ASB’s Proposed New Standard Encourages Auditors to Exercise Professional Skepticism

August 22, 2019

The proposed SAS is part of the AICPA’s Enhancing Audit Quality Initiative

NEW YORK (August 22, 2019) - The American Institute of CPAs’ (AICPA) Auditing Standards Board (ASB) has issued Proposed Statement on Auditing Standards (SAS), Auditing Accounting Estimates and Related Disclosures, to supersede SAS No. 122 section 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, and amend various other AU-C sections in AICPA Professional Standards.

“This proposed standard breaks down the various aspects of management estimates, thus addressing one of the biggest challenges auditors face and allowing auditors to focus their efforts on unique aspects like subjectivity and estimation uncertainty,” said Robert Dohrer, CPA, CGMA, AICPA Chief Auditor. “The focus on unique aspects are intended to enhance the effectiveness of the auditor’s procedures as they relate to management estimates in general.”

The proposed SAS is one piece of a larger AICPA project to enhance audit quality (see the AICPA’s Enhancing Audit Quality Initiative), which launched in 2014 and aligns all AICPA audit-and-assurance-related activities to the goal of supporting firms’ quality improvement. The proposed SAS is intended to help auditors appropriately address the increasingly complex scenarios that arise from today’s new accounting standards that include:

  • estimates and related disclosures,
  • and enhancing the auditor’s focus on factors driving estimation uncertainty and potential management bias.

The ASB believes the proposed changes will drive auditors to exercise professional skepticism, thereby improving audit quality.

Interested parties are encouraged to submit their feedback to Sherry Hazel at Sherry.Hazel@aicpa-cima.com by November 22, 2019.

About the American Institute of CPAs

The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 429,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for its members and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives professional competency development to advance the vitality, relevance and quality of the profession.