PGwire - The Official Blog of Piccerelli, Gilstein and Company, LLP

Wednesday, December 9, 2009

Are you Ready for the New Audit Standards?


As you prepare for your audit this year, we want to make you aware of a new auditing standard, Statement on Auditing Standards (SAS) 115: Communicating Internal Control Related Matters Identified in an Audit, which supersedes SAS No. 112 of the same name. SAS No. 115 goes into effect for all financial statement audits for periods ending on or after December 15, 2009. As with SAS No. 112, SAS No. 115 requires that we evaluate deficiencies in internal control that we identify during our financial statement audit to determine whether any of those deficiencies, individually or in combination, are significant deficiencies or material weaknesses.

SAS No. 115 provides new definitions of the terms material weaknesses and significant deficiencies and provides us with additional direction and guidance as to how to evaluate whether a deficiency in internal controls is a significant deficiency or materials weakness. This additional guidance enables us to further draw upon our professional judgment as we apply these definitions to each unique situation.

As with SAS No. 112, SAS No. 115 also requires that we communicate, in writing, to your management and those charged with governance, those deficiencies that we consider to be significant deficiencies or material weaknesses, including those communicated to you during previous audits, either orally or in writing, if they have not yet been remedied.

Communicating any identified significant deficiencies or material weaknesses in writing is important to heighten your awareness of internal control over financial reporting and to enable management and those charged with governance in your organization to better assess the costs and benefits of implementing any new controls that would help minimize the risks of financial statement misstatements, including those caused by fraud.

We are available at any time to discuss any questions you may have related to internal controls, examples of deficiencies in internal controls, or other matters related to your audit. If you would like to schedule a meeting to address your questions or discuss this new standard in advance of your audit, please feel free to contact Sharon Kennedy, Partner at 401-831-0200 or sharonk@pgco.com.

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