Audit Report Changes Are Coming

Audit Report Changes

Written by Emily Donohue

March 10, 2022

The Auditing Standards Board recently issued Statements on Auditing Standards (SAS) 134. The update comes as part of an effort by the Auditing Standards Board (ASB) to converge Auditing Standards with International Auditing and Assurance Standards. The standard update is also meant to increase the informational value and relevance of the auditors’ report for users and the public interest. The SAS will significantly change the look of the independent auditors’ report included in the financial statements.

Previous Layout

  • Report on the Financial Statements
  • Management’s Responsibility for the Financial Statements
  • Auditors’ Responsibility
  • Opinion
  • Report on Supplementary Information

New Layout

  • Opinion
  • Basis for Opinion
  • Responsibilities of Management for the Financial Statements
  • Auditors’ Responsibilities for the Audit of the Financial Statements
  • Supplementary Information

The Opinion and Basis for Opinion paragraphs have been moved to the beginning of the report to first state the conclusion, and then explain how the auditor reached that conclusion.

The Management Responsibilities paragraph has added a statement about management’s responsibility to evaluate the entity’s ability to continue as a going concern.

The Auditors’ Responsibility paragraph will be quite a bit longer than in the previous auditors’ report. The updated paragraph walks the financial statement user through the process of performing an audit from beginning to end. It will include a definition of reasonable assurance and material misstatement and also discuss that auditors use professional judgment and professional skepticism throughout the audit. The paragraph will explain that fraud is harder to detect than material misstatement and that the purpose of an audit is not to detect fraud. Other items covered include the role of internal controls, responsibilities for estimates made by management, and new language regarding going concern.

The Supplementary Information will still be included at the end of the auditors’ report, if supplementary information is included in the financial statements.

Since this is an audit standard, there is nothing your not-for-profit organization needs to do to prepare; just be aware of changes to expect in your upcoming report.

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Emily Donohue
I joined Hawkins Ash CPAs in 2016. As an audit manager in the firm’s Green Bay, WI, office, I perform reviews, compilations and audits of voucher schools, nonprofit organizations, employee benefit plans, credit unions and commercial entities.

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