Statement on Auditing Standards No. 118, Other Information in Documents Containing Audited Financial Statements

Issue Date: February 2010

Effective Date: This SAS is effective for audits of financial statements for periods beginning on or after December 15, 2010. Early application is permitted.

Product Number: 060713

Executive Summary

This Standard supersedes the requirements and guidance in AU section 550. Along with SAS No. 119, Supplementary Information in Relation to the Financial Statements as a Whole, this SAS also supersedes the requirements and guidance in AU section 551. This Standard

• eliminates the distinction between other information that is included in an auditor-submitted document that contains the client’s basic financial statements and the auditor’s report thereon and other information that is in a client-prepared document.
• establishes a presumptively mandatory requirement that the auditor read the other information of which the auditor is aware in order to identify material inconsistencies, if any, with the audited financial statements.
• establishes a presumptively mandatory requirement that the auditor make appropriate arrangements with management or those charged with governance to obtain the other information prior to the report release date. Further establishes a presumptively mandatory requirement that if it is not possible to obtain all of the other information prior to the report release date, that the auditor read such other information as soon as practicable.
• establishes a presumptively mandatory requirement that the auditor communicate with those charged with governance the auditor’s responsibility with respect to the other information, any procedures performed relating to the other information, and the results.
• establishes a presumptively mandatory requirement that, if, on reading the other information, the auditor identifies a material inconsistency prior to the report release date that requires revision of the audited financial statements and management refuses to make the revision, that the auditor modify the auditor’s opinion in accordance with AU section 508, Reports on Audited Financial Statements (AICPA, Professional Standards, vol. 1).
• establishes a presumptively mandatory requirement that when the auditor identifies a material inconsistency prior to the report release date that requires revision of the other information and management refuses to make the revision, that the auditor communicate that matter with those changed with governance and
  • include in the auditor’s report an explanatory paragraph describing the material inconsistency, in accordance with paragraph .11 of AU section 508;
  • withhold the auditor’s report; or
  • when withdrawal is possible under applicable law or regulation, withdraw from the engagement
• establishes a presumptively mandatory requirement that when revision of the audited financial statements is necessary as a result of a material inconsistency with other information and the auditor’s report on the financial statements has already been released, that the auditor apply the relevant requirements in AU section 561, Subsequent Discovery of Facts Existing at the Date of the Auditor’s Report (AICPA, Professional Standards, vol. 1).
• establishes a presumptively mandatory requirement that when revision of the other information is necessary after the report release date and management agrees to make the revision, that the auditor carry out the procedures necessary in the circumstances.
• establishes a presumptively mandatory requirement that when revision of the other information is necessary after the report release date but management refuses to make the revision, that the auditor notify those charged with governance of the auditor’s concerns regarding the other information and take any further appropriate action.
• establishes a presumptively mandatory requirement that if, on reading the other information for the purpose of identifying material inconsistencies, the auditor becomes aware of an apparent material misstatement of fact, that the auditor discuss the matter with management. If, after discussion, the auditor still considers that there is an apparent material misstatement of fact, the statement establishes a presumptively mandatory requirement that the auditor request management to consult with a qualified third party, such as the entity’s legal counsel, and that the auditor consider the advice received by the entity in determining whether such matter is a material misstatement of fact.
• establishes a presumptively mandatory requirement that when the auditor concludes that there is a material misstatement of fact in the other information and management refuses to correct, that the auditor notify those charged with governance of the auditor’s concerns and take any further appropriate action.

The AICPA Auditing Standards Board has issued the following three statements on auditing standards related to supplementary information: SAS No. 118, Other Information in Documents Containing Audited Financial Statements; SAS No. 119, Supplementary Information in Relation to the Financial Statements as a Whole; and SAS No. 120, Required Supplementary Information. SAS Nos. 118-120 are effective for audits of financial statements for periods beginning on or after December 15, 2010. Early application is permitted.

 

LINKS:

http://www.aicpa.org/download/members/div/auditstd/SAS118.pdf
http://www.aicpa.org/download/members/div/auditstd/SAS119.pdf
http://www.aicpa.org/download/members/div/auditstd/SAS120.pdf

Source:  AICPA