The once and future auditors: new SAS no. 84 provides transfer guidance for today's environment.In October October: see month. 1997, the American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Institute of CPAs auditing standards board In the United States, the Auditing Standards Board (ASB) is the senior technical committee designated by the American Institute of Certified Public Accountants (AICPA) to issue auditing, attestation, and quality control statements, standards and guidance to certified public issued Statement on Auditing Standards no. 84, Communications Between Predecessor and Successor Auditors AUDITORS, practice. Persons lawfully appointed to examine and digest accounts referred to them, take down the evidence in writing, which may be lawfully offered in relation to such accounts, and prepare materials on which a decree or judgment may be made; and to report the whole, together . This new standard supersedes SAS (1) (SAS Institute Inc., Cary, NC, www.sas.com) A software company that specializes in data warehousing and decision support software based on the SAS System. Founded in 1976, SAS is one of the world's largest privately held software companies. See SAS System. no. 7 of the same name and its interpretations. The ASB ASB Asbestos ASB Arbeiter Samariter Bund (German medical help organisation) ASB Anti-Social Behaviour ASB Accounting Standards Board (UK FRC) ASB Aarhus School of Business believes that the new SAS more accurately reflects today's proposal environment, described below. This article describes the new SAS and provides guidance on its implementation. Practitioners considering accepting a first-time engagement should apply SAS no. 84 in conjunction with other established client acceptance procedures. Practitioners also should consult Statement on Quality Control Standards no. 2, System Of Quality Control for a CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. Firm's Accounting and Auditing Practice, (AICPA AICPA See American Institute of Certified Public Accountants (AICPA). Professional Standards, QC [sections] 20, paragraphs 14-16). REVISED DEFINITIONS Revised definitions of predecessor and successor auditors appear in SAS no. 84 and reflect the proposal environment found in practice today. Audit clients often solicit proposals from competing auditors and shop around to compare their current auditor's services and costs with other firms'. The current auditor auditor n. an accountant who conducts an audit to verify the accuracy of the financial records and accounting practices of a business or government. A proper audit will point out deficiencies in accounting and other financial operations. is often asked to submit a proposal to be evaluated with the others. In these circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , the SAS no. 7 definitions of a predecessor and successor auditor were not appropriate. As a result, the definitions in SAS no. 84 are as follows: Predecessor auditor. An auditor who (a) has reported on the most recent audited financial statements or was engaged to perform but did not complete an audit of any subsequent financial statements and (b) has resigned, declined to stand for reappointment reappointment Hospital practice The renewal of medical staff membership and privileges of a practitioner whose previous service on the medical staff has met the staff's standard of Pt care. See Appointment. or been notified that his or her services have been or may be terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: . Under this definition a current auditor can be considered a predecessor auditor if he or she has been informed by the client that services may be terminated. Successor auditor. An auditor who is considering accepting an engagement to audit financial statements but has not communicated with the predecessor as required (see below) and an auditor who has accepted such an engagement. An auditor becomes the successor auditor after the prospective client extends an offer to perform the engagement; at this point the successor auditor can communicate with the predecessor. THE KEY POINTS Below are the main points of the new SAS and how they affect auditors and the clients they serve. Required communications. The required communications include specific and reasonable inquiries of the predecessor regarding matters that will help the successor decide whether to accept an engagement. A successor cannot accept an engagement until he or she has communicated with the predecessor and evaluated the responses. Required communications include matters relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc * Information that might bear on the integrity of management. * Disagreements with management as to accounting principles, auditing procedures or other significant matters. * Communications to audit committees or others with equivalent authority and responsibility regarding fraud, illegal acts by clients and internal control related matters. * The predecessor auditor's understanding about the reasons for the change of auditors. The proposal environment. An auditor should not accept an engagement before evaluating the responses to the above list. However, an auditor may make a proposal on an engagement before initiating communications. In this case, the auditor may wish to advise the prospective client in the proposal letter that he or she cannot formally accept the engagement until the results of the required communications have been evaluated. If a client asks for proposals from several auditors, the predecessor is not expected to respond to inquiries until one auditor conditionally accepts the engagement subject to required communications. Predecessor's response to the successor. A predecessor should respond fully to the successor's inquiries. However, a predecessor who limits his or her response should let the successor auditor know this is the case. Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , disciplinary proceedings or other such unusual circumstances may result in a limited response. If the successor receives a limited response, he or she should consider its implications and whether to accept the engagement. ACCESS TO WORKING PAPERS working papers pl.n. Legal documents certifying the right to employment of a minor or alien. Noun 1. working papers SAS no. 84 describes other communications (primarily a review of the predecessor's working papers) that may assist the successor in planning the engagement. These communications may occur before or after acceptance of the engagement. If the successor wants to review the predecessor's working papers, he or she should request that the client authorize To empower another with the legal right to perform an action. The Constitution authorizes Congress to regulate interstate commerce. authorize v. to officially empower someone to act. (See: authority) the predecessor to grant access. To reduce the risk of misunderstanding, the predecessor may wish to obtain written consent from the client. (Appendix A to SAS no. 84 includes a sample client consent and acknowledgment acknowledgment, in law, formal declaration or admission by a person who executed an instrument (e.g., a will or a deed) that the instrument is his. The acknowledgment is made before a court, a notary public, or any other authorized person. letter.) SAS no. 84 includes a list of the working papers ordinarily or·di·nar·i·ly adv. 1. As a general rule; usually: ordinarily home by six. 2. In the commonplace or usual manner: ordinarily dressed pedestrians on the street. made available to the successor, including documentation of planning, internal control, audit results and other matters of continuing accounting and auditing significance. The predecessor also can limit or deny the successor access to the working papers. The extent of access is always a matter of the predecessor's professional judgment. SAS no. 7 referred to valid business reasons as a rationale rationale (rash´  nal´),n the fundamental reasons used as the basis for a decision or action. for limiting or denying access. SAS no. 84 discusses the extent of access as a matter of professional judgment and is silent as to valid business reasons. In practice, access to working papers may be denied for several reasons, such as litigation involving the engagement, an incomplete engagement or unpaid audit fees. Successor acknowledgment letter. Before granting access to the prior-year working papers, a predecessor may request that the successor agree in writing to certain assurances. In order to obtain access, the successor might consider agreeing to certain limitations. Such agreements, although common in larger firms, may be less familiar to smaller ones, so SAS no. 84 includes an example in appendix B. The use of these written agreements in practice has provided the successor with greater access to the working papers. Obtaining greater access can assist the successor in identifying and evaluation issues when planning a first-time engagement. SAS no. 84 also includes examples of limitations the successor may agree to in order to gain access: * The successor will not comment, orally or in writing, to anyone as a result of the review as to whether the predecessor's engagement was performed in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted auditing standards Generally Accepted Auditing Standards, or GAAS, are ten auditing standards, developed by the AICPA, consisting of general standards, standards of field work, and standards of reporting, along with interpretations. . * The successor will not provide expert testimony Testimony about a scientific, technical, or professional issue given by a person qualified to testify because of familiarity with the subject or special training in the field. or litigation services or otherwise accept an engagement to comment on issues relating to the quality of the predecessor's audit. * The successor will not use the audit procedures or results thereof documented in the predecessor's working papers as evidential ev·i·den·tial adj. Law Of, providing, or constituting evidence: evidential material. ev matter in rendering See render. (graphics, text) rendering - The conversion of a high-level object-based description into a graphical image for display. For example, ray-tracing takes a mathematical model of a three-dimensional object or scene and converts it into a bitmap image. an opinion on the financial statements of the client, except as contemplated in SAS no. 84. Although a sample letter is included in SAS no. 84, the use of this letter is not required by professional standards. EVIDENTIAL MATTER What constitutes sufficient competent evidential matter with respect to evaluating opening balances? SAS no. 84 says, "The audit evidence used in analyzing the impact of the opening balances on the current-year financial statements and consistency of accounting principles is a matter of professional judgment." It continues with examples that may be used as audit evidence: * The most recent audited financial statements and the predecessor's audit report on those statements. * The results of inquiry of the predecessor. * The results of the successor's review of the predecessor's working papers. * Audit procedures performed on the current period's transactions that may provide evidence about the opening balances or consistency. The successor should not rely on the predecessor's working papers. Instead, the successor should determine how the results of his or her review of those working papers affect the nature, timing and extent of the procedures to be performed on the opening balances and the consistency of accounting principles. The results of the successor's review are the conclusions the successor reaches regarding the procedures performed and the evaluations made by the predecessor in the prior year's engagement. Ultimately, the successor must use his or her judgment in determining the extent of procedures to be performed and the audit evidence to be obtained with respect to the opening balances. REAUDITS AND DISCOVERY OF Interpretations to SAS no. 7 contained guidance on reaudits and the discovery of possible misstatements in financial statements reported on by a predecessor. The new statement incorporates this guidance. Reaudits. A reaudit is an engagement in which an auditor is asked to audit and report on financial statements that have been previously audited and reported on. An auditor who is considering accepting 2 reaudit engagement is considered to be a successor auditor and the previous auditor is a predecessor auditor under SAS no. 84. Therefore, the required communications also are applicable in this situation. In a reaudit, the successor may consider the information obtained from inquiries of the predecessor and the review of the predecessor's audit report and the prior working papers. However, this information alone is not sufficient for the successor to render (1) To make visible; to draw. The term comes from the graphics world where a rendering is an artist's drawing of what a new structure would look like. In computer-aided design (CAD), a rendering is a particular view of a 3D model that has been converted into a realistic image. an opinion; additional audit work is necessary. The results of the current period audit may be used in planning and performing the reaudit of the prior period and may even provide evidential matter useful in the reaudit. As in all audits, if the successor is unable to obtain competent evidential matter in order to express an opinion, he or she should qualify or disclaim dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. an opinion Discovery of misstatements. During an audit or reaudit, the successor may become aware of information that leads him or her to believe that the financial statements the predecessor reported on are misstated and require revision. If this situation exists, the successor should ask the client to contact the predecessor so all parties can discuss and resolve the matter. If the client refuses to allow the successor to discuss the issue with the predecessor, or if the successor is not satisfied with the resolution of the matter, the successor should evaluate the implications and determine if it is necessary to resign from the engagement. The successor also should consider consulting an attorney to determine the appropriate course of action. Predecessor is gone. Section 9900.11-.18 of the AICPA Technical Practice Aids (TPAs) provides guidance for situations in which a predecessor auditor has ceased operations. (A TPA (Transient Program Area) See transient area. TPA - Transient Program Area offers nonauthoritative guidance based on selected practice problems.) Although not included in SAS no. 84, practitioners should be aware of the existence of this guidance and have it readily available if needed. Effective date. SAS no. 84 is effective with respect to acceptance of an engagement after March 31, 1998. FREQUENTLY ASKED QUESTIONS Below are some common questions about the new SAS. * Is there a situation in which a prior auditor would not be considered to be a predecessor auditor? Yes. SAS no. 84 is not applicable if the most recent audited financial statements are more than two years prior to the beginning of the earliest period to be audited by the successor auditor. * If the most recent financial statements were compiled or reviewed, is SAS no 84 applicable? No. SAS no. 84 says that in this case, the accountant who reported on those financial statements is not a predecessor auditor. However, a successor auditor may find it useful to make certain inquiries of the prior accountant in determining whether to accept the engagement. * What are the documentation requirements of SAS no. 84? The new SAS does not have any specific documentation requirements. Firm policy will dictate TO DICTATE. To pronounce word for word what is destined to be at the same time written by another. Merlin Rep. mot Suggestion, p. 5 00; Toull. Dr. Civ. Fr. liv. 3, t. 2, c. 5, n. 410. whether or not documentation will be required. However, the standard says communications may be either written or oral and includes examples of a client consent and acknowledgment letter and a successor auditor acknowledgment letter. * Does SAS no. 84 provide guidance when a successor is replaced before completing an audit engagement and issuing a report? Yes. In this circumstance Circumstance or circumstances can refer to:
* That should a successor do if the prospective client does not permit the predecessor to respond to the successor's inquiries? If the prospective client prohibits the predecessor from responding to the successor, the successor should ask the prospective client why and then should consider the implications of that refusal in deciding whether to accept the engagement. * Is a predecessor required to respond to the successor's inquiries? Yes. SAS no. 84 says; "The predecessor auditor should respond promptly and fully, on the basis of known facts, to the successor auditor's reasonable inquiries." A predecessor who limits his or her response to the inquiries should tell the successor auditor that this is the case. * Is a successor required to review the predecessor's working papers? No. It is, however, customary and beneficial for the successor to review them. This review can affect the nature, timing and extent of the successor's procedures. A successor who does not review the prior-year working papers must use his or her judgment to determine whether sufficient audit evidence was obtained in analyzing the impact of the opening balances and consistency of accounting principles for the current year's engagement. * SAS no. 84 says the results of the successor's review of the predecessor's working papers can be considered audit evidence. "at is meant by the "results of the successor auditor's review"? The results of the successor's review of the predecessor's working papers are the conclusions reached by the successor auditor regarding the audit work performed on various account balances. The successor should use his or her judgment in determining whether the results of the review of these working papers provide enough audit evidence to be used in analyzing the impact of the opening balances and the consistency of accounting principles. For example, the successor might review the working papers related to accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying or inventory and reach a conclusion as to whether the auditing procedures performed on the aging of receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed or the cutoff tests performed on inventory provide the successor with sufficient audit evidence. * Can the predecessor's working papers alone be considered sufficient evidential matter with respect to evaluating the opening balances? No. SAS no. 84 says the successor must obtain sufficient competent evidential matter to allow him or her to afford a reasonable basis for expressing an opinion of the financial statements under audit. The predecessor's working papers alone are not sufficient evidential matter. The successor must use his or her judgment and evaluate the results of those working papers as they pertain to pertain to verb relate to, concern, refer to, regard, be part of, belong to, apply to, bear on, befit, be relevant to, be appropriate to, appertain to the opening balances. The successor also should consider other audit evidence available, such as the predecessor's audit report, the results of inquiries with the predecessor auditor and audit procedures performed in the current year's engagement that may provide evidence about opening balances or consistency. Also, the successor may apply procedures to the account balances at the beginning of the period, such as vouching for fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → from prior years. * Can a successor obtain competent evidential matter if a predecessor denies access to the prior year's engagement working papers? Yes. Although it is customary to provide access to working papers, if a predecessor denies access, the successor still can obtain audit evidence with respect to the opening balances. Audit evidence may include the predecessor's audit report and the related financial statements, the results of the predecessor's inquiry, the audit procedures performed on the current period's transactions and the audit procedures performed on account balances at the beginning of the period under audit and on transactions in prior periods. Again, the successor must use judgment in determining the nature, timing and extent of procedures to be performed with respect to the opening balances. * If the successor signs a successor acknowledgment letter as illustrated in SAS no. 84, which includes a statement that the successor auditor will not comment, orally or in writing, to anyone as a result of the review of the working papers as to whether the predecessor auditor's engagement was performed in accordance with GAAS See gallium arsenide. , does this also preclude pre·clude tr.v. pre·clud·ed, pre·clud·ing, pre·cludes 1. To make impossible, as by action taken in advance; prevent. See Synonyms at prevent. 2. the successor auditor from informing the client of the nonperformance Non`per`form´ance n. 1. Neglect or failure to perform. Noun 1. nonperformance - failure to act with the prudence that a reasonable person would exercise under the same circumstances ? Yes. The successor should comply with the agreement not to comment orally or in writing to anyone, including the client, in this area. However, if during the current audit the successor becomes aware of information that leads him or her to believe that the financial statements reported on by the predecessor may require revision, the successor should discuss the situation with the client. The three parties involved should then discuss the information and attempt to resolve the matter. The discovery of the possible misstatement mis·state tr.v. mis·stat·ed, mis·stat·ing, mis·states To state wrongly or falsely. mis·state  ment n. would be
a result of the current year's audit engagement and not a result of
the review of the predecessor auditor's working papers.
RELATED ARTICLE: EXECUTIVE SUMMARY * STATEMENT ON AUDITING STANDARDS no. 84 replaces SAS no. 7 with new guidance on communications between predecessor auditors and successor auditors. * REVISED DEFINITIONS OF PREDECESSOR and successor auditors reflect today's current proposal environment. * KEY POINTS OF THE NEW SAS include required communications and the need to evaluate these communications before accepting an engagement. * THE NEW SAS ALSO DISCUSSES what to do when the predecessor limits responses to the successor or prevents full access to prior-year working papers. * APPENDICES ap·pen·di·ces n. A plural of appendix. CONTAIN SAMPLES of a client consent and acknowledgment letter and a successor auditor acknowledgment letter. KIM M. GIBSON, CPA, is a technical manager in the AICPA audit and attest To solemnly declare verbally or in writing that a particular document or testimony about an event is a true and accurate representation of the facts; to bear witness to. To formally certify by a signature that the signer has been present at the execution of a particular writing so as standards division. STEPHEN Stephen, 1097?–1154, king of England (1135–54). The son of Stephen, count of Blois and Chartres, and Adela, daughter of William I of England, he was brought up by his uncle, Henry I of England, who presented him with estates in England and France and M. McEACHERN McEachern may refer to: People:
DELIBERATION, contracts, crimes. . |
|
||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion