No Marshmallows, Just Term Papers
Recently changes have been made regarding the rules that must be followed by auditors. This document will outline the changes and explain how the changes will affect all of our valued clients. The SAS 112 (Statement of Accounting Standards) and SAS 115 have been created so that our auditors have a better understanding that our clients are responsible for both their internal control system as well as their financial statements. These rules will also help our auditors better identify and communicate any internal issues, so that you will be able to weigh and manage any risks. (http://www.aicpa.org/download/practmon/SAS_112_Guidance.pdf)
The two requirements for our auditors under SAS 112 are to evaluate identified control deficiencies and determine the severity of these deficiencies, and to communicate these deficiencies in writing. Here are some definitions, as outlined in SAS 115, regarding deficiencies:
• Material weakness: a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.
• Significant deficiency: a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Keep in mind that our auditors are not required to have procedures in place to identify deficiencies, nor are they required to seek out such deficiencies. However, should an auditor come across anything that they may identify as a deficiency, they will be required, as per above, to evaluate these deficiencies and notify your management team and anyone charged with governance. Learning Team A Accounting Firm looks forward to continuing our strong relationship with our valued clients, and hope that this information ensures a better understanding of the new rules which have been...