Many nonprofits are gearing up for their annual audit. Expect a “facelift” in your annual audit this year thanks to new AICPA rules. AICPA’s Auditing Standards Board (ASB) has issued Statement on Auditing Standards (SAS) No. 134, Auditor Reporting Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, which will become effective for periods ending on or after December 15, 2021.
What this means is that the auditor’s opinion section of your annual audit will be different this year. Here’s what to expect from this “audit opinion makeover.”
The revised ASB Auditing Standards calls for new ways to organize the audit report. First, the auditor’s opinion will now come first in the document. The initial wording remains the same, but the opinion itself will be at the front of the document. This makes it easy for readers to find.
New Ethics Statements
New statements must be included in the report. This includes an ethics statement that clearly indicates that the auditor is required to be independent of the auditee. Additionally, the auditor must include a statement specifying they will meet all ethical standards of the profession.
Responsibilities of Management
Another new section and statement must include the responsibilities of management in respect to evaluating ongoing concerns.
The auditor’s responsibilities section is still included, but it has been revised to include additional information. The auditor’s responsibilities will be included and described in a bulleted list to make them easier to find and read.
Another change is the inclusion of a paragraph that describes in detail the auditor’s responsiblities to communicate certain matters with those charged with governance. These matters include the scope and timing of the audit, significant findings, and internal control related matters.
Key Audit Matters
Lastly, the ASB (SAS) 134 also introduces new ways to report on Key Audit Matters. This new framework means that entities must specifically hire an auditor to report on this matter. For example, if it is required by a third-party, you may wish to add this, but for most audits, it is not part of required reporting.
The changes also require enhanced reporting in regard to ongoing concerns, including a separate section in the auditor’s report where substantial doubt exists.
Is Your Organization Affected by the Changes?
All nonprofits are affected by the initial changes, but whether or not you need additional reporting on Key Audit Matters does depend upon the nature and scope of your organization and its responsiblities. This is where a good accounting professional or consultant is of great help. They can assist you through the audit process and help you determine how and where these changes impact your organization.
Preparing for Your Audit
Even if you feel that the audit is weeks or months away, it is a good idea to begin preparing for your audit now. Many nonprofits have discovered the benefit of cloud-based fund accounting programs, software that enables auditors to log in and view financial records without the need for time-consuming onsite visits. Such software makes it simple for auditors to log in from their offices and begin their auditing process. If you have such software, you may wish to take advantage of this feature and make it easier for auditors to spend any in-person time with you effectively.
Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.