New Risk Assessment Standards-Cost Beneficial?

As discussed in the last post, new audit risk assessment standards provide auditors with additional guidance to enhance understanding of the organization and to assess risk. In our preliminary audit work we have implemented these procedures and while we have not found any major issues, we have found some smaller procedural issues that have enabled us to provide our clients with some practical recommendations.

I cannot yet determine if the value of the recommendations exceeds the additional time on our end and the cost on the client’s end. However, many changes take place that don’t necessarily have a direct and equal economic value to all the participants. Hopefully industry wide the changes will provide value across the board and the long term result will be fewer problems with financial reporting.

New risk assessment standards can provide organizations with additional opportunities

Audit risk assessment standards fully took effect this year. A few new standards were implemented last year. The standards are designed to help auditors increase their knowledge of the organizations they audit and provide additional guidance to improve risk assessment.

Organizations (especially small to midsize nonprofits) noted a change with their financial statements last year. If they outsource the preparation of the financial statements to their auditor, they will need to evidence their ability to take responsibility for the statements. This could be done by completing a disclosure checklist or other steps. While a number of our clients were pretty familiar with the various disclosures and could comfortably discuss their financial statements, they did welcome the opportunity to learn a little bit more about the statements and why the disclosures are there (after an initial hesitation). The more knowledgeable an organization is about their financial picture, even in seemingly insignificant areas, the better overall picture they will have of their operations.