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AICPA Board Votes to Finalize Standards on Audit Evidence and Auditing Estimates

Thomson Reuters Tax & Accounting  

· 5 minute read

Thomson Reuters Tax & Accounting  

· 5 minute read

By Soyoung Ho

The AICPA’s Auditing Standards Board (ASB) voted to finalize two proposed auditing standards on audit evidence and estimates during a virtual meeting on May 18-21, 2020, according to Ahava Goldman, associate director for audit and attest standards with the Association of International Certified Professional Accountants.

The standards finalize two proposals issued last year with some modifications in response to feedback. The ASB sets standards for private company audits.

In June last year, the AICPA issued Exposure Draft (ED): Proposed Statement on Auditing Standards (SAS), Audit Evidence to revise the guidance for audit evidence to address various audit issues that have cropped up in a fast-changing business environment. The standard revises AU-C Section 500, “Audit Evidence.”

About two months later, the association issued ED: Proposed Statement on Auditing Standards (SAS), Auditing Accounting Estimates and Related Disclosures to improve audits of accounting estimates and encourage auditors to exercise professional skepticism. The standard supersedes SAS No. 122, AU-C Section 540, “Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures.”

Audit Evidence

The current standard, issued in 2011, did not contemplate the increased use of sophisticated technology today. Emerging audit techniques, such as audit data analytics, artificial intelligence, robotic process automation, and blockchain offer both challenges and opportunities that affect audits of financial and nonfinancial information.

AU-C Section 500 currently focuses on the design and performance of audit procedures to obtain sufficient and appropriate audit evidence.

The new standard “explains what constitutes audit evidence in an audit of financial statements and sets out attributes of information that are taken into account by the auditor when evaluating information to be used as audit evidence,” Goldman noted. It “enhances the auditor’s need to maintain professional skepticism and provides guidance on adapting to technology changes.”

The standard will be effective for audits of financial statements for periods ending on or after December 15, 2022. Auditors may implement early.


The AICPA wants auditors to focus on factors driving estimate uncertainty and potential management bias. Company management has an incentive to record estimates that make their books look better. Moreover, inspection findings have shown that this is an area in need of improvement.

The ASB’s standard enhances the auditor’s risk assessment by providing requirements that are more specific to estimates. It also requires a separate assessment of inherent risk and control risk at the assertion level for accounting estimates.

This standard “requires the auditor to focus attention on areas of higher risk, accounting judgement, and possible bias, thereby assisting the auditor to form appropriate conclusions about the reasonableness of estimates in the context of an entity’s financial reporting framework,” Goldman noted.

It becomes effective for audits of financial statements for periods ending on or after December 15, 2023. Auditors can implement it early.

COVID-19 and Effective Dates

AICPA Chief Auditor Bob Dohrer said normally revised standards go into effect 12 to 18 months after a vote to give times for firms to develop training materials and educate their personnel. During that time, third-party methodology providers and tool providers also incorporate the standards in their tools and methodology.

But with the effect of COVID-19, Dohrer said the ASB decided to give a longer preparation time. COVID-19 is the respiratory disease caused by a novel coronavirus. And in order to slow the spread of the virus, states had instituted some sort of stay-at-home orders or guidelines that have been eased recently. However, it has brought about business and logistical disruptions.

“We’ve been considering all of our, not only the effective dates of the standards but also when we expose a new standard out for comment, we are also considering COVID-19 in the context of the amount of time we allow our stakeholders to comment on a proposed standard,” Dohrer said during a recent interview. “We are trying to appreciate the load on auditors, firms, as well as—it actually trickles down to preparers also because they are being audited. So, trying to align our effective dates so we don’t get a big significant amount of standards all coming effective at the same time. So, it’s caused us to stagger out a little bit. I think it’s helpful in this environment.”


This article originally appeared in the May 28, 2020 edition of Accounting & Compliance Alert, available on Checkpoint.

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