At times, it seems that SADs are perceived as a black mark on an otherwise clean audit report, which is most likely due to a misunderstanding of what a SAD represents. SADs are a mechanism used by the auditor to quantify differences in an audit.
They are not meant to be a commentary on the qualitative aspects of management. PCAOB Auditing Standard 14 requires the auditor to evaluate the results of the audit to determine whether the evidence obtained over the course of the audit is sufficient to support the intended opinion on the financial statements.
One of the criteria the auditor should take into consideration is the accumulated differences noted during the audit. In particular, the auditor should pay careful attention to accumulated uncorrected differences noted during substantive testing. During the planning phase of an audit, the auditor establishes various thresholds of materiality e. Financial Statement materiality, work paper materiality or de minimis as a way to measure the magnitude of differences noted during fieldwork.
Any identified differences below this de minimis threshold are considered to be clearly immaterial or trivial and do not need to be accumulated. The auditor will then aggregate the work paper materiality differences noted during the audit for management to review. It is up to management to decide whether or not to make adjustments to the books for those differences proposed by the auditor. Not all features are available in all products. Visit us: www.
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