Statement on Auditing Standards

Paper Type:  Essay
Pages:  4
Wordcount:  892 Words
Date:  2022-12-02

Statement on Auditing Standards (SAS) formerly known as Auditing Standards Board (ASB) represents the minimum set of criteria for evaluation of auditor's performance and oversight over their activities. ASB or SAS was first created in 1978 after a substantial study by the American Institute of Certified Public Accountants (AICPA) together with the auditing governing council and sub-committees. It was established as the highest authoritative body in the setting up of Generally Accepted Auditing Standards, thus strengthening and substituting the previous senior technical committees.

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Until 2003, the body was responsible for the establishment of all auditing standards in the United States. In the previous year, Congress had passed an Act, Sarbanes-Oxley, which gave the Public Company Accounting Oversight Board (PCAOB) the power to delegate its mandate to another party (Byrnes et al. 2018). Given that PCAOB had no auditing standards; initially, it adopted the ASB's standards. Since then ASB has predominantly focused its auditing guidelines with international standards.

In December 2009, the American Institute of Certified Public Accountants ASB issued the compliance audits, SAS no.117. Initially, it was structured as AU section 801. These were effective compliance with the audits for the fiscal period ending on or after the 15th of June 2010. The SAS was issued to address the governmental applicable compliance requirements. It was aimed at establishing standards and provision of guidance on performance and reporting on audits of entities' compliance with governmental audit requirement.

Initially, SAS 117 was structured as AU section 801. This was until 2013; when all the AU sections were removed from AICPA professional standards. SAS no.117 reflect the underlying changes in the compliance audit domain while incorporating the risk assessment standards. Auditors were expected to adapt and apply the AU sections of the American Institute of Certified Public Accountants professional standards while conducting compliance audit and to provide guidance on how to achieve it (William, Glover and Prawitt, 2016). . It also identifies the elements that need to be included in auditors' report on a compliance audit.

Generally, the auditors' roles in compliance with audit, are to gain sufficient evidence to make an informed decision and provide a report at the specified level in the government audit according to the applicable financial regulatory framework. They also identify whether audit prerequisites are supplementary to provisions of GAAS and standards of government auditing.

One major improvement of SAS 117 is that it seeks to ensure that management is responsible for facilitating complaisance with laws and regulations that apply to their activities. Such responsibility entails the identification of applicable laws and regulations to establish controls designed to promote compliance.

Improvements

SAS 117 recommends auditors to conduct an inquiry while performing risk assessment procedures to determine whether the management is aware of findings and recommendations from previous audits (Knechel and Salterio, 2016). This enables auditors to gain an understanding of whether the previous audit affected the entity's compliance to implement corrective measures. Auditors are expected to report noncompliance and other issues as specified by the government audit requirement.

In reinsurance of compliance report, an auditor is supposed to indicate through an explanatory paragraph that the current report is a replacement of the previously issued report. This should include substantial reasons as to why the audit is being reissued. Additionally, the dates of all audit evidence should be updated to keep track of all programs being reported.

Another improvement of SAS 117 is the designing of procedures for compliance audit to detect both deliberate and in-deliberate material compliance. More often auditors tend to obtain reasonable but not sufficient assurance that a given entity complies due to factors such as judgment, sampling techniques and limitations of organizational control over compliance.

Regarding independent reporting on internal control on compliance auditors should include;

Date of the auditor's report

The word independent in the title

A statement indicating that an audit was conducted on the organizations compliance and a reference made to the report of the auditor

A statement to confirm that the audit was conducted with regards to the auditing standards of the US and the standards that apply to financial audits of Government Auditing Standards and audit requirements

Auditor's firm signature printed or manual

Recommendations

Seen from an external perspective compliance audit seeks to perform the function of averting a crisis, especially in situations where internal controls are ineffective. As such SAS 117 standards should ensure that;

Auditors possess the relevant skills, knowledge, and expertise to complete successful audits. They should be familiar with the operations and have practical experience to exercise professional judgment.

Auditors are responsible for the overall quality of an audit. The standards should ensure that control procedures are followed throughout the process while assuring that opinions and conclusions are objective under any given circumstance (Krahel and Titera, 2015).

The scope of the SAS should clear and focused in terms of subjectivity and compliance with established criteria. This is because the scoping of a compliance audit is influenced by risk, legal requirements, and materiality.

References

Byrnes, P. E., Al-Awadhi, A., Gullvist, B., Brown-Liburd, H., Teeter, R., Warren Jr, J. D., & Vasarhelyi, M. (2018). Evolution of Auditing: From the Traditional Approach to the Future Audit 1. In Continuous Auditing: Theory and Application (pp. 285-297). Emerald Publishing Limited.

Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Routledge.

Krahel, J. P., & Titera, W. R. (2015). Consequences of Big Data and Formalization On Accounting And Auditing Standards. Accounting Horizons, 29(2), 409-422.

William Jr, M., Glover, S., & Prawitt, D. (2016). Auditing and assurance services: A systematic approach. McGraw-Hill Education.

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Statement on Auditing Standards. (2022, Dec 02). Retrieved from https://proessays.net/essays/statement-on-auditing-standards

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