Proposed SAS Interim Financial Information (Redrafted)

The ASB has issued another Proposed SAS as part of its Clarity Project. The Proposed SAS Interim Financial Information (Redrafted) will supersede SAS No. 116, Interim Financial Information (AICPA, Professional Standards, vol. 1, AU sec. 722). It was issued July 8, 2010. The comment period ends October 8, 2010.

The proposed SAS would be effective for reviews of interim financial information for interim periods of fiscal years beginning on or after December 15, 2012.

Changes from existing standards include:

• Change of the term "accountant" to "auditor" because the scope of this proposed SAS is limited to a review of interim financial information performed by the auditor of the financial statements of the entity.
• Consistent with the proposed SAS Revised Applicability of Statement on Auditing No. 116, Interim Financial Information, states that the proposed SAS is applicable when the auditor audited the entity’s latest annual financial statements and the appointment of an auditor to audit the current year financial statements is not effective prior to the beginning of the period covered by the review. This change in applicability will affect current practice in that the auditor may apply AU section 722 even when the auditor does not expect to be engaged to audit the current year financial statements and will allow for appropriate transition between auditors when there is a change in auditors.
• The proposed SAS requires the auditor to issue a written report unless the review of the interim financial information is required by a third party and the third party does not require that the auditor performing the interim review issue a written review report. However, the proposed SAS permits oral reports for entities that are subject to external requirements to report in a manner that is substantially similar to the reporting required of issuers, pursuant to PCOAB AU section 722, Interim Financial Information (AICPA, PCAOB Standards and Related Rules, PCAOB Standards, Interim Standards). This change in requirements will affect current practice by limiting the circumstances in which an oral report is permitted.
• The proposed SAS requires the auditor, before accepting the engagement, (i) to review the interim financial information to determine whether the financial reporting framework to be applied in the preparation of the interim financial information is acceptable and (ii) to obtain the agreement of management that it acknowledges and understands its responsibility for certain specified matters.
• The proposed SAS requires a statement that the review of interim financial information was conducted in accordance with auditing standards generally accepted in the United States of America.

The Proposed SAS may be downloaded from the AICPA website, http://www.aicpa.org/.

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