What Is SAS 142?
SAS 142 is the AICPA’s Statement on Auditing Standards No. 142. It reimagines the concept of audit evidence and gives auditors a clear framework to use technology, analytics, and automation while still meeting the need for sufficient appropriate evidence and professional skepticism.
The core objective is unchanged: auditors must obtain sufficient appropriate audit evidence to support their opinion. How that evidence is gathered, analyzed, and interpreted can now include AI, machine learning, and audit data analytics (ADA).
A Shift from Manual to Machine-Enhanced Auditing
Traditionally, audit evidence meant stacks of invoices, spreadsheets, and transaction ticking. SAS 142 broadens the definition to include evidence from:
- Risk assessments
- Control testing
- Substantive analytical procedures
- Data analytics
So evidence is no longer only paper and manual checks; it can be insights from analytics and automated procedures, as long as relevance and reliability are assessed.
Relevance and Reliability Get a Digital Upgrade
SAS 142 pays close attention to relevance and reliability of evidence in a data-rich environment. Auditors should consider:
What to evaluate
Is the data externally generated (often less biased)?
Is it documentary or oral?
Production controls
How automated is data generation, and how strong are internal controls?
Bias potential
How much control does management have over the data?
Technology can improve reliability through traceability, transparency, and standardization. The auditor’s role remains central: assess data quality, corroborate insights, and document rationale.
From Risk Identification to Substantive Testing: The Role of ADA
SAS 142 recognizes that audit data analytics (ADA) can support both risk assessment and substantive procedures. For example, tools can apply many control points to assess unusual patterns, rare flows, or outliers at the transaction level.
By visualizing risks and trends across time, region, or department, auditors can target potential issues more accurately than with manual testing alone. Ratios, trending, and regression-type analyses can surface subtle fluctuations or outliers and guide audit scope with data-driven precision. A data-first mindset helps allocate resources more efficiently and improve overall audit quality.
Dual-Purpose Procedures: A Game-Changer
A major change in SAS 142 is the formal endorsement of dual-purpose procedures. These are analytics that at the same time support:
- Risk assessment - Identifying where risks are higher.
- Evidence gathering - Providing substantive support for the audit opinion.
If the auditor can show that controls over data production are effective and that the results are sufficiently persuasive, ADA can replace or supplement traditional substantive tests. That allows “profiling” transactions by risk and tailoring procedures accordingly: better efficiency, deeper insights, and audit files that speak for themselves.
Analytics Does Not Replace Judgment - It Refines It
SAS 142 is clear: technology is an enabler, not a replacement for professional skepticism. Auditors must still:
- Evaluate ADA outputs critically
- Ask what is abnormal and what needs further inquiry
- Assess whether the data supports or contradicts management assertions
The standard shifts the audit process from a documentation exercise to an insight-driven investigation, with judgment at the center.
Final Thoughts: A Catalyst for Change
SAS 142 marks a turning point. As firms update methodologies and invest in automation, the standard makes it clear that modern analytics are not only permitted - they are expected. Auditors can deliver more than assurance; they can deliver intelligence. The future of audit is not about replacing humans with machines but empowering them with better tools. With SAS 142, the profession is better equipped to embrace that future.
