The New Statement of Accounting Standards (Sas) 112

In: Business and Management

Submitted By LEONSWIFE
Words 508
Pages 3
Accounting Firm, LLC.
Memo
To: Firm Accountants
From: Junior Accountant
Date: 20/08/2012
Re: The New Statement of Accounting Standards (SAS) 112
Changes have been made regarding the rules auditors must follow. The purpose of this memo is to inform all the accountants about the new Statement of Accounting Standard (SAS) No. 112,Communicating Internal Control Related Matters Identified in an Audit issued by the American Institute of Certified Public Accountants (AICPA). Management considers SAS No. 112 an imperative accounting standard to know, understand, and communicate effectively and efficiently. SAS No. 112 establishes standards and provides guidance on communicating matters related to an entity’s internal control over financial reporting identified in an audit of financial statements (American Institute of Certified Public Accountants, 2011). SAS No. 112 replaces SAS No. 60 and is effective for periods ending on or after December 15, 2006.

Consequently, the term “reportable condition” will become extinct. The terms “significant deficiency” and “material weaknesses” are used to describe control deficiencies that must be communicated to management and those charged with governance during audits. The underlying principle deals with identified control deficiencies and determines whether these deficiencies, individually or in combination, are significant deficiencies or material weaknesses (American Institute of Certified Public Accountants, 2011).

Auditors are required to provide clients with an understanding of the meaning and significance of these terms. Therefore, in communicating to our clients, auditors need to use and help the client understand these terms. SAS No.112 requires that every communication to management and those charged with governance must be in writing (American Institute of Certified Public Accountants, 2011).

Every…...

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