ASB’s Proposed New Standard Encourages Auditors to Exercise Professional Skepticism

The American Institute of CPAs’ (AICPA) Auditing Standards Board (ASB) has issued Proposed Statement on Auditing Standards (SAS), Auditing Accounting Estimates and Related Disclosures, to supersede SAS No. 122 section 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, and amend various other AU-C sections in AICPA Professional Standards.

“This proposed standard breaks down the various aspects of management estimates, thus addressing one of the biggest challenges auditors face and allowing auditors to focus their efforts on unique aspects like subjectivity and estimation uncertainty,” said Robert Dohrer, CPA, CGMA, AIPCA Chief Auditor. “The focus on unique aspects are intended to enhance the effectiveness of the auditor’s procedures as they relate to management estimates in general.”

The proposed SAS is one piece of a larger AICPA project to enhance audit quality (see the AICPA’s Enhancing Audit Quality Initiative), which launched in 2014 and aligns all AICPA audit-and-assurance-related activities to the goal of supporting firms’ quality improvement. The proposed SAS is intended to help auditors appropriately address the increasingly complex scenarios that arise from today’s new accounting standards that include: