Changes in practitioner’s reports

In recent years several new reporting standards have been issued that are soon to be effective and will have a significant impact on practitioners during the upcoming busy season. Below is a summary of the most significant changes to be aware of as you plan and perform your upcoming engagements.

Audit engagements

Statement on Auditing Standards (SAS) 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, was issued in May 2019. Notable changes within this SAS include:

• Requires the “Opinion” section of the report to be presented first followed by the “Basis for Opinion” section. 
• Requires the “Basis for Opinion” section to include a statement that the auditors are required to be independent and that the auditors meet their other ethical responsibilities. Also, the statement that the auditor believes the audit evidence is sufficient and appropriate for the opinion given is moved to this section.
• Allows optional reporting of Key Audit Matters (KAMs) within the auditor’s report only if the auditor is engaged to do so at the start of the audit engagement.
• Requires a separate section of the auditor’s report with the heading “Substantial Doubt About the Entity’s Ability to Continue as a Going Concern” to state substantial doubt exists if the auditor concludes there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time.
• Expands the section on management’s responsibilities to discuss their responsibilities for going concern under the applicable financial reporting framework.
• Expands and revises the section on the auditor’s responsibilities in relation to the audit.

Subsequent to issuance of SAS 134, SAS 136, SAS 137, SAS 138, SAS 139, and SAS 140 were issued to amend certain auditing standards to conform with SAS 134 and revise other aspects of auditor reporting responsibilities and audit reports. SAS 141, Amendment to the Effective Dates of SAS Nos. 134-140, extended the effective date of these SASs to engagements performed for periods ending on or after December 15, 2021, with early adoption permitted.

Compilation and review engagements

Statement on Standards for Accounting and Review Services (SSARS) No. 25, Materiality in a Review of Financial Statements and Adverse Conclusions, was issued in February 2020 and is effective for engagements performed for periods ending on or after December 15, 2021, with early adoption permitted. Notable changes within SSARS 25 for review engagements include:

• Requires standard review reports to include an additional paragraph that includes a statement that the accountant is required to be independent of the entity being reviewed and to meet other ethical responsibilities and comply with ethical requirements.
• Requires expression of an adverse conclusion if financial statements are determined to be materially and pervasively misstated. 
• Requires review report to include a separate section with the heading “Substantial Doubt About the Entity’s Ability to Continue as a Going Concern” if the accountant concludes that substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time remains after considering conditions or events and management’s plans. 

SSARS 25 does not change compilation reporting requirements, except for reports on financial statements prepared using the contractual or regulatory basis of accounting.

PPC’s Guide to Auditor’s Reports provides extensive guidance and numerous illustrative reports concerning the changes made by SAS 134 along with other subsequently issued standards. PPC’s Guide to Compilation and Review Engagements provides extensive guidance and illustrative reports concerning the changes made by SSARS No. 25. Other Thomson Reuters products to aid your audit, review, and compilation engagements include: PPC’s Guide to GAAS, PPC’s Guide to Audits of Nonpublic Companies, PPC’s Guide to Quality Control, PPC’s Guide to Compilation and Review Engagements, and PPC’s Guide to Quality Control – Compilation and Review.

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