Redrafted SASs, Audit Evidence and Materiality

Significant Changes From Existing Standards

a) SAS, Audit Evidence (AU section 326) (Redrafted)

(1) Consistent with ISA 500, Considering the Relevance and Reliability of Audit Evidence, the ASB is proposing to transfer the requirements and guidance related to the auditor’s use of assertions from AU section 326 to AU section 314, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement.

b) SAS, Materiality in Planning and Performing an Audit (AU section 312) (Redrafted)

(1) To make the standard clearer and consistent with ISA 320 (Revised), Materiality in Planning and Performing an Audit, and ISA 450, Evaluation of Misstatements Identified during the Audit, the ASB separates AU section 312 into two separate standards.

(a) SAS, Materiality in Planning and Performing an Audit (Redrafted), would address the use of materiality in planning and performing the audit.

(b) A separate standard, Evaluation of Misstatements Identified During the Audit, would address the evaluation of misstatements identified during the audit.

(2) The definition of audit risk and its components are now defined in the SAS, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards.

(3) The ASB proposes to eliminate the mandatory requirement of the auditor to consider audit risk in an audit because the ASB believes that the consideration of audit risk is fundamental in the audit process, and an explicit requirement is not necessary.

(4) Paragraphs .62–.67 of AU section 312 address the auditor’s responsibilities to evaluate the overall effect of audit findings on the auditor’s report. The ASB proposes to delete these paragraphs from this section because it is expected that these requirements and guidance will be included in AU section 508, Reports on Audited Financial Statements (AICPA, Professional Standards, vol. 1), when AU section 508 is redrafted as part of the ASB’s Clarification and Convergence project.