Summary of New Audit Standards and their Impact on Nonprofits The AICPA's Auditing Standards Board recently established a number of new auditing standards. As discussed in our February newsletter issue, two of the standards, SAS 103 and 112, are already in effect for December 31, 2006 year end audits. The remaining eight, SAS 104-111 and collectively referred to as the "risk assessment standards," are required to be implemented for December 31, 2007 year end audits. In summary, these eight standards provide guidance to auditors concerning their assessment of the risks of material misstatements, whether caused by error or fraud. With respect to internal controls, the risk assessment standards require auditors to perform their risk assessment around the five elements of internal control outlined by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Integrated Framework. These five elements include the control environment, the risk assessment process, communication and information, monitoring, and control activities. Intended to enhance the auditor's assessment of risks, the new standards require auditors to: 1. Develop a more in-depth understanding of the entity and its environment, including its internal control, to identify and asses the risks of material misstatement in the financial statements 2. Make more rigorous assessments of risks regarding where and how financial statements could be materially misstated ...