New SAS and SSAE modify definition of materiality

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The Auditing Standards Board has issued SAS 138 and SSAE 20 which change the definition of materiality. Under current audit standards, the materiality definition matches what is currently in use by IASB and IAASB. The revision will get the definition to match what is currently used by the American legal system, PCAOB, SEC, and FASB.

The new definition:

Misstatements, including omissions, are considered to be material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

This is in contrast to current standards, which say:

…could reasonably be expected to influence the judgment of a reasonable person…

Comparable change is also made in the attestation standards.

Effective date is periods ending on or after December 15., 2020, which means audits of 12/31/120 financial statements. For attestation engagements, that will be for reports on examinations or reviews dated on or after 12/15/20.

The AICPA has a helpful page for Audit and Attest issues. Might want to bookmark that page – it has lots of good stuff for those of us providing audit, attest, review, comp, or preparation services.

Another hub has more focused attention on new pronouncements:  Auditing and Attestation Standards Issued in 2019: Information and Resources

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