The American Institute of Certified Public Accountants (AICPA) issued the Statement on Auditing Standards (SAS) No. 142 titled “Audit Evidence” in May 2019. This standard replaces SAS No. 122, “Statements on Auditing Standards: Clarification and Recodification.” It is applicable to audits of financial statements for periods ending on or after December 15, 2022.
SAS 142 introduces significant changes to the auditing standards related to audit evidence. The standard introduces updated definitions, mandates, and guidelines concerning the adequacy and reliability of audit evidence. It also outlines auditors’ obligations in evaluating and documenting audit evidence in a comprehensive manner.
Effective Date of SAS 142
SAS 142 is effective for audits of financial statements for periods ending on or after December 15, 2022. However, early implementation is permitted for audits of financial statements for periods ending on or after December 15, 2018.
CPA firms should thoroughly comprehend the requirements outlined in SAS 142 in order to accurately determine the necessary adjustments to their audit methodologies and processes, thereby ensuring compliance with the new standard.Early implementation presents an advantageous opportunity for CPA firms to proactively prepare for the upcoming changes, enabling them to navigate the transition to the new standard smoothly and seamlessly.
Key Changes in SAS 142
SAS 142 introduces significant changes to the auditing standards related to audit evidence. The standard includes new definitions, requirements, and guidance related to the appropriateness and sufficiency of audit evidence, as well as the responsibilities of auditors for evaluating and documenting audit evidence.
Changes to the Definition of Audit Evidence
SAS 142 revises the definition of audit evidence to include information that is both relevant and reliable. This new definition emphasizes the importance of considering the source and reliability of information when evaluating audit evidence.
Responsibilities of Auditors for Evaluating and Documenting Audit Evidence
SAS 142 establishes new requirements related to the responsibilities of auditors for evaluating and documenting audit evidence. The standard requires auditors to evaluate the quality of the audit evidence obtained and document the nature, timing, and extent of the procedures performed to obtain audit evidence.
Impact of Technology on Audit Procedures
SAS 142 recognises the influence of technology on audit procedures and promotes its utilisation in gathering and assessing audit evidence. Technology enables auditors to access more pertinent and dependable information, automate audit procedures, and enhance the overall efficiency of the audit process.
However, the use of technology in audit procedures also presents challenges and limitations. Auditors should be aware of these challenges and limitations and ensure that the use of technology does not compromise the quality of the audit evidence obtained.
Importance of Appropriate Audit Evidence
One of the key changes in SAS 142 is the emphasis on the appropriateness of audit evidence. Audit evidence must be relevant, reliable, and sufficient to support the auditor’s conclusions. The standard defines the term “appropriateness” as the measure of the quality of audit evidence, indicating its relevance and reliability in providing support for the audit opinion.
Appropriate audit evidence is critical for audit quality, as it helps the auditor to reach valid and reliable conclusions about the financial statements. Inappropriate audit evidence, on the other hand, can lead to inaccurate and misleading audit opinions. Examples of inappropriate audit evidence include unreliable documents, incomplete records, or unreliable third-party confirmations.
To obtain appropriate audit evidence, auditors must exercise professional judgment when assessing the relevance and reliability of the evidence collected. The standard offers guidance on factors to consider, such as the source, nature, and reliability of the evidence.
How Unison Globus Can Help
As the effective date for SAS 142 approaches, CPA firms may need assistance in complying with the new standard. Unison Globus is a leading provider of audit and assurance services, and we can help your firm navigate the changes introduced by SAS 142.
Our team of experienced professionals has a deep understanding of the new standard and can provide guidance on how to comply with the new requirements. We can help your firm assess the impact of the standard on your audit practice and develop a plan to implement the necessary changes.
We offer a range of services to assist CPA firms in complying with SAS 142, including:
- Audit readiness assessments
- Audit process redesign
- Technology enablement
- Data analytics and automation
- Training and education
Working with Unison Globus can help your firm to improve the quality and efficiency of your audit practice, while ensuring compliance with the new standard.
Conclusion
SAS 142 represents a significant change in the audit evidence standard, with a focus on the appropriateness of audit evidence and the use of technology in audit procedures. CPA firms need to be prepared for the changes introduced by the new standard and take action to ensure compliance.
In summary, SAS 142 introduces significant changes to the audit evidence standard and requires auditors to use professional judgment in evaluating the appropriateness of audit evidence. The standard also emphasizes the use of technology in audit procedures, presenting both opportunities and challenges for CPA firms.
At Unison Globus, we are committed to helping CPA firms comply with the new standard and improve the quality and efficiency of their audit practice. We can provide guidance and support to ensure that your firm is ready for the changes introduced by SAS 142.