Risk Standards (6 of 6)

In our previous posts we have discussed the new risk standards promulgated by the AICPA affecting audits for years ending after 12/16/07. In post #5 we briefly discussed SAS 108 and 109. Now we will end this series of posts and discuss SAS 110 and 111.

SAS 110 – provides new guidance on matters the auditor should consider in determining the nature, timing, and extent of audit procedures. Basically, SAS 110 redirects the auditors’ consideration of risk at the financial statement level to the financial statement category ‘line level’ so that auditor can make their risk assessment as a result of, and in conjunction with, their performance of risk assessment procedures performed as indicated above. This is the final risk assessment step. The auditor will take into consideration all of the information obtained as a result of these procedures and use that to design and perform tailored audit procedures.

SAS 111 – provides a more clear-cut guidance on the auditors’ assessment of their materiality levels.

In conclusion, this sounds like a lot of additional work, and make no mistake about it, it is. But these standards are designed to urge the auditor to make more informed, documented, and worthwhile decisions that ultimately will provide the client with a more valuable audit product, resulting in a more tailor made corporate audit.