A Brighter Way
A Brighter Way
The Statements on Auditing Standards No. 104 -111 are now effective for audit periods beginning on or after December 15, 2006. While these standards have increased the time we invest in the planning phase of your audits, there are benefits both to you, as the auditee and to us the auditor.
In the past, we were only required to gain a basic understanding and knowledge of your business and industry and internal control over financial reporting and safeguarding of assets. Now, we must understand your business better, including understanding the effect of the overall economy, the effect of the regulatory environment and other factors that you must live with in your business. Your internal control system is very important to our audit procedures. We are now required to document the control steps and determine whether or not your stated internal control features have been implemented.
How do you the benefit from the change? First, as one of our experienced auditors stated after completing his first audit under these standards, “I know more about the client’s business than I ever knew. When they call me now for advice, I will be able to give them better help because I will understand why they are asking the questions.”
The audit cost will go up, but the knowledge we have of your business will benefit you when you need help. If you really do not want to pay more for your audit and you do not have an outside requirement for an audit opinion on your financial statement, you can reduce your level of service to a review report. Check with your banker to find out it a review would meet their needs to service you.
Feel free to contact your Rea Associate to discuss these new standards and how they will impact your audit.
This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, 2/20/2008.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.
