Friday, May 20, 2011

Significant Changes in Redrafted SAS on Risk Assessment

SAS, Planning an Audit (AU section 311) (Redrafted)

(1) The ASB proposes to delete Paragraphs .05–.10 of AU section 311, Planning and Supervision, which address the auditor’s responsibilities about the early appointment of the independent auditor and establishing the terms of the engagement. These requirements are expected to be included in the proposed SAS, Terms of the Engagements, in connection with the convergence with ISA 210 (Redrafted), Agreeing the Terms of Audit Engagements.
(2) The ASB proposed to delete Paragraphs .28–.32 of AU section 311 which covers supervision in an audit. It is expected that these requirements and guidance will be included in proposed SAS, Quality Control for Audit Engagements, in connection with convergence with ISA 220 (Redrafted), Quality Control for an Audit of Financial Statements.

SAS, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (AU section 314) (Redrafted)

(1) Most of the paragraphs written in the form of presumptive and mandatory requirements, particularly in the content dealing with internal control are proposed to be moved to application guidance because the ISA was drafted in a more principles based manner.
(2) Paragraph .19 of AU section 314 contains a requirement of the auditor to perform the audit with professional skepticism. This requirement is proposed to be deleted from AU section 314 because it is addressed by the proposed SAS, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Generally Accepted Auditing Standards.
(3) Paragraph .45 of AU section 314 contains a requirement that the auditor consider whether the entity has disclosed a particular matter appropriately. This requirement is proposed to be deleted because it is expected that this requirement will be addressed when AU section 508, Reports on Audited Financial Statements is redrafted.
We have modified the ASB's Roadmap to Redrafted SASs to include the numbers of existing SASs linked to redrafted and clarified SASs. For a free email copy, please send a request to larry@cpafirmsupport.com.

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