Enhanced Formal Communication Essay Example

Enhanced Formal Communication Essay Example Enhanced Formal Communication Essay Enhanced Formal Communication Essay TO: Management FROM: C. R. Edit DATE: July 15, 2013 SUBJECT: SAS 115 Auditing Standards Please note there have been some updates to the Statement of Auditing Standards that provides information on communicating internal control matters. Statement on Auditing Standards (SAS) No. 112 still has useful information is superseded by SAS 115 effective for audits after December 15, 2009. According to American Institute of CPAs (2006-2013), the primary changes from SAS No.112 to SAS No.115 are definitional changes in the terms significant deficiency and material weakness (para. 1). One needs to take time to review the updates by going to the website and reviewing both publications. Auditors will use the new guidelines, and it is imperative to ensure accountants are in compliance and knowledgeable about what the standards entail. In addition to the new publication a PowerPoint presentation and an archived conference is available to help with getting the information needed to perform accurate audits in the near future. SAS 115 The new guideline is that any issues identified need to be in a report to management in written form. Any issues from the past identified in the audit are also put in writing to the management team. Audits are an important function of a company, and the department must realize that proper internal controls produce better audit results. Definition Changes The definition changes are important to conduct audits properly. The definitions are in reference to communicating internal controls. There are some terms no longer in the auditing standards. Reportable condition is no longer used. Significant deficiency and material weakness have definitions and examples of use in the PowerPoint and updated publication. Conclusion Please bring working knowledge current on the changes and prepare to communicate any relevant information to the clients. In addition clients may be contacting the firm to get clarification on the updated information concerning internal control matters. If one has questions or concerns with the new information please have those questions ready at the next team meeting. Memorandum TO: Our Clients of Sumfun Accounting, Inc. FROM: C. R. Edit DATE: July 15, 2013 SUBJECT: SAS 115 Auditing Standards We want to offer information designed to help understand the requirements under Statement of Auditing Standards (SAS) No. 115. When we provide auditing services as our client, we are follow standards established by the American Institute of Certified Public Accountants (AICPA). One of these standards, SAS 115, is effective for audits of financial statements for periods ending after December 15, 2009, and is applicable whenever an auditor expresses or disclaims an opinion on financial statements (AU Section 325, 2013). SAS 115 SAS No. 115, and its predecessor, SAS 112, follow the objective that an organizationâ„ ¢s management is responsible for establishing and maintaining internal controls (Robinson, Farmer, Cox Associates 2007). The Standard provides guidance on communicating matters relating to an entityâ„ ¢s internal control over financial reporting (internal control) identified in an audit of financial statements (SAS 115, FAQ, 2009). Internal Control Internal control provides a standard in which business can stay on course toward profitable goals and achievement of its mission (COSO, 2013). When the organization has effective internal control standards in place, the likelihood of successful operations is greater, it will have more reliable financial reporting, and the opportunity to reduce fraud within the organization. Our Commitment Communications required by SAS 115 (AICPA, 2013) guide us in to promoting consistency, accuracy, and good governance practices in business. During our examination of the financial statements, we evaluate areas for material weaknesses, which occur when there is a possibility that a material misstatement in the financial statements will not be prevented, or detected, and corrected, on a timely basis. A significant deficiency is less severe than a material weakness, yet important enough to merit attention by management (Eisneramper, 2010). Conclusion The requirements of and wording in SAS 115 can be puzzling. We at Sumfun Accounting commit to providing you with supreme auditing services by staying up-to-date with national standards and reporting requirements. We will be personally contact you so we can discuss the requirements of SAS 115 and how the standards will apply to your upcoming financial audits. We will also answer any question you may have regarding this matter. ? Memorandum To: Supervisor, Small Accounting Firm From: Junior Auditor, Small Accounting Firm Date: July 15, 2013 Subject: Challenges and Causes of Poor Communication of SAS-112 Overview Presented below is the conclusion of analysis describing the possible challenges of effectively communicating the accounting changes within the different groups affected by the change in the implementation of Statement of Accounting Standards (SAS) No. 112, Communicating Internal Control of Related Matters Identified in an Audit regulation issued May 2006 by the American Institute of Certified Public Accounts (AICPA). Also included are the possible areas of concern if communicated poorly among these groups. Challenges of SAS-112 With the implementation of (SAS) No. 112 there is an establishment of updated standards, responsibilities, and guidelines for conducting an audit of an entityâ„ ¢s internal control over financial reporting. The audit of financial statements identifies issues that directly affect the procedures currently in place for the auditors on staff. This changes the method in which our auditors communicate to management and the governing body any control deficiencies discovered during an audit and consider the significant deficiencies or material weaknesses and report them in writing. The changes in SAS defines the terms significant deficiencies and material weaknesses, providing guidance on evaluating the severity of control deficiencies identified in an audit of financial reporting and requires the auditor to communicate, in writing, to management, and those charged with governance, significant deficiencies, and material weaknesses identified in an audit. SAS No.112 significantly affects the procedures in which our auditors conduct an audit on the financial statement of our clients. One challenge of importance is the auditorâ„ ¢s evaluation of issues and whether they are significant deficiencies or the updated definition of material weaknesses. Because there are significant changes in the auditing of financial statements, our staff will need to be knowledgeable and capable of informing management of any possible errors in judgments. Clerks that assist the auditor as well as the auditing staff will need to be aware of any events that would cause the auditor to miss any deficiencies in the statements before presenting the final audit report to the customers. The amount of time to conduct an audit of this type should be adjusted to allow additional review of items when generating a request for proposal on all auditing services performed by our firm. Each staff member must keep accurate time records for each project and the amount of extra time used in applying these changes to existing and future audits. Timekeepers should expect increases in the hours worked by the hourly rate employees. Current salaried employee will not realize any financial compensation for any time spent more than 40 hours, according to existing employment contracts with the firm. The changes in wages and salaries will need to monitored and be relayed to the accounting department for processing. The firm, in an appropriate fashion should communicate to our existing and potential clients that the rate increase for conducting an audit of financial statements is the result of this significant change in auditing. Partners should perform a review of the firmâ„ ¢s current rate for auditing services to determine if it warrants an increase and if so should communicate this increase to all that would be preparers of requests for proposal. Poor Communication Risk Management SAS No. specifically attempts to improve communications of internal control matters, especially during the audit of an organizationâ„ ¢s financial statements. As part of our firmâ„ ¢s audit review an extensive examination of the organizationâ„ ¢s deficiency in internal control of communication particularly those that prepare the financial statements to management. While auditors are performing an audit if there is discovery of significant control deficiencies that fall within the confines of significant deficiencies or material weaknesses, it is a requirement that the auditors report these deficiencies in writing to both management and those charged with governance. Deficiencies identified in prior audits that have no remediation are to be noted in the auditorâ„ ¢s report. The existence of significant deficiencies or material weaknesses may already be known by management and individuals charged with governance, and require a decision to accept the risks associated with those deficiencies for costs and other considerations. Although these decisions are the responsibility of management, the auditor still has a communication responsibility. SAS No. attempts to improve communications between the accounting department and management gives the preparer of the financial statements the ability to exercise more judgment when control deficiencies identified during an audit rise to a level of significant deficiencies or material weaknesses. With the improvement of communications the auditor will have a better chance in promoting consistency, accuracy, and good governance practices to the organizations. The most apparent risk of poor communication exists between the audit team and management and those charged with governance regarding the deficiencies in the internal control of the organization. Deficiencies in the internal control must be in clear communication methods to management by the auditors and create an awareness that the deficiencies exist but are not required to offer methods in which to improve the deficiencies. Our clients should conduct a communications audit in the internal control of operations to determine where break down in communications are and so that the organization may make improvements to the current practices with transparency as the main objective. References American Institute of CPAâ„ ¢s. (2006-2013). Retrieved from aicpa.org/InterestAreas/GovernmentalAuditQuality/Resources/Pages/Impact%20of%20SAS%20112%20on%20Governmental%20Financial%20Audits%20Conference%20Call.aspx AICPA Professional Standards. (2013) U.S. Auditing Standards vol. 1, AU Section 300-THE STANDARDS OF FIELD WORK, AU Section 325-Communicating Internal Control Related Matters Identified in an Audit. American Institute of Certified Public Accountants, Inc., New York, NY. AICPA Audit Risk Alerts. (2013). Communicating Internal Control Related Matters in an Audit-Understanding SAS No. 115 (ARA-ICM) Introduction to Communicating Internal Control Related Matters in an Audit-Understanding SAS No. 115. American Institute of Certified Public Accountants, Inc., New York, NY. Eisneramper Accountants Advisors. (2010). Communicating Internal Control Matters â€Å" SAS No. 115, downloaded on July 9, 2013, from www.eisneramper.com/SAS-115-Internal-Controls.aspx. Robinson, Farmer, Cox Associates Client Bulletin. (May 2007). Downloaded on July 9, 2013, from www.rfca.com/resources Statement on Auditing Standards (SAS) No. 115, Communication of Internal Control Related Matters Identified in an Audit, Frequently Asked Questions for AICPA PCPS Members (2009), page 1, downloaded on July 13, 2013, from www.mocpa.org/resources/ SAS_115_FAQ_040509_final.pdf. The Committee of Sponsoring Organizations of the Treadway Commisison, Internal Control-Integrated Framework-Summary.pdf page 3 (2013), downloaded on July 13, 2013 from coso.org.