U.S. Auditing Standards have been revised
At the end of this year, U.S. Auditing Standards will be revised as a result of a multi-year project to both clarify existing standards and converge with International Standards.
As a result, many significant changes will be in effect for audits of financial statements for periods ending on or after December 15, 2012. Most of the changes relate to the work performed by your auditor, however, several changes will impact auditor and client communication.
You should be aware of the following changes:
- The auditors’ report letter has been substantially re-written and introduces many new terms, formatting and presentation changes. Many audit reports will now require two pages.
- The representation letter required has been significantly restructured. Typical representations have been re-ordered with confirmation of the fulfillment of client responsibilities being the first representation. The client is now required to include their determination of materiality. The format has been restructured to have the client confirm that they have fulfilled their responsibilities.
- There is a revised engagement letter which is now grouped as follows: objective and scope of the audit, responsibilities of the auditor, responsibilities of management and identification of applicable financial reporting framework, other relevant information such as fees, and a section on the appropriate reference to the expected form and content of the auditor’s report.