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A88701 1 (2005-06-27)

handle is hein.gao/gaobadvwp0001 and id is 1 raw text is: JL A 0 Comptroller General K MAccountability * Integrity * Reliability of the United States United States Government Accountability Office Washington, DC 20548 June 27, 2005 Ms. Sherry Boothe Audit and Attest Standards American Institute of Certified Public Accountants 1211 Avenue of the Americas New York, New York 10036 Subject: Proposed Statement on Auditing Standards-- Amendment to Statements on Auditing Standards No. 69, the Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles, for Nongovernmental Entities, dated May 9, 2005 Dear Ms. Boothe: This letter provides the U.S. Government Accountability Office's (GAO) comments on the Auditing Standards Board's (ASB) May 9, 2005 exposure draft of a proposed Statement on Auditing Standards (SAS) entitled Amendment to Statements on Auditing Standards No. 69, the Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles, for Nongovernmental Entities. The proposed amendment to SAS 69, together with the Financial Accounting Standards Board's (FASB) proposed Statement of Financial Accounting Standards entitled The Hierarchy of GenerallyAcceptedAccounting Principles, is an important step in recognizing the responsibility of the reporting entity, and not the auditor, for selecting and applying accounting principles and for the adequacy of financial statement disclosure. We strongly support the ASB's coordination with the FASB on this endeavor, and we encourage the ASB to seek convergence among all audit and accounting standard setters in recognizing common concepts for evaluating the fair presentation of financial statements. Also, we strongly support the discussion of the auditor's judgments about fair presentation. Although based on a generally accepted accounting principles (GAAP) framework, the auditor's judgments about fair presentation include considerations beyond literal compliance with GAAP. Recently revised international audit standards provide for GAAP exceptions similar to Rule 203 of the AICPA Code of Professional Conduct when the financial statements would otherwise be misleading. The ASB's proposed standard includes guidance for applying Rule 203, which gives auditors the flexibility in rendering their opinion to consider unusual circumstances in which literal application of GAAP would result in misleading financial statements. However, we believe that this guidance for applying Rule 203 should pertain to audits of both governmental and nongovernmental entities rather than to just audits of governmental entities. In addition, we believe that nongovernmental audits are not so Page 1

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