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Why Your Auditor Will Soon Ask Different Questions During the Auditing Process



Changes are on the horizon for financial statement audit engagements, which will prompt different questions from your auditor compared to previous years.


The AICPA Auditing Standards Board (ASB) recently issued two standards that will impact future financial statement audits: Statement on Auditing Standards (SAS) No. 142 and SAS No. 145.


SAS No. 142 – Audit Evidence


Poised to modernize private company auditing standards, SAS No. 142 addresses the evaluation of audit evidence and recognizes the critical value that technology and information bring to today’s audit procedures.


The standard:


  • Addresses emerging technologies used by both preparers and auditors — such as automated tools and techniques like audit data analytics, artificial intelligence, and remote observation tools — to obtain audit evidence.

  • Enhances the auditor’s application of professional skepticism and assessment of whether sufficient and appropriate audit evidence has been obtained, along with establishing a multi-faceted consideration of attributes and factors in evaluating such audit evidence.

  • Expands on the sources — both internal and external — and the procedures used to obtain the information to be used as audit evidence.

  • Addresses the accuracy, completeness, relevance, reliability, and authenticity of the audit evidence and its susceptibility to bias.

This new auditing standard is based on guidance as opposed to a formula or step-by-step procedures. It also reconsiders broad generalizations from the existing guidance on which auditors previously relied.


SAS No. 142 will become effective for audits of financial statements for periods ending on or after December 15, 2022.


SAS No. 145 – Risk Assessment


In an effort to improve an auditor’s risk assessment procedures, SAS No. 145 clarifies and enhances requirements and guidance related to assessing an entity’s system of internal control and corresponding audit risk. It also enhances existing guidance that addresses the economic, technological, and regulatory aspects of the markets and environment in which entities and audit firms operate.


The standard revises the auditor’s definition of “significant risk” and includes new guidance on the auditor’s requirement to maintain professional skepticism.


Among other things, SAS No. 145 also includes:


  • Extensive guidance regarding the use of information technology (IT) and the consideration of IT general controls.

  • Revised requirements to evaluate the design and implementation of certain controls within the control activities component.

  • Revised requirements relating to audit documentation and a new requirement to separately assess inherent risk and control risk.

  • A new requirement to separately assess inherent risk and control risk, and new guidance on scalability.

The standard will also require the auditor to perform detailed audit procedures for each relevant financial statement assertion included in the auditor’s risk assessments.


SAS No. 145 will become effective for audits of financial statements for periods ending on or after December 15, 2023.


What to expect


While these new auditing standards do not encompass a complete overhaul of the process to which entities are accustomed, they will help auditors produce a more effective and higher quality financial statement audit. Just be prepared when your auditor starts asking different questions than you may be used to answering.


If you have any questions about the information above, please contact your E. Cohen advisor.