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SAS 145 – Increased Emphasis on Understanding IT Systems and Related Controls

January 3, 2024


Statements on Auditing Standards (SASs) are designed to provide guidance to external auditors on generally accepted auditing standards for audits of non-public companies. The SASs are promulgated by the Accounting Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA). In October 2021, the ASB issued SAS 145, titled “Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement.”

Among other things, SAS 145 discusses the importance of auditors obtaining an understanding of an entity’s information technology (IT) system, including the related business processes relevant to financial reporting and communication. This understanding should also include considerations of an entity’s IT environment. SAS 145 is applicable to audits of financial statements for periods ending on or after December 15, 2023.

Key points of SAS 145 related to IT standards include:

  • Understanding the IT Environment: SAS 145 requires the auditor to understand an entity’s IT environment to the extent that it supports relevant business processes.
  • Evaluation of IT Controls: SAS 145 calls for an evaluation of an entity’s IT controls that prevent or detect and correct material misstatements.
  • Assessing IT Risks: SAS 145 requires the auditor to assess the risks related to the IT environment and an entity’s applications that are relevant to the audit.
  • IT and Financial Reporting: SAS 145 emphasizes the importance of understanding how an entity uses IT in the preparation of financial statements.

Essentially, SAS 145 acknowledges the emphasized role of IT in accounting and auditing processes and the need for auditors to understand and assess the entity’s IT environment and controls. This understanding is not only crucial for assessing the risks of material misstatement but also for determining the nature, timing, and extent of audit procedures. Consequently, you may notice an increase in IT-related inquiries from your friendly Wilkins Miller auditor during your upcoming audit. If you should have any questions regarding SAS 145, please give us a call.