Academic journal article Journal of Accountancy

Statement on Auditing Standards - Communicating Internal Control Related Matters Identified in an Audit (Redrafted)

Academic journal article Journal of Accountancy

Statement on Auditing Standards - Communicating Internal Control Related Matters Identified in an Audit (Redrafted)

Article excerpt

Statement on Auditing Standards (SAS) Communicating Internal Control Related Matters Identified in an Audit (Redrafted) supersedes SAS No. 115, Communicating Internal Control Related Matters Identified in an Audit (AICPA, Professional Standards, vol. 1, AU sec. 325).

CONTENTS

Introduction
Scope of This Statement on Auditing
  Standards/1-4
Effective Date/5
Objective/6
Definitions/7
Requirements
Determination of Whether Deficiencies in
  Internal Control Have Been Identified/8
Evaluating Identified Deficiencies in Internal
  Control/9-10
Communication of Deficiencies in Internal
Control/11-16
Application and Other Explanatory Material
Determination of Whether Deficiencies in
  Internal Control Have Been Identified/A1-A4
Evaluating Identified Deficiencies in Internal
  Control/AS-A14
Communication of Deficiencies in Internal
  Control/A15-A36
Exhibit A: Illustrative Written
  Communication/A37
Exhibit B: Illustrative No Material Weakness
  Communication/A38
Exhibit C: Examples of Circumstances That May
  Be Deficiencies, Significant Deficiencies, or
  Material Weaknesses/A39
Exhibit D: Comparison of Statement on Auditing
  Standards Communicating Internal Control
  Related Matters Identified in an Audit
  (Redrafted) With International Standard on
  Auditing 265, Communicating Deficiencies in
  Internal Control to Those Charged with
  Governance and Management/A40

INTRODUCTION

Scope of This Statement on Auditing Standards

1. This Statement on Auditing Standards (SAS) addresses the auditor's responsibility to appropriately communicate to those charged with governance and management deficiencies in internal control that the auditor has identified in an audit of financial statements. This SAS does not impose additional responsibilities on the auditor regarding obtaining an understanding of internal control or designing and performing tests of controls over and above the requirements of the clarified SASs Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (Redrafted) and Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained (Redrafted). The clarified SAS The Auditor's Communication With Those Charged With Governance (Redrafted) establishes further requirements and provides guidance regarding the auditor's responsibility to communicate with those charged with governance in relation to the audit.

2. The auditor is required to obtain an understanding of internal control relevant to the audit when identifying and assessing the risks of material misstatement. (1) In making those risk assessments, the auditor considers internal control in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of internal control. The auditor may identify deficiencies in internal control not only during this risk assessment process but also at any other stage of the audit. This SAS specifies which identified deficiencies the auditor is required to communicate to those charged with governance and management.

3. Nothing in this SAS precludes the auditor from communicating to those charged with governance or management other internal control matters that the auditor has identified during the audit.

4. This SAS is not applicable if the auditor is engaged to report on the effectiveness of an entity's internal control over financial reporting under AT section 501, An Examination of an Entity's Internal Control Over Financial Reporting That Is Integrated With an Audit of Its Financial Statements (A1CPA, Professional Standards, vol. 1).

Effective Date

5. This SAS is effective for audits of financial statements for periods ending on or after December 15, 2012.

OBJECTIVE

6. The objective of the auditor is to appropriately communicate to those charged with governance and management deficiencies in internal control that the auditor has identified during the audit and that, in the auditor's professional judgment, are of sufficient importance to merit their respective attentions. …

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