Auditors Have New Responsibilities Relating to Other Information in Annual Reports
Statements on Auditing Standards No. 137, The Auditor’s
Responsibilities Relating to Other Information Included in Annual Reports,
was issued in July 2019. It is codified
under AU-C Section 720 of the AICPA Professional Standards.
The standard applies only to a single document or
combination of documents that meet the definition of an “annual report” within
this standard, not what may be referred to as an “annual report” by others (such
as IRS Form 5500 or 990). The standard
requires obtaining a written management acknowledgement as to which document(s)
make up the “annual report”, which may be included in the engagement letter,
representation letter, or other written communication.
The auditor’s opinion does not cover the other information, and the auditor is not required to obtain audit evidence beyond that required to form an opinion on the financial statements as a whole. However, the auditor should read the other information, whether financial or non-financial in nature, to consider whether any material inconsistencies exist with audited financial statements. The auditor should remain alert for indications of any material inconsistency which may undermine the credibility of the audited financial statements.
The auditor’s responsibilities apply regardless of whether
the other information is obtained before or after the date of the auditor’s
report. However, when the auditor has
obtained the other information as of the date of the auditor’s report, the
auditor should include a separate section in the auditor’s report headed “Other
Information” or similar, regardless of whether or not the auditor has
identified an uncorrected material misstatement of the other information. Sample language is provided in the new
standard, which explicitly states that no assurance is provided on the other
This new standard is effective for audits of financial statements for periods ending on or after December 15, 2020. Early implementation is not permitted.
Stay up to date on the changing requirements for auditing. Click here to review the changed requirements for auditor reporting and performance on ERISA plan financial statements.