Investment Companies, 2019

Appendix L New Auditing Standards to Change the Auditor’s Report

This appendix is nonauthoritative and is included for informational purposes only.

Note: The following auditing standards are effective for audits of financial statements for periods ending on or after December 15, 2020. Early implementation is not permitted. However, due to the breadth of the changes, auditors are encouraged to review these standards now to prepare.

In May 2019, the Auditing Standards Board (ASB) issued Statements on Auditing Standards (SAS) No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, aimed at enhancing the relevance and usefulness of the auditor’s report. SAS No. 134 replaces AU-C sections 700, Forming an Opinion and Reporting on Financial Statements;¹ 705, Modifications to the Opinion in the Independent Auditor’s Report; and 706, Emphasis-of-Matter and Other-Matter Paragraphs in the Independent Auditor’s Report. It also establishes a new AU-C section 701, Communicating Key Audit Matters in the Independent Auditor’s Report, in the AICPA’s Professional Standards.

SAS No. 134 was developed in consideration of the following issues:

•     Although users value the “pass/fail” nature of the auditor’s opinion, they would like the auditor’s report to provide greater transparency into the audit.

•     Users would like the auditor’s report to include more information about areas with higher assessed risks of material misstatement, ...