By Michael Purrazzella, MBA

For non-issuer auditors, the past few months have most likely been more challenging than most. Between service companies working remotely, and nonessential businesses shut down for a period of time, gathering sufficient and appropriate audit evidence may have proven to be more time-consuming than normal. The coronavirus has proven to be not just a subsequent disclosure or possible going concern issue for the 2019 calendar year, it has also become an ongoing concern for 2020. This is compounded by the fact that the Auditing Standards Board (ASB) has released seven amendments to the audit report or process since May 2019. These amendments were initially set to roll out for periods ending on or after December 15, 2020. Relief was granted in May 2020, when the ASB issued Statement on Auditing Standards 141 (SAS No. 141). The new statement effectively gives non-issuer auditors the choice of deferring the seven new audit standards for one year, beginning with periods ending on or after December 15, 2021.

Person reviewing and taking notes on SAS No. 141

The SAS amendments covered by this relief (numbered SAS No. 134 to SAS No. 140) cover a wide range of topics including forming an opinion, disclosures, independence, documentation, and materiality. These central concepts were broadly applied and covered all industries, except for SAS No. 136 which was strictly related to employee benefit plans subject to ERISA. Many of these new SAS center around changes to the auditor’s opinion, which will give the report a fresh new modern look that will lengthen the report and require the opinion paragraph to come first. With the release of SAS No. 138, the ASB modified the framework for misstatements to include the phrase “substantial likelihood” when dealing with the impact of a misstatement. The board is clearly trying to move from a more numerical foothold to more broadly-defined and judgment-based reasoning. These changes and more could culminate in a potential change to the planning stages and materiality levels previously believed to be appropriate.

SAS No. 141 defers these changes and gives CPA firms more auditing familiarity under the old guidelines for the coming calendar year. For those who already began to put the new standards in place or still want to put them in place, SAS No. 141 removed the prohibition for early adoption. This was previously forbidden from the explicit writing in SAS Nos. 134-140. While the 2019 calendar year-end has most likely been concluded by the writing of this article, it does give the option to adopt these new standards as well as the new framework, today. This is made possible by the removal of the previous restrictive sentences, and the fact that SAS No. 141 is effective as of issuance.

SAS No. 141 is a complete 180 from the previously released SAS No. 140, which restricted the adoption date. This immediate action was in response to the ever-growing strain on the accounting community to respond and adapt to the coronavirus pandemic.

The virus does not look to be going away any time soon, and its long-term effects are hard to estimate. Regardless, this may come as a temporary relief to some. The fact remains, however, that private auditing will have an interesting road ahead, come time for the year ending December 31, 2020.

If you have any questions about how SAS No. 141 alters the audit landscape, please contact your Untracht Early advisor.