United States

Omnibus Statement on Auditing Standards issued

FINANCIAL REPORTING INSIGHTS  | 

In developing and updating auditing standards, the Auditing Standards Board (ASB) considers, among other matters, the standards of other standard setters, such as the Public Company Accounting Oversight Board (PCAOB). Accordingly, the ASB has reviewed recent PCAOB auditing standards to consider whether the standards include material that, if included in the requirements or application material of U.S. generally accepted auditing standards, would enhance audit quality for audits of nonissuer financial statements in an effective and efficient manner. As a result, the ASB recently issued Statement on Auditing Standards (SAS) 135, Omnibus Statement on Auditing Standards – 2019, which includes the following amendments, among several others:

  • Additional requirements for the auditor to communicate with those charged with governance:
    • Significant unusual transactions
    • Matters that are difficult or contentious for which the auditor consulted outside the engagement team and that are, in the auditor’s professional judgment, significant and relevant to those charged with governance regarding their responsibility to oversee the financial reporting process
    • That uncorrected misstatements or matters underlying those uncorrected misstatements could potentially cause future-period financial statements to be materially misstated, even if the auditor has concluded that the uncorrected misstatements are immaterial to the financial statements under audit
  • Enhanced requirements to identify previously unidentified or undisclosed related parties or significant related party transactions; and enhanced procedures to test the accuracy and completeness of the related parties and relationships and transactions with related parties identified by the entity
  • Required communication to the component auditor about the nature of the entity’s relationships and transactions with those related parties in the list of related parties prepared by group management and any other related parties of which the group engagement team is aware
  • Requirements for basic procedures for obtaining information for evaluating significant unusual transactions

SAS 135 is effective for audits of financial statements for periods ending on or after December 15, 2020.