The American Institute of CPAs launched a brand new customary to assist auditors assess the dangers of fabric misstatement.
The brand new Assertion on Auditing Requirements (SAS) No. 145, goals to enhance the necessities and steerage associated to an auditor’s danger evaluation, particularly with regards to gaining a greater understanding of a enterprise’s system of inner controls and assessing the assorted management dangers. The brand new steerage offers with the financial, technological and regulatory elements of the markets and atmosphere by which entities and audit companies function.
The AICPA’s Auditing Requirements Board labored on the usual in response to the outcomes of some peer opinions final yr that discovered deficiencies within the auditor’s danger evaluation procedures. They wished to modernize the usual in relation to data expertise issues, together with the dangers arising from an entity’s use of IT and figuring out the dangers of a cloth misstatement.
SAS No. 145 additionally consists of revised necessities to guage the design of some controls, together with expertise controls, and to find out whether or not the controls have been carried out. There’s additionally a brand new requirement to individually assess the inherent dangers and management dangers, together with a brand new requirement to evaluate management dangers on the most stage so, if the auditor doesn’t plan to check the working effectiveness of the controls, the evaluation of the danger of fabric misstatement could be the identical because the evaluation of inherent danger. There’s additionally a revised definition of “important danger,” together with new steerage on scalability {and professional} skepticism. As well as, SAS No. 145 comprises a brand new “stand-back” requirement to encourage auditors to do extra to determine important transactions, account balances and disclosures. The usual additionally consists of revised necessities pertaining to audit documentation, together with an modification to undertake substantial procedures for every related assertion of each important class of transactions, account stability and disclosure, it doesn’t matter what stage of management danger.
“SAS No. 145 doesn’t essentially change the important thing ideas underpinning audit danger, which is a perform of the dangers of fabric misstatement and detection danger,” mentioned the doc. “Relatively, SAS No. 145 clarifies and enhances sure elements of the identification and evaluation of the dangers of fabric misstatement to drive higher danger assessments and, due to this fact, improve audit high quality.”
The brand new customary turns into efficient for audits of monetary statements for intervals ending on or after Dec. 15, 2023.