Accounting for a Detoured Economist

In the United States a new set of audit standards are taking effect that are providing guidance to external auditor that may have a dramatic effect on non-SOX audits. The Statement of Audit Standards (SAS) 103 through 112 will force auditors to prove why they assess the risk for an entity (as opposed to just defaulting to high risk and over-auditing each section). Furthermore, the auditors will be required to do more written descriptions that explain control risk for specific accounts and assertions. We will no longer be able to blindly follow audit programs and checklists. The managers will have to delete and add audit steps based on risk and relevant assertions. This is bad news for many auditors that have risen through the ranks in the last few years.

I know of more then a few auditors of all levels that get completely lost when they have to think independently and can’t rely on a standard audit program and last years workpapers. These people will be in trouble if they can’t begin to think independently about the objectives and risks of each individual audit area and assertion. Personally, I get bored stiff following audit steps blindly. I become the most intellectually stimulated and have the most fun when problem popup that cause me to go outside the standard audit steps to prove an assertion that substantially limits the risk of material misstatements. I look forward to the new standards…I wonder how many other feel the same way?