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This proposed statement on auditing standards contains three amendments to existing statements. These amendments: 1. Make explicit the required language that the auditor should include in an explanatory paragraph of the report when he or she concludes that there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time not to exceed one year from the balance-sheet date. 2. Clarify language in the auditor's report to describe the level of service the successor auditor performs on adjustments made to restate prior-year financial statements audited by a predecessor auditor whose report is not presented. 3. Clarify language in the auditor's report to describe the level of service the auditor performs on the combination of financial statements following a pooling-of-interests transaction when the auditor is asked to report on restated financial statements of one or more prior years when other auditors have audited one or more of the entities included in such financial statements. This proposed Statement consists solely of amendments to existing statements. For each statement affected, the paragraph being amended is shown with a line drawn through the amended language and the new wording is presented in boldface italics. The proposed amendments are outlined as follows: I. Paragraph 12 of SAS No. 59, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern (AICPA, Professional Standards, vol. 1, AU sec. 341.12) This proposed amendment: A. Makes explicit the required language for the explanatory paragraph (following the opinion paragraph) in the report that describes the auditor's conclusion that there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time not to exceed one year from the balance-sheet date. B. Requires explicitly in the explanatory paragraph the use of the phrase "substantial doubt about its [the entity's] ability to continue as a going concern" or similar wording that includes the terms substantial doubt and going concern. II. Paragraph 83 of SAS No. 58, Reports on Audited Financial Statements (AICPA, Professional Standards, vol. 1, AU sec. 508.83) This proposed amendment: A. Modifies the explanatory language for the successor auditor when the prior-year financial statements audited by a predecessor auditor are restated and the predecessor auditor's report is not presented. B. Replaces the phrase "We also reviewed the adjustments" with the phrase "We also audited the adjustments." The Board, along with the staff of the Securities and Exchange Commission (SEC), believes that the use of the term reviewed confuses users of the successor auditor's report by connoting a different level of service than the service performed. III. Paragraph 16 of SAS No. 1, Codification of Auditing Standards and Procedures, section 543, "Part of Audit Performed by Other Independent Auditors" (AICPA, Professional Standards, vol. 1, AU sec. 543.16) This proposed amendment: A. Modifies the reporting guidance for the auditor who, following a pooling-of-interests transaction, is asked to report on the combination of restated financial statements for one or more prior years when other auditors have audited one or more of the entities included in such statements. B. Conforms the explanatory report language for the same reason the Board is proposing amendment to paragraph 83 of SAS No. 58 (discussed previously). This proposed amendment would replace the phrase "We also have applied procedures to the combination" with the phrase "We also audited the combination." How lt Would Change Existing Standards The proposed amendment solely amends the specific paragraphs of the three existing statements discussed previously.
Consolidation and merger of corporations -- Auditing -- Standards -- United States; Going concern (Accounting); Financial statements -- Auditing -- Standards
Accounting | Taxation
American Institute of Certified Public Accountants. Auditing Standards Board, "Proposed statement on auditing standards : omnibus statement on auditing standards, 1990;Omnibus statement on auditing standards, 1990" (1990). Statements of Position. 537.