The AICPA’s Auditing Standards Board (ASB) recently released SAS No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, which updates the form and content of a financial statement auditor’s report. Although fairly simple, the changes may make it easier for financial statement users to understand the results of the audit, as well as the auditor’s and management’s responsibilities.

Auditor’s Opinion

One of the most obvious changes involves the placement of the auditor’s opinion. Just as journalists don’t want to “bury the lead” by introducing important information too late in a news story, the new format of the auditor report will include the auditor’s opinion first, followed by the Basis for Opinion section.

Included in the Basis for Opinion section will be a statement that the auditor is required to be independent of the entity it is auditing, which is a fundamental part of the auditor’s ethical standards. The new format will also require the auditor to highlight their ethical responsibilities related to the performance of the audit.

When an audit opinion is not “clean”, the auditor will continue to issue a qualified, adverse or disclaimer of opinion. However, any necessary Modifications to the Opinion section will be aligned with the changes made to the Auditor’s Opinion section. It should be noted that the updates do not affect the situations that will require a modification to an auditor’s opinion or the process for determining the type of modification that must be made to the auditor’s opinion when those circumstances arise.

Going Concerns

A few years ago, the Financial Accounting Standards Board (FASB) released an accounting standards update (ASU) that affects the disclosures for an entity’s uncertainty about its ability to continue as a going concern. ASU 2014-15 generally took effect for both public and private companies in the 2017 calendar year.

SAS No. 134 will enhance the discussion and prominence of the going concern evaluation by including enhanced information related to the going concern evaluation. The new auditing standard will require a description of the respective responsibilities of management when required by the financial reporting framework, and a description of the going concern responsibilities of the auditor regardless of whether the substantial ability about an entity’s ability to continue as a going concern exists.

Auditor Responsibilities

The new report will make it easier to understand the auditor’s responsibilities. Not only does it include additional information, but certain key aspects of the auditor’s responsibility will now be described in a bullet point list, making it easier to identify and understand the key responsibilities of the auditor.

In general, the new report will include additional description about the auditor’s responsibilities related to professional judgment and skepticism, and communications with those charged with governance for the entity. It also amends previous guidance to communicate with those charged with governance about the significant risks identified by the auditor.

Key Audit Matters

Perhaps the most significant change under the new auditing standard is that a company may now choose to engage their auditor to report on Key Audit Matters (KAMs). This change enables a private company to engage their auditor to provide information similar to Critical Audit Matters (CAMs) that are being required by the Public Company Accounting Oversight Board (PCAOB) for public companies. KAMs are intended to provide readers of the auditor’s report greater transparency into the audit that was performed.

KAMs are matters that were communicated by the auditor to those charged with governance, and that in the professional judgement of the auditor were most significant in the audit of the financial statements. The inclusion of KAMs in the auditor’s report is not required, but may be elected by a private company by engaging its auditor to include KAMs in the auditor’s report.

When financial statement auditors include KAMs in their report, they will be including why the matter was considered to be one of the most significant in the audit and how the matter was addressed in the audit.

In addition to the new guidance on KAMs, the new standard also provides guidance that CAMs should be reported, when applicable under PCAOB guidance, when an auditor is engaged to perform an audit under both AICPA and PCAOB auditing standards for an entity that is not within the jurisdiction of the PCAOB.


Changes were made to the Emphasis-of-Matter section to clarify how these sections would be affected by communication of KAMs. For example, Emphasis-of-Matter descriptions cannot be used in place of the KAMs section, and must be clearly delineated from KAMs by a header.


Auditors will be asked to pay more attention to the entity’s financial statement disclosures, including understanding the entity, its environment, and its risks for material misstatements. The new auditing standards also include practical guidance for auditing disclosures, which have become more complex with recent accounting standards updates to revenue recognition and leasing.

Even More Changes

In addition to the new auditor’s report, the ASB issued SAS No. 135, Omnibus Statement on Auditing Standards – 2019. The changes in SAS No. 135 were designed to more closely align an audit performed under AICPA standards with one performed under PCAOB standards. In addition to other improvements, SAS No. 135 most significantly addresses the auditor’s communication with those charged with governance, the auditor’s responsibilities relating to related party relationships and transactions in the financial statement audit, and the auditor’s consideration of fraud in a financial statement audit.

Effective Dates

The changes in the new auditing standards will take place for audits of financial statement for periods ending on or after Dec. 15, 2020 (generally 2020 financial statement audits). Early implementation is not permitted. For any comments, questions, or concerns about what the auditing changes mean for your audit, please contact us

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Published on June 25, 2019