When it comes to the "biggest change in financial statement auditing in 30 years," the Stambaugh Ness Audit Team is already retooling its skills to meet the challenge.

Just as mechanics must train to work on the new hybrid car engines, so are our auditors spending their summer months learning how to properly implement the eight new, risk-based audit standards issued recently by the Auditing Standards Board of the American Institute for Certified Public Accountants (AICPA). These standards, which will take effect for the 2007 fiscal year, will improve the quality and effectiveness of audits for private companies and not-for-profit organizations, according to the Board. Auditors must now more fully assess risks of material misstatement in the financial reports of their clients. Additionally, the link between these risks and the audit steps performed must be documented.

Overall, according to Supervisor Ernie Malkin, CPA, chairman of SN's Implementation Team, the new standards will result in a better product for users of financial statements. "Audits will be more efficient, more value-added and more meaningful for users of financial statements including lenders and investors," he notes. "This is a result of the customization of each audit as opposed to traditional audits that involve a more standardized approach."

Although it is likely that auditing fees may increase, Malkin added, "Audits will be more meaningful and require more planning. This will lead to a better understanding of organizations' operations, better detection of fraud weaknesses, improved business advice, and improvements in the operations of businesses."

The new standards respond to the conclusions of standard setting bodies both in the United States and other countries. They are the result of years of research dating back to 2000. These standards were originally exposed for comments from the financial and accounting community in December 2002. Based upon comments received, the standards were rewritten and issued in February of 2006.

In addition to the knowledge gained about how to meet the new auditing standards, Malkin says the SN Audit Team will tighten its quality control and improve the quality of its performance. This is being accomplished by a combination of formal in-house training sessions, including a three-day session in May and others planned in July and August, and by sending team members to specialized offsite training.

As noted in this article, the new auditing standards are effective for audits of financial statements for the 2007 fiscal year. If you have questions regarding the standards or would like to discuss working with the Stambaugh Ness Audit Team, please contact Supervisor Ernie Malkin, CPA at 717-637-7131 or 888-220-6033, or use the email option below.

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