Learning Team A Accounting Firm
Re: New SAS 115 Rules
New SAS 115 Rules
The purpose of this memo is to inform you of the new auditing rules described by SAS 115.
The Accounting Standards Board issued Statement on Accounting Standards (SAS) 115. This regulation is an amendment to and replaces SAS 112. The new regulation kept the same name as the previous regulation. The name of the regulation is Communicating Internal Control Related Matters Identified in an Audit.
Per the American Institute of CPAs website, “SAS 115 requires the auditor to make communications, in writing, to management and those charged with governance regarding significant deficiencies and material ...view middle of the document...
In SAS No.112 material weakness’ definition stated “more than a remote likelihood” that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. This has changed as it distinguishes that a reasonable possibility exists, rather than “more than a remote likelihood”.
“A deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.”
The change in the definition of Significant Deficiency included omission of the following, “…there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected.” This gives the auditor the ability to apply more professional judgment in determining whether the deficiency is a significant deficiency and merits attention by the client’s management or those charged with governance.
How does this change affect you?
You will need to become familiar with and follow the new rules described by SAS 115. There have been changes made on how to communicate your findings during an audit. Communicating, in writing, any material weaknesses or significant deficiencies identified during the audit to management and those charged with governance, is still required by auditor. For more information on SAS 115, please see the AICPA’s website, http://www.aicpa.org. If you have any questions about the new regulation, please let us know and we can schedule a meeting to address any questions related to the new regulation.