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A88273 1 (2009-08-31)

handle is hein.gao/gaobadvtw0001 and id is 1 raw text is: i Acc untabi ity I Integrity Reliability United States Government Accountability Office Washington, DC 20548 August 31, 2009 Ms. Sherry Hazel Audit and Attest Standards American Institute of Certified Public Accountants (AICPA) 1211 Avenue of the Americas New York, New York 10036-8775 Subject: AICPA Auditing Standards Board (ASB) May 2009 Exposure Draft of proposed Statement on Auditing Standards (SAS) on external confirmations. This letter provides the U.S. Government Accountability Office's (GAO) comments on the ASB's proposed statement on auditing standards. Except for serious concerns about retaining the presumptive requirement to request confirmation of accounts receivable, we support the proposed standard. This concern, along with our comments on other aspects of the proposed standard, is noted below. Presumptive requirement to use external confirmation procedures for accounts receivable: The ASB is seeking views on its decision to retain the presumptive requirement to use external confirmation procedures for accounts receivable through a conforming amendment to the proposed SAS, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained (Redrafted). The presumptive requirement to confirm accounts receivable is problematic because it supplants auditor judgment by presuming that confirmation procedures are the most effective audit procedure to address the risk of material misstatement in accounts receivable, and directs the auditor to perform the audit using that assumption. Rather than requiring auditors to use judgment based on audit risk and materiality as the starting point to determine the most effective procedure to obtain audit evidence related to accounts receivable, the presumptive requirement directs auditors to use the same procedure unless the auditor can justify not using confirmations if certain conditions exist. The unintended consequences of the presumptive requirement are that it may encourage auditors to: (1) minimize the importance of risk and materiality assessments of accounts receivable, since the procedures to be performed on accounts receivable are predetermined; (2) spend too much time performing

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