Audit Opinions: Changes from Numerous ASB Statements

by Nancy J. Stempin, CPA, CGMA, CIDA | Mar 01, 2021

The AICPA Auditing Standards Board (ASB) issued SAS No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements in May 2019. It was originally effective for audits of financial statements for periods ending on or after Dec. 15, 2020, but implementation was delayed for one year until Dec. 15, 2021. “The new standard will benefit users of audited financial statements throughout the U.S. by placing the auditor’s opinion at the front of the report for added visibility and providing necessary transparency into the basis for the auditor’s opinion and the responsibilities of both entity management and auditors,” said Robert Dohrer, CPA, CGMA, AICPA’s chief auditor.1 There are five key changes within the new standard with targeted enhancements to communicate the value of the auditor’s report: 
• The order of sections will change. It will start (rather than end) with the opinion. 
• The Basis for Opinion section states the auditor must be independent and ethically can only reach a conclusion of a clean opinion based on review of appropriate documentation. 
• The Responsibilities of Management for the Financial Statements section states the requirements of management, including the evaluation of conditions and events that might give rise to questions about the company’s ability to continue as a going concern, along with a conclusion as to the probability of mitigating and reducing to an acceptable level the effects of any such conditions. Under SAS No. 134, this will be a required disclosure: currently, it is only included if there are questions or issues. 
• The Auditor’s Responsibilities for the Audit of Financial Statements section states the requirements of the auditor for evaluation of judgments, estimates, internal control, and risks, which includes the evaluation of conditions and events that might give rise to going concern questions. It will be a required disclosure; today, it is only included if there is an issue. 

• 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.

What Are KAMs?

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.

Changes to the Report on Another Comprehensive Basis of Accounting

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 137’s Impact on Opinion

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.

What Auditors Should Be Doing Now

Transparency has been the thread running through all the recent SASs. Now is the time to share the form and content of the new opinion with those charged with governance and to share the changes with potential users of the statements. 
Become familiar with the more detailed aspects designed to align ASB guidance more closely with that of the Public Company Accounting Oversight Board, and focus on the auditor’s communication with those charged with governance and related parties, as well as consideration of fraud in a financial statement audit.  

1 AICPA press release, AICPA’s Auditing Standards Board Issues Suite of Standards on Auditor Reporting (2019).

Nancy J. Stempin, CPA, CGMA, CIDA, is director of technical accounting at Brown Schultz Sheridan & Fritz, headquartered in Camp Hill, as well as an adjunct professor at Fairleigh Dickinson University in Madison, N.J. She can be reached at

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