Statements of Position



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This proposed Statement on Auditing Standards (SAS) provides guidance to auditors in planning and performing auditing procedures for financial statement assertions about financial instruments. The Auditing Standards Board (ASB) believes the guidance is needed primarily because of expanding requirements for financial statements to provide information about the fair value of financial instruments and the increasing tendency for entities to use service organizations to help them manage activities involving financial instruments. This proposed SAS: a. Indicates that an auditor may need special skill or knowledge to plan and perform auditing procedures for certain assertions about financial instruments and provides guidance on obtaining that skill or knowledge. b. Provides guidance on inherent risk considerations for assertions about financial instruments. c. Provides guidance on control risk considerations for assertions about financial instruments, including considerations when the entity uses one or more service organizations. d. Indicates that evaluating evidential matter for assertions about financial instruments may require the auditor to use considerable judgment and provides general guidance for those situations. e. Provides general guidance on auditing considerations related to the initial designation of a financial instrument as a hedge and the continued application of hedge accounting. f. Indicates that a service organization's services may affect the nature, timing, and extent of the auditor's substantive tests in a variety of ways. g. Provides examples of substantive tests for the existence or occurrence, completeness, and rights and obligations assertions. h. Provides guidance on substantive tests of valuation assertions that are based on management's intent and ability, including consideration of generally accepted accounting principles that require management to document its intentions. i. Provides guidance on designing substantive tests of valuation assertions based on cost, an investee's financial results, amounts due under a contract, and fair value, including guidance for evaluating management's consideration of the need to recognize impairment losses. This proposed SAS would supersede SAS No. 81, Auditing Investments.



Publication Date


Relational Format



Financial instruments -- Auditing -- Standards -- United States


Accounting | Taxation


Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants; Exposure draft (American Institute of Certified Public Accountants), 1999, June 10

Proposed statement on auditing standards : auditing financial instruments : (to supersede Statement on auditing standards no. 81, Auditing investments);Auditing financial instruments : (to supersede Statement on auditing standards no. 81, Auditing investments)



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