The Complete CPA Reference

CHAPTER 12

Auditing Standards

This chapter provides the practitioner with a handy reference guide to the major practical provisions of the Statements on Auditing Standards (SAS) and Auditing Standards (AS) of the Public Company Accounting Oversight Board (PCAOB) not previously covered.

Statements on Auditing Standards set forth authoritative guidance for properly conducting an audit of a nonpublic company. Audits of publicly traded companies should also be based on SAS unless provisions are superseded by Auditing Standards issued by the PCAOB. In applying the substantive material of these Statements, the practitioner must exercise professional judgment and due professional care.

SAS 1—Codification of Auditing Standards and Procedures

This statement covers the material contained in Statements on Auditing Procedures numbers 33 through 54. While much of SAS 1 has been superseded by subsequent pronouncements, the information presented here remains in effect.

What are “subsequent events”?

Subsequent events are events that occur after the balance sheet date but before the issuance of the financial statements and the auditor's report. They provide additional information about conditions or circumstances:

• Existing at or before the balance sheet date (Type I)
• Arising after the balance sheet date (Type II)

How should subsequent events be handled?

• Type I subsequent events require adjustment of the financial statements.
• Type II subsequent events may require disclosure in the financial ...