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SAS No. 134 – Your Audit Report is Changing

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In May 2019, the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) issued Statement on Auditing Standards (SAS) No. 134, Auditor Reporting and Amendments, including Amendments Addressing Disclosures in the Audit of Financial Statements. The standard’s original effective date was for reporting periods ending on or after December 15, 2020. During April 2020, the ASB agreed to defer implementation by one year making the standard generally effective for audits of calendar year end 2021 financial statements.

ASB designed SAS No. 134 to improve transparency and communication in all audit reports. As a result, SAS No. 134 makes several changes to the layout of auditor’s report as well as the information required to be presented within the auditor’s report. The most significant changes made by SAS No. 134 are described below:

  • Opinion Section – The layout of the auditor’s report will now begin with the opinion. Users of the financial statements often view the audit opinion as the most important portion of the auditor’s report. Previously the opinion paragraph was reported much later in the auditor’s report.
  • Basis for Opinion Section – SAS No. 134 requires this section for all auditor reports. Previously, this section was only required for auditor reports with modified opinions. The basis for opinion section will set users’ expectations for the auditor’s report and will:
    • State whether the auditor believes the audit evidence obtained is sufficient and appropriate to provide a basis for the auditor’s opinion
    • State that the audit was conducted in accordance with generally accepted auditing standards (GAAS) and identify the United States as the country of origin of those standards.
    • Refer to the section of the auditor’s report that describes the auditor’s responsibilities under GAAS.
    • Include a statement that the auditor is required to be independent of the entity and to meet other ethical responsibility requirements
  • Responsibilities of Management Section – This section will now include management’s acknowledgment of their responsibility to evaluate, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern. This sentence is required regardless of if there is any doubt about going concern. Prior to SAS No. 134, the term “going concern” was only stated in situations in which it applied. Additionally, if substantial doubt does exist about an entity’s ability to continue as a going concern, this is now disclosed in a separate section of the auditor’s report titled “Substantial Doubt about the Entity’s Ability to Continue as a Going Concern.”
  • Key Audit Matters (KAMS) – SAS No. 134 introduces the optional disclosure of KAMs within the auditor’s report. This optional disclosure is comparable to the standard for public companies requiring the reporting of “critical audit matters” (CAMs) that are discovered during an audit. Those charged with governance will decide prior to the beginning of the audit whether to engage the auditor to report on KAMs. KAMs may include, among other things:
    • Higher assessed risk of material misstatement areas or significant risk areas
    • Areas that required considerable judgment, such as accounting estimates
    • Significant events or transactions

If the auditor was engaged to report on KAMs, the auditor’s report will describe the following for each KAM:

    • Primary reason for designation as a KAM,
    • How the KAM was addressed in the audit, and
    • Reference to the financial statement accounts or disclosures related to the KAM.

The communication of KAMs does not alter the audit opinion and the enhanced transparency to the users of the financial statements may provide an advantage for nonprofits seeking funding in a competitive environment.

If you have any questions about SAS No. 134 and how it affects your entity, please reach out to us at

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