The Auditing Standards Board made a significant stride in June 2021 with the release of Statement on Auditing Standards No. 144 (SAS No. 144). Titled "Amendments to AU-C Sections 501, 540, and 620 Related to the Use of Specialists and the Use of Pricing Information from External Information Sources," this standard introduces crucial changes aimed at enhancing the audit process. The effective date for these amendments is set for audits of financial statements for periods ending on or after December 15, 2023, with the option for early application. In this discussion, we will delve into some of the noteworthy amendments brought about by SAS No. 144.
Nature of Amendments
While a substantial portion of SAS No. 144 consists of minor linguistic adjustments, these changes collectively contribute to improved consistency across various AU-C sections. The overarching objective is to augment clarity in the application of existing requirements and elevate the overall quality of financial statement audits. Additionally, these amendments align with the guidance provided by the Public Company Accounting Oversight Board (PCAOB) concerning audits of issuers, showcasing a commitment to convergence with industry standards.
Amendments by Section
AU-C Section 501 – Audit Evidence – Specific Considerations for Selected Items:
SAS No. 144 introduces amendments to AU-C Section 501 with a focus on enhancing guidance related to the evaluation of a management’s specialist's work. A management’s specialist, as defined, refers to an individual or organization possessing expertise in a field other than accounting or auditing. Such expertise is enlisted by the entity to aid in the preparation of financial statements. The amendments serve to refine the evaluation process. Moreover, the reference to the use of an external inventory-taking firm's work as a "management’s specialist" has been eliminated from the application guidance. However, guidance on evaluating this form of audit evidence has been retained.
AU-C Section 500 – Audit Evidence:
A new appendix titled "Use of Pricing Information from Third Parties as Audit Evidence" is introduced in AU-C Section 500. This addition aims to provide comprehensive guidance for evaluating estimates pertaining to the fair value of financial instruments. The drafting of this appendix aligns with PCAOB guidance and emphasizes a principles-based approach to obtaining and evaluating audit evidence, especially concerning auditing accounting estimates.
AU-C Section 620 – Using the Work of an Auditor’s Specialist:
SAS No. 144 brings enhancements to AU-C Section 620, specifically focusing on various application guidance within this section. The amendments are designed to provide greater clarity and effectiveness in the utilization of an auditor's specialist.
Implications for Auditors and Accountants
These amendments bear significance for auditors and accountants involved in audit-related roles. Staying informed about the changes introduced by SAS No. 144 is imperative to ensure that audits are conducted in adherence to the latest industry standards. By doing so, professionals can better serve their clients and contribute to maintaining the highest levels of audit quality.
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It is important to note that the content provided in this article is for informational purposes only and does not constitute tax advice. For advice applicable to specific situations, individuals are advised to consult a tax advisor who can offer personalized guidance based on their unique circumstances.
About the Author
Jennifer, the author of this article, boasts over 25 years of experience in crafting high-quality training programs covering a diverse range of technical and "soft-skills" topics crucial for professional and organizational success. In 2003, she founded Emergent Solutions Group, LLC, dedicated to designing and delivering practical and engaging accounting and auditing training. Jennifer initiated her career in audit at Deloitte & Touche and graduated summa cum laude from Marymount University with a B.B.A. in Accounting.