Communication Memos

memo

to: Mr. Supervisor

from: Accounting team b

subject: Challenges Implementing SAS No. 115

date: 7/25/2011

The issuance of SAS No. 115 by the AICPA created the need to communicate significant audit procedure changes to our clients, client bookkeepers, and our own firm accountants. SAS No. 115 supersedes SAS No. 112. Due to SAS No. 115, significant changes need to take place in order to comply with the new accounting principles. Specifically, internal company controls have become a major focus of the standard audit procedures. Each of the three groups experienced certain challenges regarding the requirements of the new directive. Specifically:

* Firm Accountants - The new audit requirements force our audit staff to focus issues outside the financial statements. Our staff maintains a high competency regarding the financial statements themselves, but the requirement to review company financial controls and procedures has many of the younger staff confused. The younger staff has little experience with how companies run operationally, and they are now being required to judge the quality of these operations. Training regarding best practice financial controls is recommended to bolster the staff's ability to complete the audits per the new directive.

* Clients - The new requirements force companies to spend time in interviews with clients and in preparing documentation to present to the audit team regarding financial controls and other operations. Many of our clients are small business, and this requirement takes valuable time away from daily business. Clients used words like "cumbersome" and "waste of time" when informed of the new requirements. Additionally, the audit will in most cases be more expensive than previous years to properly review internal controls.

* Client Bookkeepers - As the front line for the company audit, client bookkeepers bear the brunt of the new requirements. Many bookkeepers work offsite, receiving only enough information...