A complete overhaul of the auditor’s report for audits of 12/31/20 financial statements is going to be a very big deal. Please tune in to the new standards!
In November 2019, the AICPA published the first of a new semi-annual newsletter, PR Prompts!, designed to help CPAs keep current on peer review news.
The AICPA gave me permission to reprint portions of the newsletter on my blog.
This is the fifth of six posts to help you stay up to date.
I have looked at this page on the AICPA website. It is quite helpful. If you provide audits to your clients, it would be worth your time to find, browse, and bookmark this page.
The following comment is quoted verbatim. For ease of reading it will not be set inside quotation marks:
The form and content of the auditor’s reports will change substantively which will be effective for audits of financial statements for periods ending on or after December 15, 2020. Statement on Auditing Standards (SAS) No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, was issued in May 2019. SAS No. 134 includes a new AU-C section 701, Communicating Key Audit Matters in the Independent Auditor’s Report, and replaces the following AU-C sections in AICPA Professional Standards:
- Section 700, Forming an Opinion and Reporting on Financial Statements
- Section 705, Modifications to the Opinion in the Independent Auditor’s Report
- Section 706, Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs in the Independent Auditor’s Report
Changes to the auditor’s report include placing the “Opinion” section first, followed by the “Basis for Opinion” section, which is required to include a statement that the auditor is required to be independent of the entity and to meet the auditor’s other ethical responsibilities in accordance with the relevant ethical requirements relating to the audit. The description of the auditor’s responsibilities has been expanded, and auditor reporting relating to going concern has been enhanced. New Section 701 is only applicable when the auditor is engaged to report key audit matters. Generally accepted auditing standards (GAAS) does not require the communication of key audit matters.
The ASB has also issued the following:
- SAS No. 135, Omnibus Statement on Auditing Standards – 2019.
- SAS No. 136,Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA.
- SAS No. 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports.
Early implementation of SAS No. 134 is not permitted. However, because SAS No. 134 amends various other sections, including AU-C section 210, Terms of Engagement, auditors are encouraged to familiarize themselves with the requirements before the start of any engagement.
As mentioned at the top of this post, this article is reprinted with permission of the AICPA.