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Accounting & Audit

AICPA Discussion Paper Prepares CPAs Making Professional Judgments on Attestation Materiality

The paper was initially exposed for public comment in August 2019 and was developed by a Working Group of the AICPA Assurance Services Executive Committee (ASEC).

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CPAs are performing attestation engagements on a variety of new and emerging subject matters, not all of which can be numerically measured and evaluated. To assist practitioners in considering materiality, today the American Institute of CPAs (AICPA) issued nonauthoritative guidance Materiality Considerations for Attestation Engagements Involving Aspects of Subject Matters That Cannot be Quantitatively Measured. Materiality, often considered one of the most difficult exercises in auditing and financial reporting, can be even more daunting when auditing new and emerging subject matters (such as security controls and sustainability matters) that cannot be evaluated using quantitative measurements. 

“When considering materiality in attestation engagements, it can be challenging if the subject matter cannot be quantified,” said Bob Dohrer, CPA, CGMA, AICPA Chief Auditor. “For example, when a practitioner performs a review engagement of an entity’s corporate social responsibility information, some aspects can only be evaluated qualitatively. In those situations, practitioners are faced with the challenge of how to consider materiality when planning, performing and reporting in attestation engagements. We hope this paper will go a long way in helping CPAs consider materiality in those engagements.”

The paper was initially exposed for public comment in August 2019 and was developed by a Working Group of the AICPA Assurance Services Executive Committee (ASEC). As the demand for CPAs to perform attestation engagements has increased, challenges related to considering materiality have grown. To further assist CPAs, the paper also includes a helpful flowchart that demonstrates the flow of materiality from the planning phase, to execution and reporting. 

“ASEC’s mission is developing and promoting new services for CPAs to perform,” said Jim Burton, CPA, Partner at Grant Thornton and ASEC Chairman. “In addition to developing these new services, we also have a responsibility to provide CPAs with the tools they need to perform them at the highest quality. Understanding how to consider materiality when performing these new engagements is critical, and this discussion paper opens a dialogue within the profession to address this issue.”