Formal Communications Essay

1265 words - 6 pages

Team B Formal Communications
University of Phoenix

Team B Formal Communications
To: Accountants
From: Team B
Subject: Statement on Auditing Standards (SAS) 112 and 115 Notification
Changes have been made regarding the rules that must be followed by auditors. The purpose of this memo is to provide an outline of the changes and explanation on how the changes will impact our valued clients. As accountants, understanding the Statement of Auditing Standards (SAS) No. 112 and the superseding SAS No. 115 is extremely important as they may affect our audit results and findings. This internal memo is being distributed to all accountants in our office to provide information related to the new ...view middle of the document...

However, significant deficiency is important enough to the ones in charge with governance (AICPA, 2009).
The change in the definition of a material weakness is in the distinguishing of reasonable possibility. SAS No. 112 stated "more than a remote likelihood" that a material misstatement of entity's financial statements will not be prevented, or detected and corrected on a timely basis. This change in definition also gives the auditors the ability to use more professional judgement (AICPA, 2009).
We, as accountants, need to understand our financial statements and ensure we are properly recording information to ensure no issues arise. We also need to ensure that we use proper internal controls in our process of completing financial statements. It is important for use to know and understand these new changes to ensure we understand what to do if we encounter significant or material deficiencies.
If anyone has any questions regarding this memo or questions regarding SAS No. 115, please contact us as any time.
Sincerely,
To: Key Clients
From: Team B
Subject: Statement on Auditing Standards (SAS) 112 and 115 Notification
The purpose of this memo is to provide some important information in developing communications regarding internal control matters. Statement on Auditing Standards (SAS) No. 112 was replaced by SAS No. 115, effecting audits of financial statements for periods ending on or after December 15, 2009 (AICPA, 2009).
SAS No. 112, Communicating Internal Control Related Matters Identified in an Audit, required an auditor to report, in writing, to management and governing bodies any control deficiencies found during an audit that were considered significant deficiencies and material weaknesses. This was to help make your audits more effective and provide better risk assessments (State of Minnesota, 2007).
SAS No. 115, Communicating Internal Control Related Matters Identified in an Audit, improved the meaning of significant deficiency and material weakness in internal controls. SAS No. 115 provided clear guidance on three deficiency and material weakness (AICPA, 2009).
1. Control Deficiency - occurs when the company does not have the ability to check its financial statements
2. Significant Deficiency - is a loss of internal control but not as severe as a material weakness
3. Material Weakness - can affect future data and cause everything that have been accepted to come under suspicion
The superseding of SAS No. 112 with SAS No. 115 auditors will now have the necessary tools that will allow them to detect significant and material weakness in the organization. Also, the auditors will be able to use their judgement in communicating this information to the nonprofit. Some things you will need to focus on to be in compliance with SAS No. 115 are as followed: (AICPA, 2009)
* Department Internal Controls exists and are functioning correctly
* Documentation has signature or emails for trail
* Control...

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