As we discussed in an earlier article, technology has become a core portion of the audit, and the AICPA had been considering standards to reflect the evolution. New technologies have popped up over the past decade that have made audits easier in some regards, more complex in others, and more challenging to keep up with.

In this, we promised in an earlier blog to keep you updated on the changes that are coming, and just days ago saw that new guidance emerged to reflect the increasing role of technology in the audit. Issued by the Auditing Standards Board, the Statement on Auditing Standards No. (SAS) 142 Audit Evidence was written to modernize auditing standards for private companies.

As reported in Accounting Today,

“The new Statement on Auditing Standards No. (SAS) 142 Audit Evidence aims to modernize private company auditing standards by addressing the emerging technologies used by both preparers and auditors, along with the application of professional skepticism, the expanding sources of information to be used as audit evidence, and the accuracy, completeness, relevance and reliability of audit evidence.”

Quick Look: SAS No. 142

Set to take effect for audits of financial statements for periods ending on or after December 15, 2022, the new standard was written to reflect the evolution of auditing software recommended by the AICPA. SAS No. 142 supersedes AU-C section 500, Audit Evidence and amends various other sections of SAS 122, Statements on Auditing Standards: Clarification and Recodification, as amended.

“Our substantially revised standard addresses the evaluation of audit evidence and has been modernized to reflect our current business environment,” said AICPA chief auditor Bob Dohrer in a statement. “It recognizes the use of automated tools and techniques such as audit data analytics, AI and remote observation tools to obtain audit evidence.

[…] New attributes of information for the auditor to consider include, whether the information is corroborative or contradictory to management assertions, the authenticity of the evidence and its susceptibility to bias.”

You can view the entire standard and fact sheet by clicking the links, but as documented by the SAS 142 Fact Sheet, the update focuses on the following areas:

  • Expanded guidance on evaluating whether sufficient appropriate audit evidence has been obtained.
  • Automated tools and techniques.
  • Professional skepticism.
  • Management specialists.

Expanded Guidance on Sufficient Audit Evidence

The first stated goal in the fact sheet, SAS No. 142 expands the objective of the extant standard. When assessing whether sufficient appropriate audit evidence has been obtained, the guidance recommends considering the attributes of information to be used as audit evidence in assessing. Attributes of reliable information include its accuracy, completeness, authenticity, and susceptibility to bias.

Automated Tools and Techniques

Technology use is evolving on both sides of the audit, and the new guidance reflects that. Tools including audit data analytics, drones or remote observation tools have seen increasing use, and the standard now recognizes these prominently.

“SAS No. 142 also states that an auditor may use automated tools and techniques to perform both a risk assessment procedure and a substantive procedure concurrently if the objectives of both types of procedures are achieved. The standard also contains an exhibit illustrating this concept.”

Professional Skepticism

Information, even information automatically generated, is susceptible to bias, and auditors need to be increasingly aware how the use of technology impacts this. This content includes the auditor’s consideration of susceptibility of information to bias and whether the audit evidence obtained corroborates or contradicts management’s assertions.

Learn More: The Evolving Audit

As the audit process continues to evolve, it’s important to keep up with all the latest. The Controllers Council has recently announced its new members-only forum that will allow you to discuss all of the latest changes taking place and explore others’ tactics. Stay tuned by subscribing to our free newsletter and join the discussion by joining the Controllers Council today!

Additional Resources

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