AICPA Finalizes Another New Auditing Standard
School Advisor, 2007 Issue No. 1  

In December, 2006 the AICPA published yet another new auditing standard—SAS No. 114, The Auditor’s Communications With Those Charged With Governance. This standard replaces SAS No. 61, Communication With Audit Committees.

Under SAS No. 61, auditors were required to communicate certain audit-related matters directly to formally designated audit committees. Many entities have not formed formal audit committees and were thus exempted from SAS 61. The new standard expands these communications to include communications to “those charged with governance” for all audit engagements. For most school districts, the board of education will be the governing body with whom these communications are made.

The required communications will include the following topics:

• Responsibilities of the auditor under generally accepted auditing standards
• Overview of the planned audit scope and timing
• Significant audit findings and matters, including:
  • Auditor’s views regarding qualitative matters including accounting policies, significant estimates, and disclosures
  • Significant difficulties encountered in the conduct of the audit (for example, delays, difficulty in obtaining information, etc.)
  • Uncorrected misstatements
  • Management representations
  • Consultations with other accountants
  • Adjusting entries identified in the audit
  • Issues discussed with management
  • Other significant findings

The new standard also emphasizes the need for adequate two-way communication to occur between the board and auditor to enhance the effectiveness of the audit process and the governance of the district.