In conjunction with its efforts to clarify generally accepted auditing standards for audits of nonpublic companies and to converge such standards with International Standards on Auditing (ISAs), the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants recently issued a proposed Statement on Auditing Standards (SAS), Subsequent Events and Subsequently Discovered Facts. This proposed SAS would supersede SAS No. 1, Codification of Auditing Standards and Procedures; AU Section 530, Dating of the Independent Auditor’s Report, as amended; AU Section 560, Subsequent Events, as amended; AU Section 561, Subsequent Discovery of Facts Existing at the Date of the Auditor’s Report, as amended; and SAS No. 58, Reports on Audited Financial Statements, paragraphs .71–.73, as amended.
The proposed SAS has been drafted using ISA 560, Subsequent Events, as a base. ISA 560 defines subsequent events to include both events occurring between the date of the financial statements and the date of the auditor’s report, and facts that become known to the auditor after the date of the auditor’s report. The ASB’s proposed SAS includes separate definitions for subsequent events and subsequently discovered facts to clearly distinguish the auditor’s responsibilities for each. The ASB believes this distinction does not create differences between ISA 560 and the proposed SAS.
In addition to converging with ISA 560, the proposed SAS combines elements of existing standards and considers the impact of accounting guidance related to subsequent events. In particular, the proposed SAS:
- Combines the guidance pertaining to subsequent events and subsequent discovery of facts into one section.
- Incorporates the guidance related to report re-issuances that currently resides in paragraphs .06–.08 of AU Section 530 and in paragraphs .71–.73 of AU Section 508. The proposed SAS includes requirements related to a predecessor auditor’s responsibilities when re-issuing the auditor’s report on previously issued financial statements of a prior period that are to be presented on a comparative basis with audited financial statements of a subsequent period. ISA 560 does not include such requirements.
- Eliminates the accounting guidance related to subsequent events from the auditing literature. The accounting guidance related to subsequent events will reside in the FASB Accounting Standards Codification.
If finalized, the proposed SAS will be effective for audits of financial statements for periods beginning on or after December 15, 2010. This effective date is provisional but will not be earlier than December 15, 2010.
The proposed SAS is available for comment until July 15, 2009 at http://www.aicpa.org/download/auditstd/Subsequent_Events_ED_final.pdf. |