Sas 112

In: Business and Management

Submitted By srodgers79
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MEMORANDUM TO: Accounting Staff
FROM: Junior Accountant
DATE: September 23, 2013 SUBJECT: Replacement of SAS 112 with SAS 115 The American Institute of CPAs (AICPA) Statement on Auditing Standards (SAS) Number 115 supersedes SAS Number 112. Going forward, auditors are to use rule SAS 115 when performing internal control audits. The rules have some similarities. However, the key differences in the rules are the definitions for control deficiency, significant deficiency, and material weaknesses. The change in rules also creates more opportunities for accounting firms to offer services.
Similarities between SAS 112 and SAS 115: Similarities exist between SAS 115 and SAS 112. The rules require auditors to look at deficiencies found during an audit. The auditor must continue to identify the deficiencies found as significant deficiencies or material weaknesses.1 SAS 112 and SAS 115 require auditors to determine if internal controls can prevent and detect errors. Management receives written communication of the findings, as before. Both rules require management to become more aware of the weaknesses in the organizational internal controls. The differences in rules SAS 112 and SAS 115 are as significant as the similarities.
Differences between SAS 112 and SAS 115: The differences between SAS 112 and SAS 115 are subtle but important. The major difference between the two rules is the definition of control deficiency, significant deficiency, and material weakness.1 Quoting from the AICPA website,1 listed below are the definitions with the differences highlighted as follows:
SAS 112 Control Deficiency – A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect misstatements on a timely basis.1
SAS 115 Control…...

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