The American Institute of Certified Public Accountants recently issued Statement on Auditing Standards (SAS) No. 150, External Confirmations, which amends AU-C section 505, External Confirmations, and other related auditing standards, including AU-C section 330, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained, and AU-C section 500, Audit Evidence. SAS No. 150 modernizes the confirmation guidance to address changes in technology, the use of intermediaries and evolving audit evidence practices. The standard is intended to improve the relevance and reliability of audit evidence obtained through external confirmation procedures and clarifies auditor responsibilities when designing and performing confirmation procedures, evaluating responses and considering whether information obtained directly from a knowledgeable external source may satisfy certain confirmation requirements.
Key changes include:
- Requiring external confirmation procedures for cash and cash equivalents held by third parties to respond to the assessed risks of material misstatement unless specific exceptions apply.
- Adding guidance on directly accessing information maintained by a knowledgeable external source.
- Expanding guidance on the use of intermediaries and the reliability of electronic confirmation responses.
- Requiring certain new conditions to be met when using negative confirmation requests to address an assessed risk of material misstatement.
SAS No. 150 is effective for audits of financial statements for periods ending on or after December 15, 2028.
