United States

ASB issues auditor reporting standard


The Auditing Standards Board (ASB) has monitored the auditor reporting projects of the International Auditing and Assurance Standards Board (IAASB) and the Public Company Accounting Oversight Board, as well as the IAASB’s project addressing the auditor’s focus on financial statement disclosures. After considering the implications of these projects on audits of nonissuers, the ASB recently issued Statement on Auditing Standards (SAS) 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, which supersedes AU-C sections 700, 705 and 706. Following is a brief summary of some changes resulting from the issuance of SAS 134, among many others:

  • The SAS provides some changes to the format of and verbiage used in the auditor’s report issued for audits of nonissuers, including, among others:
    • The auditor’s opinion is presented in the first section of the auditor’s report.
    • The descriptions of the responsibilities of management and the auditor are expanded.
  • Auditors of nonissuers may be engaged to communicate key audit matters, defined as those matters that, in the auditor’s professional judgment, were of most significance in the audit. Key audit matters are selected from matters communicated with those charged with governance.
  • If, after considering identified conditions or events and management’s plans, the auditor concludes that substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time remains, the auditor should include a separate section in the auditor’s report under the heading “Substantial Doubt About the Entity’s Ability to Continue as a Going Concern” instead of an emphasis-of-matter paragraph.
  • The auditor is required to communicate with those charged with governance about the significant risks identified by the auditor as part of the required communication of an overview of the planned scope and timing of the audit.
  • Certain amendments are intended to focus the auditor’s attention on disclosures earlier in the process of auditing financial statements.

SAS 134 is effective for audits of financial statements for periods ending on or after December 15, 2020.