|Original Pronouncement||Statement on Auditing Standards (SAS) 12.|
|Effective Date||This standard is now effective.|
|Applicability||Audits of financial statements in accordance with generally accepted auditing standards (GAAS).|
SAS No. 122, Codification of Auditing Standards and Procedures, is effective for audits of financial statements with periods ending on or after December 15, 2012.
AU-C 501 combines the requirements and guidance from extant AU Section 331, Inventories; 332, Auditing Derivative Instruments, Hedging Activities and Investments in Securities; and 337, Inquiry of a Client’s Lawyer Concerning Litigation, Claims, and Assessments.
AU 337.06 states, in part, “the auditor should request the client’s management to send a letter of inquiry to those lawyers with whom management consulted concerning litigation, claims, and assessments.” AU-C 501 takes a more principle-based approach. AU-C 501.18 requires the auditor to seek direct communication with the entity’s external legal counsel (through a letter of inquiry) if the auditor assesses a risk of material misstatement regarding litigation or claims, or when audit procedures performed indicate that material litigation or claims may exist.
AU-C Section 501 supersedes Appendix—Illustrative ...