS), collaborative rulemaking, and guidance notes

Examples of PCAOB standards include AS 2110 (Identifying and Assessing Risks of Material Misstatement) and AS 2201 (An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements). Mastery of these numbering conventions is beneficial for quick reference and research.

Preparing for the CPA Exam

In the context of the Uniform CPA Examination, especially the Auditing and Attestation (AUD) section, you will be asked to:

1. Distinguish between requirements under AICPA standards for nonpublic entities vs. PCAOB standards for public entities.
2. Identify the scope and objectives of main standards, such as AU-C 200 (Overall Objectives of the Independent Auditor) or PCAOB AS 2201 (Internal Control Audits).
3. Apply knowledge of how each standard influences audit planning, fieldwork, evidence-gathering, and reporting.

Exam questions may focus on areas of overlap (e.g., risk assessment procedures) or differences (e.g., integrated audits for public companies required by PCAOB AS 2201 vs. voluntary for nonpublic companies under AU-C sections).

Navigating the Codification: Quick Tips

Quick navigation is vital in both exam settings and real-world engagements. Here are a few practical strategies:

1. Learn the Key Sections: For AICPA Clarified Standards (AU-C), remember that AU-C 200 deals with overall objectives, AU-C 300 with planning, AU-C 315 with understanding the entity and its environment, and AU-C 700 with audit reports.
2. Cross-Reference Tools: AICPA’s online resource and printed materials often include cross-references between old SAS numbers and new AU-C sections.
3. Bookmark PCAOB Standards: Keep a concise chart that pairs the PCAOB AS numbers with their subject matter. For instance, AS 2110 covers risk assessment, while AS 2315 addresses audit sampling.
4. Know Interpretation Documents: Both AICPA and PCAOB issue interpretations to clarify ambiguous areas or address new challenges. Stay up-to-date with these releases; they often contain critical guidance.

Below is a simple diagram illustrating how each set of standards influences audit engagements:

    flowchart LR
	    AICPA(Nonpublic / Private Companies<br> AICPA AU-C Standards) --> Planning
	    AICPA --> Fieldwork
	    AICPA --> Reporting
	    PCAOB(Public Companies<br> PCAOB AS) --> Planning
	    PCAOB --> Fieldwork
	    PCAOB --> Reporting

This diagram highlights the parallel tracks auditors follow depending on their client type—nonpublic vs. public entities.

Historical Development and Current Trends

Prior to the establishment of the PCAOB, all GAAS were effectively set by the AICPA’s ASB—influenced by pronouncements from the American Accounting Association, SEC guidance, and other professional bodies. After Sarbanes-Oxley, the PCAOB assumed standard-setting and enforcement authority for public company audits. While the PCAOB initially adopted the existing GAAS framework, it has subsequently issued its own standards, which sometimes mirror or refine AICPA principles.

In practice, many auditing concepts remain similar across both bodies. For instance, the notion of professional skepticism is equally emphasized, and risk-based approaches to auditing financial statements are fundamental. However, public company auditors face additional layers of regulation (e.g., more stringent independence rules, mandatory integrated audits of financial statements and internal control).

Applying the Standards: Practical Insights

1. Planning the Audit: Under both AU-C 300 and PCAOB AS 2101, the standards emphasize a top-down, risk-based approach. For a nonpublic entity, an auditor may have more latitude in deciding the extent of internal control testing, while for a public company client, integrated audits necessitate a deeper evaluation of internal control over financial reporting.
2. Evidence Collection: Regardless of whether the engagement follows AICPA or PCAOB requirements, sufficiency and appropriateness of audit evidence remain foundational principles.
3. Audit Documentation: PCAOB standards (e.g., AS 1215) and AICPA AU-C sections (e.g., AU-C 230) outline documentation requirements. Noncompliance may lead to disciplinary actions or even litigation.
4. Reporting Responsibilities: AICPA’s AU-C 700 series guides reporting on financial statements for nonpublic entities. PCAOB’s AS 3101 sets forth requirements for public issuers, including the new requirement to communicate critical audit matters (CAMs).
5. Ethical Standards: Although not strictly within auditing standards themselves, practitioners must be mindful of the AICPA Code of Professional Conduct and PCAOB Ethics rules, which shape independence and objectivity.

Glossary

• AU-C Sections: The codified format of Clarified Auditing Standards used by the AICPA. For instance, AU-C 315 covers the auditor’s responsibilities to understand the entity’s environment and identify risks of material misstatement.
• PCAOB AS (Auditing Standards): Standards primarily for audits of public companies in the U.S., encompassing everything from risk assessment (AS 2110) to internal control auditing (AS 2201).
• SAS (Statements on Auditing Standards): Issued by the AICPA’s Auditing Standards Board pre-clarification, many of these have been integrated into AU-C sections.
• Interpretations: Formal announcements clarifying ambiguous points or providing additional guidance on how to apply a standard in specific scenarios.

Official Regulations and Resources

Below are essential references to deepen your understanding:

• AICPA – https://www.aicpa.org/research/standards/auditattest

• Offers links to the Clarified Statements on Auditing Standards (AU-C) and related interpretations.
• Useful “Audit and Accounting Manual” can guide you through application examples.

• PCAOB – https://pcaobus.org/oversight/standards/auditing-standards

• Access to Auditing Standards (AS), staff guidance, and updates on newly adopted rulings.

• Reading

• AICPA “Audit and Accounting Manual” provides step-by-step structure for using SAS and AU-C references.
• PCAOB Staff Guidance includes interpretive releases on recently adopted standards.

• Online Courses

• “AICPA Codification Navigation” offered by various CPA review programs. These sessions guide you through finding relevant sections within the codification during real engagements or exam scenarios.

Staying current with new releases and comparing AICPA and PCAOB updates ensures you will be well-prepared to meet any audit engagement’s demands—public or private—and excel in the AUD section of the CPA Exam.

Key AICPA and PCAOB Auditing Standards: Test Your Knowledge

For Additional Practice and Deeper Preparation

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Disclaimer: This course is not endorsed by or affiliated with the AICPA, NASBA, or any official CPA Examination authority. All content is created solely for educational and preparatory purposes.