In 2019 the AICPA introduced a new Statement on Auditing Standards 134, Auditor Reporting and Amendments, Including Addressing Disclosures in the Audit of Financial Statements. The main provisions of SAS 134 included the following, according to AICPA Insights:
- A specific order which placed the Opinion section first, followed by the Basis for Opinion after.
- To that end, the Basis of Opinion was introduced as a new section.
- Enhanced reporting for going concerns, including information regarding management’s responsibilities to discern whether conditions or events raise substantial doubt as to whether a company has staying power.
- Revisions to the auditor’s responsibilities section.
- A framework for determining, communicating and documenting key audit matters (KAM)1.
MICPA member and CEO of Gnosis Praxis Ltd. Gerald W. Hepp, CPA, said of the revisions, “The disclosure of key audit matters is something that potentially will be very useful to users of financial statements but inclusion of the information in the audit report will be controlled by the entity’s management.”
Hepp, a Plante & Moran retired partner, and Alan Reinstein, George R. Husband Professor of Accounting at the Mike Ilitch School of Business Administration at Wayne State University, discuss the major revisions to the auditor’s report caused by SAS 134 and SAS 135, Omnibus Statement on Auditing Standards, 2019, in a recent article published in The CPA Journal.
“Significant study will be necessary to ensure appropriate attention to all aspects of the new standard,” Hepp further explained, adding, “I believe the new audit report supports the importance of the CPA’s opinion on financial statements.”
Indeed, according to the Journal of Accountancy, the new standards are meant to “enhance the communicative value of the auditor’s report” as well as better align with generally accepted auditing standards (GAAS). While implementation of these standards was delayed by one year due to the coronavirus pandemic, so far, the SASs are effective for audits of financial statements for calendar year-end 20212.
Those wanting to refresh their knowledge on SAS 134 and SAS 135 will want to visit Hepp and Reinstein’s report on all the major revisions impacting the auditor’s report. Their article can be found here.
Gerald W. Hepp, CPA, is the CEO of Gnosis Praxis Ltd., Novi, Mich. He was a partner and in charge of professional standards at Plante & Moran until 1999, after which he continued with the company for another 10 years.
Alan Reinstein, CPA, DBA, is the George R. Husband Professor of Accounting in the Mike Ilitch School of Business Administration at Wayne State University, Detroit, Mich. He was awarded the 2011 MICPA Distinguished Service Award and served as member of the MICPA Board of Directors from 1991-1997.
References
- AICPA Communications Team. “5 Things You Need to Know About the New Auditor Reporting Standards…” AICPA Insights. 16 Jul. 2019. Accessed on 13 Apr. 2021.
- Dohrer Bob, et al. “What CPAs Should Consider Before Deferring…” Journal of Accountancy. 14 May 2020. Accessed on 13 Apr. 2021.