Topics: Auditing, Audit, Financial statements Pages: 12 (3815 words) Published: February 19, 2013

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H IGH LIG HTS AUDITING • The AICPA Auditing Standards Board • A new auditing standard approved unanimously by the PCAOB is de(ASB) issued Statement on Auditing Stansigned to encourage two-way, effective communication between exdards (SAS) No. 126, The Auditor's Considternal auditors and audit committees during public company audits. eration of an Entity's Ability to Continue as a With the aim of improving audit quality, the PCAOB approved Auditing StanGoing Concern (Redrafted), as a result of its dard (AS) No. 16, Communications With Audit Cominittees, and amendments to other Clarity Project to supersede SAS No. 59, The PCAOB standards. AS 16 describes interactions a public company auditor will be Auditor's Consideration of an Entity's Ability to required to have with the audit committee. Continue as a Coing Concern, as amended AS 16 supersedes AU section 310, Appointment of the Independent Auditor, and (AICPA, Professional Standards, AU section AU section 380, Communication With Audit Committees. AU section 380 referred 341 and AU-C section 570). to communication between auditors and audit committees as incidental to the audit. SAS No. 126 does not change or exThe new standard makes it clear that communication is essential to a high-qualipand SAS No. 59, as amended, in any sigty audit. nificant respect. A summary is available at The PCAOB has no jurisdiction over audit committees, so the standard's quirements are aimed strictly at external auditors. The new standard requires auThe ASB moved forward with the clariditors to: ty redraft of SAS No. 59, as amended, so that e Establish the understanding of the terms of the audit engagement with the it is consistent with the format of the other audit committee. The terms of the engagement must be recorded in an enclarified SASs that were recently issued as gagement letter. Previously, AU section 310 had required the understandSAS No. 122, Statements on Auditing Staning to be established with company management rather than the audit dards: Clarification and Recodification\ SAS committee. No. 124, Financial Statements Prepared in Ac• Provide audit committees with an overview of the overall audit strategy, incordance With a Financial Reporting Framecluding the timing of the audit, significant risks the auditor identified, and work Generally Accepted in Another Country, significant changes to the planned audit strategy or risks. and SAS No. 125, Alert That Restricts the Use (Conünued on page 19) of the Auditor's Written Communication. However, the ASB decided to delay convergence with International Standard on AuThe proposal. Omnibus Statement on Au- pose FRF-SME that was expected to be diting 570, Going Concern, pending FASB's diting Standards—2012, would amend SAS ready for exposure in October. The frameanticipated development of accounting No. 122 section 800, Special Considera- work would be defined as a definite set of guidance addressing going concern. tions—Audits of Financial Statements Prepared logical, reasonable criteria that is applied to SAS No. 126 is effective for audits of fi- in Accordance With Special Purpose Frame- all material items appearing in financial nancial statements for periods ending on or works, by denning a new, special-purpose fi- statements. after Dec. 15, 2012. SAS No. 126 is avail- nancial reporting framework for the This definition is similar to one that preable for purchase at cpa2biz.conn by search- purpose of audits. viously had been deleted from AICPA auing for product number ASASST126E Currently, the other special-purpose diting standards because of lack of use. The • Proposed amendments to auditing stan- frameworks included in the AICPA Profes- previous definition, though, gave price-level dards issued by the ASB include changes sional Standards are: accounting as a practical example....
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