The Clarity Project Makes Changes to Auditor's Report for US GAAS Audits

Posted by admin on Apr 22, 2013 5:41:36 PM

At the same time the convergence of US accounting standards with International Financial Reporting Standards (IFRS) was taking place, the Auditing Standards Board (ASB) was conducting the Clarity Project. The Clarity Project is intended to revise and re-codify US generally accepted auditing standards (US GAAS) to make auditing standards easier to read, understand and implement in practice, while at the same time converging US GAAS with the International Auditing and Assurance Standards Board of the International Federation of Accountants.

As a result of the Clarity Project, a clarified statement on auditing standard (SAS), Forming an Opinion and Reporting on Financial Statements, was issued. This clarified SAS requires the auditor’s report to be in a new format, and it also will contain additional required verbiage. The new format is required for periods ending on or after December 15, 2012.

Detail of Audit Report Changes

The new format will include the following headings:

  • “Report on the Financial Statements”
  • “Management’s Responsibility”
  • “Auditor’s Responsibility”
  • “Opinion”

“Report on the Financial Statements”

This first heading will state the name of the Company, the time period, and the financial statements that were audited.

“Management’s Responsibility for the Financial Statements”

This paragraph will detail management’s responsibility is for the preparation and fair presentation of the financial statements and will make reference to management’s responsibility for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statements.

“Auditor’s Responsibility”

This paragraph will contain a statement related to the auditor’s responsibility to express an opinion on the financial statements based on the audit and that the audit was conducted in accordance with auditing standards generally accepted in the United States. There are also is additional wording added to the scope portion of this section.


This paragraph will be separate and distinct. There are no changes to the wording in the unqualified opinion paragraph. If the auditor issues an opinion other than unqualified, there still must be a paragraph before the opinion paragraph detailing the reason for the modified opinion, but now this preceding paragraph must be labeled as “Basis for Qualified Opinion,” “Basis for Adverse Opinion,” or “Basis for Disclaimer of Opinion.”

The opinion is still required to be signed and dated by the auditor.

While these changes relate more to the format and presentation, it is still important for management to read and fully understand the auditor’s report.

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