AICPA Issues New Standard on Group Audits
As part of its efforts to converge its standards with those of the International Auditing and Assurance Standards Board, the AICPA Auditing Standards Board (ASB) recently issued Statement on Auditing Standards (SAS) No. 149, providing a risk-based approach to group audits.
SAS No. 149, Special Considerations — Audits of Group Financial Statements (Including the Work of Component Auditors and Audits of Referred-to Auditors), supersedes SAS No. 122, as amended, Section 600, Special Considerations — Audits of Group Financial Statements (Including the Work of Component Auditors). It also makes conforming amendments to related SASs.
The new SAS modifies the auditor's method in determining the components at which to perform audit work from identifying "significant components" to using professional judgment based on assessed risk.
SAS No. 149 preserves the two reporting options available to the group auditor in AU-C Section 600, described as "assuming responsibility for the work of component auditors" and "making reference to the audit of a component auditor." In the new SAS, the "assuming responsibility" option is referred to as "being involved in the work of component auditors" or "when component auditors are involved."
SAS No. 149 also introduces the term "referred-to auditor," defined as an auditor "who performs an audit of the financial statements of a component to which the group engagement partner determines to make reference in the auditor's report on the group financial statements." It also signifies that a referred-to auditor is not part of the engagement team.
Additionally, SAS No. 149 revises the definition of component auditor to indicate that a component auditor is part of the engagement team.
The ASB also issued Statement on Quality Management Standards (SQMS) No. 3, Amendments to QM Sections 10, A Firm's System of Quality Management, and 20, Engagement Quality Reviews, to conform some terms used in the quality management standards to language used in SAS No. 149, as well as to offer guidance on determining the difference between a resource and an information source.
SAS No. 149 is effective for audits of group financial statements for periods ending on or after Dec. 15, 2026. SQMS No. 3 is effective concurrently with the effective dates in QM Sections 10 and 20.