STATEMENT ON AUDITING STANDARDS 145: WAS STAKEHOLDER FEEDBACK INCORPORATED IN THE FINAL STANDARD?

Arianna Pinello, Ara Volkan and Adam McCord

Accounting & Taxation, 2023, vol. 15, issue 2, 15-29

Abstract: Understanding the entity’s environment and assessing the risk of material misstatement are fundamentalcomponents of the audit planning process that have been found deficient by regulators, peer reviews, and research studies. In 2020, the Auditing Standards Board of the American Institute of Certified Public Accountants issued an exposure draft of a Statement on Auditing Standards to clarify and enhance the requirements for auditors to understand an entity’s system of internal controls and determine the risk of material misstatement. In addition, the proposal modernized the existing audit requirements regarding information technology use and addressing risks arising from such use. This paper analyzes the comment letters submitted to the Auditing Standards Board to assess the degree of stakeholder agreement with the proposed requirements. Next, the language of the exposure draft is compared to the text of the final standard to determine the degree of standard setters’ responsiveness to the feedback they received during the standard-setting process. The analyses suggest general acceptance by respondents, with requests that additional clarifications be provided. The final text of the standard indicates that the standard setters agreed with respondent suggestions. While the final SAS is well received and achieves its aims, further clarification and guidance will be needed for its efficient and effective implementation.

Keywords: SAS No. 145; AICPA; Entity Environment; Risk Assessment; Material Misstatement; Audit Standards (search for similar items in EconPapers)
JEL-codes: M42 (search for similar items in EconPapers)
Date: 2023
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