Discusses the significance of multiple ASB standards, including SAS 137’s impact on opinion and actions auditors should be taking right now to be prepared.
by Nancy J. Stempin, CPA, CGMA, CIDA Mar 1, 2021, 08:29 AM
• The Key Audit Matters (KAM) section will need to be communicated from the auditor to client management. In certain circumstances, KAMs should be included in the opinion.
KAMs are considered matters that, in the auditor’s professional judgment, were of most significance in the audit of the financial statements of the current period. KAMs are selected from matters communicated with those charged with governance. Examples include areas of higher risk, areas of significant judgment, and the effect on the audit of significant events or transactions.
KAMs will need to be discussed between the auditor and client management. However, inclusion in the audit report will be determined as part of the engagement. These will likely be similar to the critical audit matters used today with those charged with governance. Communication of KAMs does not substitute for, nor mitigate, necessary disclosures or modifications to the auditor’s report.
SAS No. 139, Amendments to AU-C Sections 800, 805 and 810 to Incorporate Auditor Reporting Changes from SAS No. 134, is designed to assess the impact of SAS No. 134 on areas of guidance on special considerations, specifically special purpose frameworks, specific elements, accounts, or items of a financial statement. The outline of the design of a report on a special purpose framework (SPF), most commonly cash basis or tax basis, is similar to SAS No. 134. The biggest exception is the inclusion of an emphasis of matter paragraph after the basis of opinion and prior to the responsibilities of management. This inclusion explains the basis of accounting and states that it is other than generally accepted accounting principles. The responsibility of management section requires reference to the special basis of accounting.
Perhaps the biggest difference to SAS No. 134 is the responsibility of management section, which does not include an explicit going concern assessment. SAS No. 139 was issued in March 2020 and, like SAS No. 134, takes effect for audits of financial statements for periods ending on or after Dec. 15, 2021.
SAS No. 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports, is designed to help the auditor identify at what point, before the date of the report, the auditor has obtained other information, if any. If it was obtained, it should be noted in an Other Matter section in the report below the auditor’s responsibility section. SAS No. 137 was issued in July 2019 and it too will take effect for audits of financial statements for periods ending on or after Dec. 15, 2021.
1 AICPA press release, AICPA’s Auditing Standards Board Issues Suite of Standards on Auditor Reporting (2019).
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