New Audit Standards for 2012 Audit

As you plan for your next financial statement audit, be aware there are changes in auditing standards that may impact your engagement. Statements on Auditing Standards (SAS) Nos. 122-125 (referred to as the Clarified Auditing Standards) introduce some changes that go into effect for financial statement audits for periods ending on or after December 15, 2012. Our goal is ensure a smooth transition to the new audit requirements. Below we've provided a summary you can review to begin familiarizing yourself with the changes.

• Although management responsibilities are unchanged, management's responsibilities will be spelled out more clearly in the engagement letter as a result of the new standards.
• All confirmations are now required to be in writing. In some circumstances we may have relied on verbal confirmations; however, that is no longer an option. We may need your help to get cooperation from banks, service providers, or others if they are not responding to our confirmation requests quickly.
• The audit report has changed, with headings to distinguish each section and a more complete description of management responsibilities. In some circumstances, new paragraphs may be included in the audit report to address special situations.
• Our communications to you regarding internal control deficiencies must now include a description of the potential effect of significant deficiencies or material weaknesses that we identify through our audit procedures. We won't quantify the potential effect; we'll just give a description. The expanded reporting is intended to enhance your ability to address internal control issues and reduce the potential risk of material misstatement or fraud.
• If your plan uses a service organization, such as an investment custodian, we will ask you whether the service organization has reported any fraud, noncompliance with laws and regulations, or uncorrected misstatements that could affect your organization. We may have to adjust our audit procedures accordingly.
• If you have engaged us to perform an audit for the first time, we will discuss with you the enhanced procedures required in an initial audit (or reaudit).

Some of the benefits of the clarified auditing standards include enhanced communication between your team and ours, improved audit quality, and increased confidence in the audited financial statements.

If you have questions in advance of your audit, please feel free to contact your Legacy Engagement Partner any time.

By Eileen E. Brassil, CPA, CFE, Partner, ebrassil@legacycpas.com