New Chairman Signals Focus on Maintaining, Improving Existing Rules
In an effort to glean insight that would aid in understating the financial reporting challenges that companies uniquely face at this point in time, new FASB Chairman Richard Jones said priority is to listen and learn. Jones said the board will “press pause” to listen to companies’ challenges from their unique vantage points and enable the board to nimbly address issues “in ways that provide investors with better information in the most cost-effective way.” “I believe we already have a solid set of standards, so I anticipate most of our work will focus on maintenance and improvement rather than dramatic accounting changes,” said Jones. “That said, there should be opportunities to strike a balance between the user’s desire for more granular information with the preparer’s call for less cost and complexity. Your input helps us discover how to do that.” Jones also highlighted the importance of independent standards-setting, stating it is a great asset and privilege. “It’s an asset because it drives standards that provide unbiased information to investors and other capital suppliers,” he said. “It’s a privilege because we must continually earn the right to set standards—by listening and responding to the needs of our stakeholders.”
Revised Standard to Improve Audits of Accounting Estimates
The AICPA’s Auditing Standards Board (ASB) has issued a revised standard intended to improve audits of accounting estimates and encourage auditors to exercise professional skepticism. Statement on Auditing Standards (SAS) 143, Auditing Accounting Estimates and Related Disclosures, supersedes SAS 122, AU-C Section 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures. The AICPA wants auditors to focus on factors driving estimate uncertainty and potential management bias. Company management has an incentive to record estimates that make their books look better. Moreover, inspection findings have shown that this is an area in need of improvement. “This new auditing standard provides more robust guidance for auditors who are addressing an increasingly complex financial reporting environment,” AICPA Chief Auditor Bob Dohrer said in a statement. “In our current period of economic uncertainty and volatility, management’s asset impairment estimates are particularly important, and this standard will aid auditors in assessing them.” The final standard becomes effective for audits of financial statements for periods ending on or after December 15, 2023. Auditors can implement early.
New Standard on Audit Evidence Issued
The AICPA’s Auditing Standards Board (ASB) issued a final standard that revises the guidance for audit evidence to address various audit issues that have cropped up in a fast-changing business environment. Statement on Auditing Standards. (SAS) 142, Audit Evidence, is largely based on a proposal issued in June 2019 in the exposure draft (ED), “Proposed Statement on Auditing Standards (SAS), Audit Evidence.” The revision comes as the existing standard, issued in 2011, did not contemplate the increased use of sophisticated technology today. Emerging audit techniques, such as audit data analytics, AI, robotic process automation, and blockchain offer both challenges and opportunities that affect audits of financial and nonfinancial information. “It recognizes the use of automated tools and techniques such as audit data analytics, AI [artificial intelligence] and remote observation tools to obtain audit evidence,” AICPA Chief Auditor Bob Dohrer said in a statement. SAS 142 becomes effective for audits of financial statements for periods ending on or after December 15, 2022.