New SAS on investments parallels FASB statements.

The American Institute of CPAs auditing standards board updated its guidance on Investments in Statement on Auditing Standards no. 81, Auditing Investments. The new SAS supersedes AU section 332, "Long-Term Investments," of AICPA Professional Standards and deletes Interpretation no. 1 of AU section 332, "Evidential Matter for the Carrying Amount of Marketable Securities."

"Our goal was to update the auditing literature to address the recent Financial Accounting Standards Board pronouncements that cover investments: Statement no. 115, Accounting for Certain Investments in Debt and Equity Securities, and no. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations," George E Patterson, Jr., chairman of the task force that drafted SAS no. 81 and a former ASB member, told the Journal. He said the new SAS lets auditors "enter the 115/124 world," providing guidance on areas such as evaluating management's intent related to an investment and an entity's ability to hold a debt security to maturity.

Scope

SAS no. 81 covers securities as defined by Statement nos. 115 and 124, and investments accounted for under Accounting Principles Board Opinion no. 18, The Equity Method of Accounting for Investments in Common Stock. It does not cover derivatives, even though a derivative might meet the definition of a security; however, it does provide some helpful guidelines, according to Patterson.

A more complete discussion will appear in an article in the February Journal. SAS no. 81 is available from the AICPA order department by calling 800-862-4272.