The Auditing Standards Board has issued Statement on Auditing Standards no. 117, Compliance Audits.
The standard supersedes SAS no. 74, Compliance Auditing Considerations in Audits of Governmental Entities and Recipients of Governmental Financial Assistance.
The new guidance reflects changes in the compliance audit environment and incorporates the risk assessment standards. It requires the auditor to adapt and apply the AU sections of AICPA Professional Standards to a compliance audit and provides guidance on how to do so.
The SAS also identifies the AU sections that are not applicable to a compliance audit, defines terms related to compliance audits and used in the SAS, and identifies the elements to be included in an auditor’s report on a compliance audit.
The provisions are effective for compliance audits for fiscal periods ending on or after June 15, 2010. Earlier application is permitted. For a summary of the SAS, click here.