To help auditors in the CPA community, the AIPCA peer review staff publishes PR Prompts, a newsletter with information for firms providing audits, review, compilations, and other attestation services.
The newsletter is unbranded and AICPA gives explicit permission to peer reviewers to put their logo and branding information on the newsletter. Those of us who are peer reviewers have specific permission to send it to our clients.
I will present their comments in four posts:
- New audit standards.
- New accounting rules effective this year.
- New accounting rules coming into play over next few years.
- Tips for firms in peer review program.
One section of the newsletter provides a condensed introduction to new audit standards that will be required for our upcoming year end audits.
If you are an auditor, you really need to become familiar with the whole string of SASs, from #134 through #140 before you dig into your year end engagements.
The following comments are provided to you courtesy of the AICPA. I gratefully acknowledge their work in preparing this info and gladly share it with you. For ease of reading, I will not put all the following material in quotations.
PR Prompts – Fall 2021:
New Standards
SAS No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, as amended
Required implementation is right around the corner for Statement on Auditing Standards (SAS) No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements. SAS No. 134, as amended, is effective for audits of financial statements for periods ending on or after December 15, 2021, with early implementation permitted.
SAS No. 134 replaces AU-C sections 700B, 705B and 706B and introduces a new section 701. SAS No. 134 contains the following sections:
- Section 700, Forming an Opinion and Reporting on Financial Statements, codified in AU-C section 700 of AICPA Professional Standards, is the foundational section that addresses the auditor’s responsibility to form an opinion on the financial statements and prescribes the form and content of the auditor’s report when issuing an unmodified “clean” opinion. This section also includes an appendix of amendments to various AU-C sections relating to auditor reporting and disclosures.
- Section 705, Modifications to the Opinion in the Independent Auditor’s Report, codified in AU-C section 705 of AICPA Professional Standards, addresses the form and content of the report when the auditor concludes that a clean auditor’s opinion in accordance with section 700 is not appropriate (qualified, adverse, or disclaimer of opinion).
- Section 706, Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs in the Independent Auditor’s Report, codified in AU-C section 706 of AICPA Professional Standards, addresses additional communications in the auditor’s report (emphasis-of-matter and other-matter paragraphs).
- New! Section 701, Communicating Key Audit Matters in the Independent Auditor’s Report, codified in AU-C section 701 of AICPA Professional Standards, addresses the auditor’s responsibility to communicate key audit matters (KAMs) in the auditor’s report when the auditor is engaged to do so. SAS No. 134, as amended, does NOT require the communication of KAMs.
In addition to the auditor reporting content, SAS No. 134, as amended, also amends various AU-C sections to focus auditor attention on disclosures throughout the audit process AICPA staff has prepared an “At a glance” document to provide a detailed summary of the standard.
SAS No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, as amended
Statement on Auditing Standards (SAS) No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (EBP SAS), as amended, is effective for audits of financial statements for periods ending on or after December 15, 2021. Early implementation is permitted. The EBP SAS prescribes certain new performance requirements for an audit of financial statements of employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and changes the form and content of the related auditor’s report. It should not be adapted for plans that are not subject to ERISA. The EBP SAS, as amended, has been codified in new AU-C section 703 of the AICPA Professional Standards.
The EBP SAS, as amended, specifically addresses requirements for:
- Engagement acceptance
- Audit risk assessment and response, including the auditor’s consideration of relevant plan provisions
- Communications of reportable findings with those charged with governance
- The auditor’s responsibilities relating to the ERISA-required supplemental schedules and the Form 5500
- The form and content of the related auditor’s report
Formerly referred to as a “limited-scope audit,” the EBP SAS refers to this type of audit as an “ERISA section 103(a)(3)(C) audit.” The EBP SAS clarifies what is expected of the auditor, including specific procedures when performing an ERISA section 103(a)(3)(C) audit, and establishes a new form of report that provides greater transparency about the scope and nature of the audit and describes the procedures performed on the certified investment information.
New FAQ for EBP Auditors
In September 2021, the AICPA issued a new resource for auditors of ERISA plan financial statements. The Employee Benefit Plans Industry FAQ with Illustrative Auditor’s Reports for Initial Year of Implementation of SAS No. 136, as Amended, provides nonauthoritative guidance on auditor’s reports for the initial implementation year of the SAS No. 136, as amended. Because ERISA requires the presentation of certain comparative financial statements, this resource provides the auditor with illustrations and options for reporting during the implementation year of SAS No. 136, as amended.