It’s a fact: auditor reports continue to change — even the opinions.
For entities with a December 31, 2021, year-end or later, there are notable changes to reports’ “Opinion” section and other areas that must be implemented. Read on for why and what the changes look like.
In May of 2019, the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants issued Statement on Auditing Standards (SAS) No. 134, Auditor Reporting and Amendments, including Amendments Addressing Disclosures in the Audit of Financial Statements. This new standard makes changes to the layout of the report, as well as the information required to be presented in all auditor reports issued under generally accepted auditing standards (GAAS).
SAS 134 was issued by the ASB to make the auditor’s opinion more closely aligned with the auditor’s reporting standards of the International Auditing and Assurance Standards Board and the Public Company Accounting Oversight Board.
The revised reporting is intended to enhance value to the audited financial statements’ users by providing more transparency, more information about the auditor’s responsibility and new guidance for the form and content of the auditor’s report.
An example opinion for ABC Company, a Pennsylvania S corporation with a December 31, 2021, year-end is included. Among the changes you’ll see reflected in the example:
- The “Opinion” section of the report is to be presented first (previously it was last), followed by the “Basis for Opinion” section.
- The “Basis of for Opinion” section must include a statement that explains the auditors are required to be independent of the entity and meet other ethical requirements. There also must be a statement that says auditor believes the audit evidence is sufficient and appropriate for the opinion given.
- The description in the “Responsibilities of Management” section is expanded to include management’s responsibility to evaluate whether there are going concerns about conditions or events.
- The description in the “Auditor’s Responsibilities” section is expanded to include the auditors’ use of professional judgement and maintenance of professional skepticism, the evaluation of going concern and required communication with those charged with governance, to name a few.
The effective date of SAS 134 is for the audits of financial statements for periods ending on or after December 15, 2021.
For more on these changes, further audit assistance or to chat with our team, schedule a call today.