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A87684 1 (2003-04-30)

handle is hein.gao/gaobadvtt0001 and id is 1 raw text is: I & , G A 0 Comptroller General AAccountability * Integrity * Reliability of the United States United States General Accounting Office Washington, DC 20548 April 30, 2003 Mr. James S. Gerson, Chair Auditing Standards Board Mr. Charles E. Landes, Director Audit and Attest Standards American Institute of Certified Public Accountants 1455 Pennsylvania Avenue, N.W. Washington, D.C. 20004 Re: Proposed Statements on Auditing Standards Messrs. Gerson and Landes: This letter provides GAO's comments on the AICPA's December 2, 2002, exposure draft of seven proposed Statements on Auditing Standards Related to Audit Risk. We commend the AICPA's efforts to enhance auditor assessment of risk and the linkage between the auditor's risk assessment and the performance of audit procedures. We agree with the AICPA's goal of developing stronger auditing standards that are intended to effect a substantial change in auditor performance and thereby improve audit effectiveness. We support the objectives of the exposure draft and are especially pleased that the proposed standards call for the following: Strengthening the requirement for auditors to understand and assess the entity and its environment, including internal control, and linking this understanding to risk assessment and the design of audit procedures. Eliminating the default of assessing inherent and control risk at the maximum by requiring auditors to document the basis for their risk assessment, regardless of the risk assessment level. Placing greater emphasis on testing financial statement disclosures for material misstatement. GAO has specific recommendations for improving five of the proposed standards, as described in the five attachments. GAO's suggestions are aimed at achieving the AICPA's goal of stronger, more definitive auditing standards that will improve audit effectiveness. We are making specific recommendations for changes to the following proposed statements: Audit Risk and Materiality in Conducting an Audit (Attachment 1), Planning and Supervision (Attachment 2),

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