AICPA Proposes Seven SASs Related to Audit Risk

The American Institute of CPAs (AICPA) released an exposure draft of seven proposed Statements on Auditing Standards (SASs) related to audit risk. The proposed standards are designed to enhance the auditor's use of the audit risk model and improve the effectiveness of audits. They are also likely to increase the overall work effort by the audit team, particularly for new engagements and when first implemented on continuing engagements.

The proposed standards would require:

  • More in-depth understanding of the entity and its environment, including its internal control, to identify the risks of material misstatement in the financial statements and what the entity is doing to mitigate them.
  • More rigorous assessment of the risks of a material misstatement of the financial statements based on the above understanding.
  • Improved linkage between the assessed risks and the nature, timing, and extent of audit procedures performed in response to those risks.

The proposals were developed jointly with the International Auditing and Assurance Standards Board of the International Federation of Accountants. Key changes in audit practice that the proposed standards are expected to achieve are summarized in the document. Among other things, the key changes include greater emphasis on the entity's risk assessment process and on the testing of disclosures. Documentation requirements are also significantly expanded.

The proposed effective date is for audits of financial statements for periods beginning on or after December 15, 2004.

Download the exposure draft. Comments are due by April 30, 2003 to Julie Anne Dilley.

-Rosemary Schlank

You may like these other stories...

In a letter sent to Congress last week, the American Institute of CPAs (AICPA), the Virgin Islands Society of CPAs (VISCPA), and the Guam Society of CPAs (GSCPA) sought clarification regarding net investment income tax (NIIT...
The American Institute of CPAs (AICPA) on Thursday released a discussion paper seeking input from CPAs, regulators, financial statement users, and others in the profession on how better audit performance of private entities...
Recently, there has been a lot of buzz about the future of continuing professional education (CPE). The American Institute of CPAs (AICPA) created a task force on the Future of Learning with an accompanying fancy website. In...

Already a member? log in here.

Upcoming CPE Webinars

Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.