Because the efficient date of SAS 134-140 arrives, auditors ought to put together for the most important adjustments to the audit course of and auditor’s report.
Based on SAS 141, “Amendments to the Efficient Dates of SAS Nos. 134-140,” SAS 134-140 are efficient for audits of monetary statements for durations ending on or after Dec. 15, 2021.
SAS 134: Auditor Reporting and Amendments
SAS 134 adjustments the format and the content material of the auditor’s report back to align extra intently with the requirements of the Public Firm Accounting Oversight Board and the Worldwide Auditing and Assurance Accounting Requirements Board. The auditor’s report suite supersedes a number of AU-C sections of their entirety and introduces AU-C Part 701, “Speaking Key Audit Issues in Unbiased Auditors Report.”
The communication of key audit issues (KAMs) is optionally available and included within the auditor’s report following the “Foundation for Opinion” paragraph solely when these charged with governance have engaged the auditor to report on KAMs. The willpower of KAMs is a matter {of professional} judgment, and due to this fact the reporting of KAMs will fluctuate between entities even throughout the similar business, in addition to from interval to interval for a similar entity.
In figuring out which issues to report when engaged to report on KAMs, the auditor ought to consider issues that required important consideration throughout the audit, similar to areas of excessive assessed danger of fabric misstatement, important dangers, areas requiring important auditor judgment, and the impression of great transactions and occasions. Auditors ought to observe that an merchandise reported as a KAM mustn’t even be included in an emphasis-of-matter or other-matter paragraph within the auditor’s report.
There’s a new assertion below the “Obligations of Administration for the Monetary Statements” part of the auditor’s report, making it clear that administration has the duty for evaluating going concern. The “Auditor’s Obligations for the Audit of Monetary Statements” part has been expanded to incorporate descriptions of the next:
- Cheap assurance
- Circumstances that will forestall materials misstatements from being detected
- Materiality
- Requirement to conclude on the entity’s capability to proceed as a going concern
- Exercising skilled judgment and sustaining skilled skepticism
- Required communications with these charged with governance
SAS 136: Forming an Opinion and Reporting on Monetary Statements of Worker Profit Plans Topic to ERISA
SAS 136 applies to audits of worker profit plans which might be topic to the Worker Retirement Earnings Safety Act of 1974 (ERISA) and can impression each auditors and directors of ERISA plans, and addresses the next:
- Adjustments to the shape and content material of the auditor’s report, together with when administration elects to have an audit carried out pursuant to ERISA Part 103(a)(3)(c), previously referred to as “restricted scope”
- Conforming modifications to the engagement letter, communications to these charged with governance, and administration’s illustration letter
- New audit procedures associated to audit danger evaluation and response
- Concerns associated to the IRS Kind 5500 submitting
Essentially the most important change of SAS 136 is to the auditor’s opinion. After implementation of SAS 136, when administration elects to have auditors exclude testing of sure funding info ready and authorized by a professional establishment as described in 29 CFR 2520.103-8, this may now not represent a scope limitation and thus eliminates the disclaimer of opinion.
The Auditor’s Duty for “Different Data”
Many organizations challenge annual studies that embrace different info, outlined as monetary and non-financial info aside from monetary statements and the auditor’s report. When different info is included in an annual report and the annual report is offered earlier than the auditor’s report is issued, the auditor’s report is required to incorporate an “Different Data” part.
This part is required to element administration’s and the auditor’s duty concerning the opposite info included within the annual report and an announcement that the auditor’s opinion doesn’t cowl the opposite info. The brand new customary defines “annual report” and offers examples of studies which don’t meet the definition, similar to IRS Kinds 990 and 5500.
The Name for Elevated Communications
On account of the adjustments to the auditor’s report below SAS 134 and 136, adjustments must be made to audit engagement letters, communications with these charged with governance, and administration’s illustration letter. Auditors might be required to speak to these charged with governance any important dangers recognized when planning the audit and any anticipated modifications to the auditor’s report.
Value mentioning is that a number of amendments had been made to direct the auditor’s consideration to the notes on the monetary statements all through the audit course of. As we gear up for adoption, take the time to fastidiously evaluation and successfully implement these auditing requirements adjustments to make sure that all of us uphold the integrity of the career and the standard of the audit course of.
The unique article appeared in Insights Journal, the official publication of the Illinois CPA Society.
