New audit risk assessment standards issued to enhance audit process.

• Position: News update

Eight new statements on auditing standards collectively referred to as the "Risk Assessment Standards" have been issued by the Auditing Standards Board. The new statements, SAS No. 104 through SAS No. 111, will be effective for audits of financial statements for periods beginning on or after Dec. 15, 2006, giving members significant lead time to prepare for implementation. Early implementation is permitted.

The Risk Assessment Standards establish standards and provide guidance concerning the auditor's assessment of the risks of material misstatement (whether caused by fraud or error) in a non-issuer financial statement audit; design and performance of tailored audit procedures to address assessed risks; audit risk and materiality; planning and supervision; and audit evidence. A summary of the new standards has been posted on www.aicpa.org/risk/.

In developing the Risk Assessment Standards, the ASB had three objectives:

* A more in-depth understanding of the entity and its environment, including its internal control.

* A more rigorous assessment of the risks of where and how the financial statements could be materially misstated.

* Improved linkage between the auditor's assessed risks and the nature, timing and extent of audit procedures performed in response to those risks.

"The standards will result in more effective audits as a result of better risk assessments and improved design and performance of audit procedures to respond to...