Magazine article The CPA Journal

Audited Financial Statements and the World Wide Web

Magazine article The CPA Journal

Audited Financial Statements and the World Wide Web

Article excerpt

Private companies have joined public companies in presenting audited financial statements on their websites. There are many questions regarding the auditor's responsibility and how much involvement, if any, the auditor should have with information included on a client's website.

The Electronic Dissemination of Audited Financial Information Task Force (task force) of the AICPA's Auditing Standards Board was formed to monitor developments in this arena. The task force, in conjunction with the Steering Group of the Illinois CPA Society's Accounting and Assurance Services Network, prepared a questionnaire to gather the views and comments of the membership regarding this complex topic. As a result of the questionnaire, it was apparent that additional guidance was needed with respect to the CPA's responsibilities under Statements on Auditing Standards (SAS) No. 8, Other Information in Documents Containing Audited Financial Statements, and its Interpretation #4, Other Information in Electronic Sites Containing Audited Financial Statements. The respondents also requested guidance about the procedures, if any, that a CPA should perform if a client plans on electronically disseminating audited financial statements.

SAS No. 8

SAS No. 8 is "applicable only to other information contained in a) annual reports to holders of securities of beneficial interest, annual reports of organizations for charitable or philanthropic purposes distributed to the public, and annual reports filed with regulatory authorities under the Securities Exchange Act of 1934 or b) other documents to which the auditor, at the client's request, devotes attention." Under SAS No. 8, the auditor's responsibility for other information in a document containing audited financial statements does not extend beyond the financial information identified in his or her report, and the auditor has no obligation to perform any procedures to corroborate other information contained in such a document. However, the auditor should read the other information and consider whether such information (or the manner of its presentation) is materially inconsistent with information (or the manner of its presentation) appearing in the financial statements. SAS No. 8 was issued in 1975, when the concept of electronically disseminated audited financial statements was not contemplated.

In March of 1997, the Audit issues Task Force of the Auditing Standards Board issued an interpretation of SAS No. 8 that addressed electronically disseminated financial information. The interpretation addressed the question, "When audited financial statements and the independent auditor's report thereon are included in an electronic site, what is the auditor's responsibility with respect to other information included in the electronic site?"

This interpretation explains that electronic sites are a means of distributing information and are not considered documents as that term is used in SAS No. 8. Therefore, the auditor is not required to read information contained in electronic sites or to consider the consistency of other information in such sites with the original documents. In this interpretation, annual reports, financial statements, and auditors' reports are included in the concept of "information."

Open Issues

Although the interpretation is clear as to the auditor's responsibility with respect to other information in electronic sites, the results of the questionnaire indicate that there are still unanswered questions regarding this topic. The following are issues that were raised by respondents to the questionnaire:

Issue 1: What was the basis for the conclusion reached in Interpretation #4 to SAS No. 8, Other Information in Electronic Sites Containing Audited Financial Statements?

Discussion: On a given website, there may be no clear boundaries between the audited financial statements and other financial or nonfinancial information. …

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