AICPA updates audit standards related to external confirmations

A newly published AICPA standards update will affect how CPAs obtain audit evidence through external confirmation procedures.

The most significant change in Statement on Auditing Standards (SAS) No. 150, External Confirmations  is a new requirement for the auditor to perform external confirmation procedures for cash and cash equivalents held by third parties unless certain conditions exist. SAS No. 150 acknowledges direct access to information maintained by a knowledgeable external source as a way to satisfy requirements related to external confirmation procedures and provides related guidance.

SAS No. 150 updates existing guidance to reflect the increasingly widespread use of intermediaries in external confirmation procedures. It establishes new conditions to be met when using negative confirmation requests.

“External confirmations remain a critical source of reliable audit evidence, and these updates are designed to strengthen that foundation in today’s increasingly digital and intermediary-driven environment,” Jennifer Burns, CPA, the AICPA’s chief auditor, said in a news release in May, when the AICPA Auditing Standards Board voted to approve the standards update.

The standards update was published Monday and becomes effective for audits of financial statements for periods ending on or after Dec. 15, 2028. Early adoption is possible.

SAS No. 150 amends:

• SAS No. 122, Statement on Auditing Standards: Clarification and Recodification, as amended (AU-C section 330, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained; and AU-C section 505, External Confirmations);
• SAS No. 142, Audit Evidence, as amended; and
• Various other SASs and other sections in SAS No. 122, as amended.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.