Are You Ready? Changes Coming to Form, Content of Auditor’s Reports
The form and content of the auditor’s reports is about to change substantively, which will be effective for audits of financial statements for periods ending on or after December 15, 2020. The changes stem from Statement on Auditing Standards (SAS) No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, which 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, which 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.
Click Here for Other Upcoming Changes to the Peer Review Process
The AICPA’s Auditing Standard Board also has 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.
Need help with your peer review process, either getting started, properly documenting work or navigating the standard changes? We’re here to help!
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