The AICPA’s Auditing Standards Board issued an exposure draft of a proposed SAS andproposed SSAE titled “Amendments to the Description of the Concept of Materiality.” When effective, the proposed amendments would impact the description of when misstatements are considered material, adding consistency to the description of materiality. In fact, the proposal would align the concept of materiality in the AICPA Professional Standards with the definition of materiality used by the Public Company Accounting Oversight Board (PCAOB), SEC, FASB, and the U.S. judicial system. The amendments are not expected to significantly affect practice in the United States. Issued on June 5, feedback is due by Aug. 5, 2019.
The updates primarily relate to whether a misstatement “would influence” or “could reasonably be expected to influence.” Definitions come forward from the 1976 decision U.S. Supreme Court in TSC Industries Inc. v. Northway Inc., where the Court opined that “an omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.”
“Do we expect a huge change in practice? Probably not. But it’s probably better for us to be consistent within the United States, given that’s our jurisdiction when we come to things like lawsuits,” Galasso says. “So they decided it was probably in the best interest of everyone to sort of work on that convergence project so U.S. standards would all be consistent.”
Proposed effective dates: For audits of financial statements for periods ending on or after Dec. 15, 2020; and for practitioners’ reports dated on or after Dec. 15, 2020.
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Upcoming Broadcast Note: Join Melisa Galasso for a one-hour credit A&A Broadcast Course on “The New AICPA Auditor’s Report,” a must-see for auditors.
SCACPA is excited to partner with Galasso Learning Solutions and the Genuine Learning Blog for real-time A&A updates and answers for SCACPA members. With over 15 years of experience in the accounting profession, Melisa Galasso designs and facilitates courses in advanced technical accounting and auditing topics, including not-for-profit and governmental accounting. She closely monitors regulatory bodies for changes in auditing and accounting guidance and serves as a subject matter expert in implementing the updated guidance.
Melisa was a speaker on audit topics at SCACPA’s 2019 Spring Splash. Look for her to return this November for Fall Fest as well as many seminars and rebroadcasts.
You can read SCACPA’s Q&A with Melisa conducted during some break time at Spring Splash here.