audit methodology

To help auditors in the CPA community, the AIPCA peer review staff publishes PR Prompts, a newsletter with information for firms providing audits, review, compilations, and other attestation services.

The newsletter is unbranded and AICPA gives explicit permission to peer reviewers to put their logo and branding information on the newsletter. Those of us who are peer reviewers have specific permission to send it to our clients.

I will present their comments in four posts:

• New audit standards.
• New accounting rules effective this year.
• New accounting rules coming into play over next few years.
• Tips for firms in peer review program.

One section of the newsletter provides a condensed introduction to new audit standards that will be required for our upcoming year end audits.

If you are an auditor, you really need to become familiar with the whole string of SASs, from #134 through #140 before you dig into your year end engagements.

The following comments are provided to you courtesy of the AICPA.  I gratefully acknowledge their work in preparing this info and gladly share it with you. For ease of reading, I will not put all the following material in quotations.

PR Prompts – Fall 2021:

New Standards

SAS No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, as amended

Required implementation is right around the corner for Statement on Auditing Standards (SAS) No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements. SAS No. 134, as amended, is effective for audits of financial statements for periods ending on or after December 15, 2021, with early implementation permitted.

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Brief overview of new rules for audits of 12/31/21 financial statements.Read More »

Note:  This discussion is cross posted from my other blog, Nonprofit Update because it provides a live-action illustration of rationalization. Auditors study the concept of rationalization because that is a factor we consider when thinking through fraud risk assessment during an audit. Part 2 of this series is cross posted here. Exercise for CPAs is to read these two posts, then identify multiple points where the rationalization thought process transforms inappropriate actions into acceptable behavior. 

It is taking more and more time to keep up with the political and public health leaders who don’t bother to comply with the recommendations they give us.

This time it is Dr. Deborah Birx who blew off the travel restrictions and gathering size limits at Thanksgiving. Oh, pardon me. It doesn’t count as a Thanksgiving trip since she traveled to her destination the day after Thanksgiving.

Saddest part of this example of hypocrisy is it took place after a large volume of other supposed leaders drew massive criticism for ignoring the rules. It isn’t as if every political and public health leader hasn’t been given notice their behavior is being observed.

Scariest part is her rationalization that there was absolutely nothing wrong with the trip.

Last point in this discussion is the wish that every American had the same freedom she has exercised. Specifically, the freedom to make our own decisions on what is best for our family given our circumstances.

12/20/20 – Associated Press – Birx travels, family visits highlight pandemic safety perils – The day after Thanksgiving, Dr Deborah Birx, coordinator for the official White House coronavirus response team, traveled from her D.C. home to her vacation home in Delaware. Joining her in Delaware were her husband, daughter, son-in-law, and two grandchildren. While in Delaware they ate meals together for two days.

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The parade of alleged leaders who ignore their own Covid recommendations keeps growing.Read More »

In May 2019, the Auditing Standards Board issued Statement on Auditing Standards Number 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements.

SAS 134 will make a lot of changes to auditing standards. The most visible impact likely will be complete revision of the audit report.

You can download a copy of SAS 134 at this link

SASs 135 through 140 also make lots of changes in audit procedures. A lot.

All of the documents are interrelated and will be effective at the same time.

Over the next year or two I will probably write more posts talking about the changes. For the meantime here’s an illustration of what the new report will look like.

Effective date

As issued initially, the effective date would have been for audits of years ending on or after December 15, 2020. First financial statements affected would be December 31, 2020.

Then the pandemic hit.

In May 2020, the ASB issued SAS #141, Amendment to the Effective Dates of SAS Nos. 134-140.

You can download a copy here. This pronouncement defers effective dates of SAS 134 through 140 by one year.

All of them will now be effective for years ending on or after December 15, 2021. That means the long series of SASs will first be required for audits of December 31, 2021 financial statements.

Another change made by SAS 141 is the series of SAS may now be early implemented. This allows firms who were well underway towards implementation on 12/31/20 audits to continue their transition.

Sample of revised audit report

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New audit report under SAS 134.Read More »

So far in July, the AICPA has issued two new auditing standards:

• Statement on Auditing Standards No. 143, Auditing Accounting Estimates and Related Disclosures
• Statement on Auditing Standards No. 142, Audit Evidence

The AICPA provides a list of Recently Issued Auditing and Attestation Standards: Information and Resources.

I will try to provide a condensed description of the condensed summary provided in the At a Glance press releases linked above.

Audit Evidence

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New standards on audit evidence and auditing estimates: SASs 142 and 143Read More »

Description of research tools for auditors working in the IT area is courtesy of the AICPA’s Spring 2020 PR Prompts! newsletter. The format of the newsletter is set up to allow firms who provide peer reviews to put their logo and branding information at the top of the newsletter, print it, and send it to all their clients.

Since the AICPA is making it available for firms to use in their marketing, an extract follows.

For ease of reading, following text will not be put into quotation marks even though it is a verbatim quote from the AICPA.

 

Digital Assets

The digital asset ecosystem is changing and expanding rapidly. For financial statement preparers or auditors, either currently in the digital asset ecosystem, or considering entering it, the AICPA’s Digital Assets Working Group developed a practice aid, which includes vital information for you on how to account for and audit digital assets. It is intended for those with a fundamental knowledge of blockchain technology, is based on existing professional literature and the experience of members of the Digital Assets Working Group and is specific to U.S. GAAP and GAAS.

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IT tools for auditors – Extract from PR Prompts!, part 4Read More »

Following news on variety of audit issues is courtesy of the AICPA’s Spring 2020 PR Prompts! newsletter. The format of the newsletter is set up to allow firms who provide peer reviews to put their logo and branding information at the top of the newsletter, print it, and send it to all their clients.

Since the AICPA is making it available for firms to use in their marketing, an extract follows.

For ease of reading, following text will not be put into quotation marks even though it is a verbatim quote from the AICPA.

 

Resources from the AICPA’s Enhancing Audit Quality(EAQ) Initiative

Through the EAQ,  the AICPA shares resources and education to help you avoid the most common audit quality issues. Check out the latest resources:

COVID-19 Audit Implications

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Resources for auditors during pandemic – Extract from PR Prompts!, part 3Read More »

Following news on deferral of a long string of major SASs is courtesy of the AICPA’s Spring 2020 PR Prompts! newsletter. The format of the newsletter is set up to allow firms who provide peer reviews to put their logo and branding information at the top of the newsletter, print it, and send it to all their clients.

Since the AICPA is making it available for firms to use in their marketing, an extract follows.

For ease of reading, following text will not be put into quotation marks even though it is a verbatim quote from the AICPA.

Ready, Set, Implement: News on A&A Standards

Deferral of effective dates for SAS Nos. 134-140

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Deferral of SASs #134 to #140 – Extract from PR Prompts!, part 2Read More »