Audited Financial Statements Impacted by 2021 Audit Opinion Changes
For those with audited financial statements, there have been several changes to the form and content in the 2021 audit opinion.
As of the 2021 financial reporting period, the Statement of Auditing Standards (SAS) No. 134 audit opinion requirements went through substantial changes. The new auditor's report presents the opinion first and expresses the responsibility of management for preparing the financial statements and the auditor's responsibilities for the audit. The new standards will take effect for audits of financial statements for periods ending on or after Dec. 15, 2021.
According to the AICPA’s Auditing Standards Board (ASB), “The new SAS is meant to make it easier for users of the financial statement to understand the results of the audit and better emphasizes the auditor’s and management’s responsibilities.”
Key Changes
The first change to the auditor's report is the "Opinion" section will be placed at the beginning of the report, rather than near the end. This change makes it easier to identify whether a firm has taken steps to prevent a material misstatement or fraud. The Auditor's Opinion section includes statements regarding independence, which is a key element of the ethical standards in auditing.
Process Updates
The Audit Opinion should be objective and should not be influenced by other factors. It is an integral part of the audit report and should be considered as such. A well-written and consistent audit report provides an unambiguous interpretation of a company's financial statements. In addition, it must be complete and independent.
The new auditor's report must include a separate paragraph for the "Basis for Opinion," plus a separate section when substantial doubt exists. The Audit Opinion should be placed in the front of the report (it was the last paragraph of the report in the past) and summarize the company's financial statements.
In addition, the Responsibilities of Management for the Financial Statement section has been enhanced with management’s responsibility to evaluate going concern matters. Also, the Auditor’s Responsibilities section has been reworded to make it easier to understand the auditor’s responsibilities to communicate certain matters, as well as those charged with governance, including topics such as:
Audit scope and timing;
Significant audit findings, and;
Certain internal control-related matters.
There are also many other requirements for the auditor, including disclosure of risks and key audit matters (KAMs) as it relates to privately held companies, not-for-profits, and governmental entities.
Contact Us
If you have questions about the new auditing standards and how they might impact your company, please reach out to LMJ CPAs. We can help.