In February 2009, the AICPA Auditing Standards Board (ASB) issued Statement on Auditing Standards (SAS) No. 116, Interim Financial Information, which revised the applicability of AU Section 722, Interim Financial Information, such that the SAS does not apply when the provisions of Statements on Standards for Accounting and Review Services (SSARS) apply. SAS No. 116 is applicable when an auditor performs the audit of the latest annual financial statements of a nonpublic company and expects to be engaged to audit the current-year financial statements. SAS No. 116 is not applicable when the auditor expects that a new auditor may be engaged for the current year. To allow for an appropriate transition between auditors when an auditor change is anticipated, the ASB recently proposed to revise the applicability of SAS No. 116 to include engagements when the auditor expects that a new auditor may be appointed for the current year, but such appointment is not effective prior to the beginning of the period covered by the review.
The proposed amendment would be effective for interim reviews of interim financial information for periods beginning after December 15, 2011, with early implementation permitted. The proposed SAS, Revised Applicability of Statement on Auditing Standards No. 116, Interim Financial Information, is available for comment until October 8, 2010.
In addition, in conjunction with its efforts to clarify generally accepted auditing standards for audits of nonpublic companies, the ASB recently issued a proposed SAS, Interim Financial Information (Redrafted). The redrafted standard reflects the proposed revision discussed above, together with the following proposed changes, among others:
- AU Section 722 notes that an accountant is not required to issue a written report on a review of interim financial information, except under certain conditions. The proposed SAS requires the auditor to issue a written report unless the review of the interim financial information is required by a third party and the third party does not require that the auditor performing the interim review issue a written review report. However, the proposed SAS permits oral reports for entities that are subject to external requirements to report in a manner that is substantially similar to the reporting required of issuers, pursuant to Public Company Accounting Oversight Board AU Section 722, Interim Financial Information.
- The proposed SAS requires the auditor, before accepting the engagement, (i) to review the interim financial information to determine whether the financial reporting framework to be applied in the preparation of the interim financial information is acceptable and (ii) to obtain the agreement of management that it acknowledges and understands its responsibility for certain specified matters.
- AU Section 722 requires that the review report include a statement that the review of interim financial information was conducted in accordance with standards established by the AICPA. To differentiate between the proposed standard and other standards established by the AICPA, such as SSARSs, the proposed SAS requires a statement that the review of interim financial information was conducted in accordance with auditing standards generally accepted in the United States of America.
If finalized, the proposed SAS would be effective for reviews of interim financial information for interim periods of fiscal years beginning on or after December 15, 2012. |
