Jerome P. Dublan, CPA
New Standards Require Expanded Audits
The purpose of this Important Notice is to let you know about some significant changes in the audit industry. Those changes result from the AICPA issuing a suite of new auditing standards, collectively referred to as the risk assessment standards. These standards require expanded audit procedures. We are required to follow those standards as part of our audit of your financial statements. The changes are so sweeping, we want to discuss them with you now.
The risk assessment standards establish requirements and provide guidance about the auditor’s assessment of the risks of material misstatement, whether caused by error or fraud, in a financial statement audit of non-SEC clients, and the design and performance of audit procedures whose nature, timing, and extent are responsive to the assessed risks.
Additionally, the standards establish requirements and provide guidance on planning and supervision, and the nature of audit evidence. The objective of the risk assessment standards is to strengthen and maintain the quality of the independent audit. These new standards require us to:
• Obtain a more in-depth understanding of your company and its environment, including internal controls.
• Perform a more rigorous assessment of the risks of material misstatement in the financial statements based on that understanding.
• Improve the linkage between our risk assessment and the resulting audit procedures we perform.
Implementation of the new standards should increase the effectiveness of financial statement audits however, we anticipate that, for most audits, the new standards will result in an overall increase in effort by the company and the audit team.
We would be pleased to discuss in more detail the effects of the new standards on your audit and your financial statement preparation process.
Jerome P. Dublan, CPA
Insurance Industry Auditing and Consulting, Ltd
The purpose of this IIAC, Ltd. IMPORTANT NOTICE is to heighten your awareness to new statutory audit requirements implemented by a change to the NAIC Annual Statement Instructions. I would like to acknowledge the help and input I received from Mr. Joe Herbers of Pinnacle Actuarial Resources, Inc. and his work with the Committee on Property and Liability Financial Reporting. Based on information currently available, there will most likely be further information and clarification from the NAIC upcoming.
Please feel free to contact Jerry Dublan with any questions or comments at 630.971.1200 or email Jerry.
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