AU Section 431

Adequacy of Disclosure in Financial Statements

[Superseded, effective for audits of fiscal years beginning on or after December 15, 2010. See PCAOB Release No. 2010-004.]
Supersedes Statement on Auditing Standards No. 1, section 430)
Source: SAS No. 32.
Issue date, unless otherwise indicated: October, 1980.


The third standard of reporting is:

Informative disclosures in the financial statements are to be regarded as reasonably adequate unless otherwise stated in the report.


The presentation of financial statements in conformity with generally accepted accounting principles includes adequate disclosure of material matters. These matters relate to the form, arrangement, and content of the financial statements and their appended notes, including, for example, the terminology used, the amount of detail given, the classification of items in the statements, and the bases of amounts set forth. An independent auditor considers whether a particular matter should be disclosed in light of the circumstances and facts of which he is aware at the time.

[The following paragraph is effective November 15, 2008. See PCAOB Release 2008-001 (January 29, 2008). For the paragraph effective before November 15, 2008, click here.]


If management omits from the financial statements, including the accompanying notes, information that is required by generally accepted accounting principles, the auditor should express a qualified or an adverse opinion and should provide the information in his report, if practicable, unless its omission from the auditor's report is recognized as appropriate by a specific Statement on Auditing Standards. In this context, practicable means that the information is reasonably obtainable from management's accounts and records and that providing the information in the report does not require the auditor to assume the position of a preparer of financial information. For example, the auditor would not be expected to prepare a basic financial statement or segment information and include it in his report when management omits such information.

[Paragraph deleted, effective November 15, 2008. See PCAOB Release 2008-001 (January 29, 2008). Click here to view the paragraph.]