The Auditing Standards Board (ASB) of the AICPA has published two new and long-awaited Statements on Auditing Standards (SAS), SAS 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, and No. 135, Omnibus Statement on Auditing Standards — 2019.
The issuance of SAS 134 marks the completion of auditor reporting standards for the three major standard setters (AICPA, PCAOB, and IAASB). These changes are intended to enhance the relevance and usefulness of the auditor’s report and provide financial statement users with more meaningful information about the audit. The new auditor reporting standards will result in the first significant changes to auditor’s reporting in decades, most notably the re-ordering of report sections, and when applicable, the reporting of key audit matters.
SAS 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements
The new auditor reporting standard makes important changes to the requirements for the form and content of the auditor’s report issued as a result of an audit of financial statements. In addition, it addresses the auditor’s responsibilities to form an opinion on the financial statements.
Most significantly, SAS 134 moves the opinion section, requiring that it be the first section presented in the auditor’s report. This is designed to provide both added visibility and transparency. The opinion is to be followed the basis for opinion section and then separate sections for responsibilities of management and auditors, respectively.
SAS 134 applies to an audit of a complete set of general purpose financial statements. It does not apply when the auditor is forming an opinion and reporting on financial statements of employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (ERISA). Although the AICPA has not yet issued it, a new SAS, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, will apply in that situation.
SAS 134 adopts new AU-C Section 701, Communicating Key Audit Matters in the Independent Auditor’s Report, and supersedes the following AU-C sections:
- AU-C section 700, Forming an Opinion and Reporting on Financial Statements;
- AU-C section 705, Modifications to the Opinion in the Independent Auditor’s Report; and
- AU-C section 706, Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs in the Independent Auditor’s Report.
In addition to superseding these sections, SAS-134 also amends:
- AU-C Section 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards
- AU-C Section 210, Terms of Engagement
- AU-C Section 220, Quality Control for an Engagement Conducted in Accordance With Generally Accepted Auditing Standards
- AU-C Section 230, Audit Documentation
SAS 134 also adds AU-C Sections 700A, 9700A, 705A, and 706A to retain currently effective guidance until the effective date of SAS 134.
SAS 135, Omnibus Statement on Auditing Standards—2019
The ASB also issued SAS 135, Omnibus Statement on Auditing Standards—2019.One of the objectives of SAS 135 is to more closely align ASB guidance with the PCAOB’s auditing standards. SAS 135 amends the following AU-C Sections of the Auditing Standards Codification:
- AU-C Section 210, Terms of Engagement;
- AU-C Section 240, Consideration of Fraud in a Financial Statement Audit;
- AU-C Section 260, The Auditor’s Communication With Those Charged With Governance;
- AU-C Section 265, Communicating Internal Control Deficiencies Identified in an Audit;
- AU-C Section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement;
- AU-C Section 330, Performing Audit Procedures in Responses to Assessed Risks and Evaluating the Audit Evidence Obtained;
- AU-C Section 510, Opening Balances—Initial Audit Engagements, Including Reaudit Engagements;
- AU-C Section 550, Related Parties;
- AU-C Section 560, Subsequent Events and Subsequently Discovered Facts; Section 580, Written Representations;
- AU-C Section 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors)
- AU-C Section 930, Interim Financial Information; and
- AU-C Section 940, An Audit of Internal Control Over Financial Reporting That Is Integrated With an Audit of Financial Statements.
The provisions of both SAS 134 and 135 are effective for audits of financial statements for periods ending on or after December 15, 2020, with early implementation not permitted.
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