Ask the Accounting Community

We received an engagement letter from our auditing firm in which they state that effective with the fiscal years ending December 31, 2021 they are now required to disclose any areas that are considered to be significant risk of material misstatement.

This is how they stated it in our letter:

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Richard Bernier
Controller
Orlando FL
United States
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I'm assuming you're a private company, similar to where I am as well. I had new language in my engagement letter from our auditors as well this year. I asked them about it and they said it's a result of a new audit standard. It's now required that they communicate areas of higher risk. They said they have always documented them internally on their engagement paperwork, but now they have to list them in the engagement letter, per the new standard. They said it would have no effect on their audit approach. You can look up SAS 134 if you want more info.

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Stephen Hall CMA
Chief Financial Officer
Gatehouse Media, Inc.
Las Vegas NV
United States
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Original Message:
Sent: 09-14-2022 04:03 PM
From: Richard Bernier
Subject: New Audit Engagement Wording

We received an engagement letter from our auditing firm in which they state that effective with the fiscal years ending December 31, 2021 they are now required to disclose any areas that are considered to be significant risk of material misstatement.

This is how they stated it in our letter:

"As part of our audit planning procedures we are required to assess the impact of the following significant risks of material misstatement that we have identified that may impact the audit approach and procedures performed:

                   Improper revenue recognition due to fraud
                   Management override of internal controls"

This firm has done the last 3 audits of our firm and there have been no findings with an unmodified opinion.

Is this standard language? Do we have any concerns with the way this is stated? What is the best way to explain this to the partners of the company?

Thanks for any insight.

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Richard Bernier
Controller
Orlando FL
United States
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We are a private firm. Thank you for your answer and pointing me to the standard to review. This has helped.

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Richard Bernier
Controller
Orlando FL
United States
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Original Message:
Sent: 09-15-2022 12:56 AM
From: Stephen Hall
Subject: New Audit Engagement Wording

I'm assuming you're a private company, similar to where I am as well. I had new language in my engagement letter from our auditors as well this year. I asked them about it and they said it's a result of a new audit standard. It's now required that they communicate areas of higher risk. They said they have always documented them internally on their engagement paperwork, but now they have to list them in the engagement letter, per the new standard. They said it would have no effect on their audit approach. You can look up SAS 134 if you want more info.

------------------------------
Stephen Hall CMA
Chief Financial Officer
Gatehouse Media, Inc.
Las Vegas NV
United States

Original Message:
Sent: 09-14-2022 04:03 PM
From: Richard Bernier
Subject: New Audit Engagement Wording

We received an engagement letter from our auditing firm in which they state that effective with the fiscal years ending December 31, 2021 they are now required to disclose any areas that are considered to be significant risk of material misstatement.

This is how they stated it in our letter:

"As part of our audit planning procedures we are required to assess the impact of the following significant risks of material misstatement that we have identified that may impact the audit approach and procedures performed:

                   Improper revenue recognition due to fraud
                   Management override of internal controls"

This firm has done the last 3 audits of our firm and there have been no findings with an unmodified opinion.

Is this standard language? Do we have any concerns with the way this is stated? What is the best way to explain this to the partners of the company?

Thanks for any insight.

------------------------------
Richard Bernier
Controller
Orlando FL
United States
------------------------------