Statement on Auditing Standards, Engagements to Report on Summary Financial Statements

1. This SAS:

a) Superseded SAS No. 42, Reporting on Condensed Financial Statements and Selected Financial Data (AICPA, Professional Standards, vol. 1, AU sec. 552).

b) Redrafted AU section 552 to apply the ASB’s clarity drafting conventions and to converge with International Standards on Auditing (ISAs).

2. Convergence

a) Drafted using ISA 810, Engagements to Report on Summary Financial Statements, as a base.

b) Differences between this SAS and ISA 810 for which the ASB believes no compelling reason exists for the difference have been eliminated.

c) The ASB has made various changes to the language of the ISA to use terms or phrases that are more common in the United States, and to tailor examples and guidance to the U.S. environment.

3. Effective Date

The SAS will be effective for audits of financial statements for periods ending on or after December 15, 2012.

4. Changes From Existing Standards

In converging with ISA 810, the proposed SAS:

a) addresses the auditor’s responsibilities for specified procedures and reporting formats when reporting on summary financial statements derived from financial statements audited by that same auditor.

b) Procedures required:

(1) requires the auditor to determine whether the criteria applied by management in the preparation of the summary financial statements are acceptable.

(2) requires the auditor to obtain management’s agreement that it acknowledges and understands its responsibilities for the summary financial statements, including its responsibility to make the audited financial statements readily available to the intended users of the summary financial statements. The audited financial statements need not accompany the summary financial statements.

(3) requires the auditor to request management to provide, in the form of a representation letter addressed to the auditor, written representations relating to the summary financial statements.

(4) stipulates specific procedures to be performed as the basis for the auditor’s opinion on the summary financial statements.

c) Reporting requirements. In addition to standard reporting elements the new standard:

(1) eliminates reporting on selected financial data

(2) stipulates specific elements of the auditor’s report, including management’s responsibility and a description of the auditor’s procedures.

(3) requires the auditor to deny an opinion on the summary financial statements when the auditor issued an adverse opinion or disclaimer of opinion on the audited financial statements. This type of report will require the auditor to:

(a) state that the auditor’s opinion on the audited financial statements contains an adverse opinion or disclaimer of opinion

(b) describe the basis for that adverse or disclaimer of opinion.

(c) state that, as a result of the adverse opinion or disclaimer of opinion, it is inappropriate to express, and the auditor does not express an opinion on the summary financial statements. The auditor is not required to include the paragraph describing the procedures. However the auditor should indicate that the report is prepared in accordance with the standards established by the American Institute of Certified Public Accountants.

d) clarifies the auditor’s responsibilities related to subsequent events and subsequently discovered facts when the date of the auditor’s report on the summary financial statements is later than the date of the auditor’s report on the audited financial statements.

e) includes requirements relating to comparatives, unaudited information presented with summary financial statements, and other information included in a document containing the summary financial statements and related auditor’s report.