Welcome to International Auditing and Assurance Standards Board (IAASB) eNews.

In This Issue: 

1. Focus on Auditor Reporting—Feedback on June 2012 Invitation to Comment
2. IAASB Proposes Standard Enhancing Auditor Responsibilities for Disclosures Beyond the Financial Statements
3. IAASB Staff Q&A Publication Addresses Proportionate Application of ISQC 1
4. Directions in Auditing and Assurance: Challenges and Opportunities
5. Upcoming IAASB Meeting
6. Other Relevant IFAC Initiatives
7. Share IAASB eNews with Your Colleagues

1. Focus on Auditor Reporting—Feedback on June 2012 Invitation to Comment

Auditor reporting continues to be the IAASB’s foremost priority, and significant resources will be dedicated to the topic during 2012–2014. To solicit feedback on its June 2012 Invitation to Comment (ITC): Improving the Auditor’s Report, the IAASB held three well-attended global roundtables in North America, Europe, and Asia Pacific. More than 190 investor, analyst, regulatory and oversight, preparer, academic, those charged with governance, standard-setter, and firm representatives from more than 20 countries participated in the roundtables. Information, including audio recordings, is available on the IAASB’s Auditor Reporting Roundtables page.

To date, more than 160 comment letters have been received on the ITC. The IAASB’s discussion of these comments will commence at its December 2012 meeting, followed by an additional IAASB meeting planned for February 2013 to enable continued rapid progress toward an exposure draft of revised auditor reporting standards in 2013. To access the ITC comments, please visit the IAASB’s ITC web page.

2. IAASB Proposes Standard Enhancing Auditor Responsibilities for Disclosures Beyond the Financial Statements

The IAASB has released for public comment proposed International Standard on Auditing (ISA) 720 (Revised), The Auditor’s Responsibilities Relating to Other Information in Documents Containing or Accompanying Audited Financial Statements and the Auditor’s Report Thereon.

The proposed standard clarifies and enhances the scope and focus of auditor efforts on “other information”—that is, information included in documents containing or accompanying the entity’s audited financial statements. The proposals recognize that significant changes in financial reporting have occurred over the last two decades regarding the information issued in connection with an entity’s financial statements and the manner in which it is shared with users. The proposals extend the scope of the extant standard and the auditor’s responsibilities and include suggested auditor reporting responsibilities.

The deadline for comments is March 14, 2013. To submit a comment, click here.

3. IAASB Staff Q&A Publication Addresses Proportionate Application of ISQC 1

IAASB Staff released a Questions & Answers (Q&A) publication titled Applying ISQC 1 Proportionately with the Nature and Size of a Firm. The publication highlights how the design of International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, enables it to be applied in a proportionate manner.

ISQC 1 applies to firms of all sizes that provide services covered by the IAASB’s international standards, including International Standards on Auditing (ISAs), International Standards on Review Engagements (ISREs), International Standards on Assurance Engagements (ISAEs), and International Standards on Related Services (ISRSs).[k1] 

While ISQC 1 applies to all firms, the Q&As focus on matters that are likely to be of particular relevance to the application of ISQC 1 in the context of smaller firms. Smaller firms, as well as smaller public sector audit organizations, should find the publication helpful in achieving an effective and efficient implementation of ISQC 1.

This initiative follows the 2009 IAASB Staff Q&A publication, Applying ISAs Proportionately with the Size and Complexity of an Entity.

4. Directions in Auditing and Assurance: Challenges and Opportunities

IAASB Chairman Prof. Arnold Schilder recently was a guest speaker at a seminar in Melbourne, Australia, hosted by the Australian Auditing and Assurance Standards Board. His presentation–Directions in Auditing & Assurance: Challenges and Opportunities–focused on the impact of the global environment on the relevance of an audit, and included the response of the IAASB to these challenges. Particular topics included the IAASB’s Invitation to Comment on auditor reporting, the IAASB’s projects on audit quality and disclosures, and alternatives to audits aimed at meeting the needs of small- and medium-sized entities (SMEs).

Other challenges and opportunities to enhance relevance were also discussed, including how to reinforce and support professional skepticism, and how to deal with emerging developments, such as integrated reporting.

5. Upcoming IAASB Meeting

The IAASB will meet in New York, USA, December 10–13, 2012. As a reminder, all meeting agenda materials are publicly available and posted on the IAASB's website in advance of IAASB meetings.

Topics that will be discussed include: auditor reporting, audit quality, disclosures, using the work of internal auditors, and the revision of International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information.

In addition, meeting highlights, a summary podcast, and complete audio recordings are posted after each meeting. Visit the IAASB Meetings page.

6. Other Relevant IFAC Initiatives

Initiatives of IFAC committees and other independent standard-setting boards supported by IFAC may be of interest to those who follow the work of the IAASB, including the following:

International Education Standard (IES) 6, Initial Professional Development – Assessment of Professional Competence (Revised)

Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Elements and Recognition in Financial Statements

Responding to a Suspected Illegal Act―IESBA Proposes Changes to Code of Ethics to Address Illegal Acts

PAIB Committee Response to the IAASB Invitation to Comment: Improving the Auditor’s Report

IFAC and the IIRC Sign MoU on Cooperation, Collaboration For IR

7. Share IAASB eNews with Your Colleagues

The IAASB issues regular eNews updates to keep you apprised of the board's activities and recent publications. Please forward this eNews to any interested colleagues and let them know they can register and subscribe to this and other eNews bulletins.

IAASB Chair Prof. Arnold Schilder was a guest speaker at the Public Seminar in Melbourne, Australia, presenting Directions in Auditing & Assurance: Challenges and Opportunities. The presentation focused on the relevance of Clarified International Standards on Auditing (ISAs), the Challenges to the Relevance of Audit, Auditor reporting and the IAASB’s Invitation to Comment (ITC), titled Improving the Auditor’s Report, and the challenges and opportunities in setting international auditing and assurance standards.

The International Auditing and Assurance Standards Board (IAASB) today released for public comment proposed International Standard on Auditing (ISA) 720 (Revised), The Auditor’s Responsibilities Relating to Other Information in Documents Containing or Accompanying Audited Financial Statements and the Auditor’s Report Thereon.

The proposed standard clarifies and enhances the scope and focus of auditor efforts on “other information”–that is, information included in documents containing or accompanying the entity’s audited financial statements. The proposals recognize that significant changes in financial reporting have occurred over the last two decades regarding the information issued in connection with an entity’s financial statements and the manner in which it is shared with users.

“Today, pertinent disclosures are made not only within financial statements, but also outside of them. As preparers endeavor to better communicate with stakeholders, these disclosures are being disseminated through a diverse range of documents as other information that accompanies audited financial statements. Users are attaching greater importance to this information, particularly when it is more qualitative in nature,” notes Prof. Arnold Schilder, IAASB Chairman. “The public interest question is: Is this auditing standard as up-to-date as it needs to be, and does it do enough to ensure that auditors review this other information in the context of their understanding of the audited entity? Our proposals for an enhanced ISA 720 seek to evolve the requirements so that they remain relevant and sufficient in today’s financial reporting environment.”

Under the proposed standard, the auditor is required to read and consider the other information in light of the understanding of the entity and its environment the auditor has acquired during the course of the audit, and to respond appropriately when the auditor identifies a potential material inconsistency in the other information or a material misstatement in the audited financial statements. The proposed ISA 720 expands the documents considered as “other information,” and clarifies and enhances the nature of the auditor’s responsibilities with respect to reading and considering other information. In addition, it includes guidance to assist auditors in determining the nature and extent of their work in considering the other information.

Proposed ISA 720 (Revised) also introduces reporting obligations to explain in the auditor’s report the nature of the auditor's responsibilities relating to the other information and the findings from the auditor's work, to enhance transparency. The proposals do not extend the scope of the auditor’s opinion on the financial statements to cover the other information.

How to Comment
The IAASB invites all stakeholders to comment on its proposals. To access the Exposure Draft or submit a comment, visit the IAASB’s website at www.iaasb.org. Comments on the exposure draft are requested by March 14, 2013.

About the IAASB
The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC).

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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This IAASB Staff Questions & Answers publication highlights how the design of International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, enables it to be applied in a manner proportionate with the nature and size of a firm.