In This Issue:

1. IAASB Meeting Highlights
2. Approval of Exposure Draft of Proposed International Standard on Auditing (ISA) 720 (Revised)Auditor Reporting Invitation to Comment (ITC)—Comment Period
3. Drawing to a Close
4. IAASB Continues to Address Assurance Needs of Smaller Entities; Issues Revised Standard on Review Engagements

1. IAASB Meeting Highlights

The most recent IAASB meeting was held September 17–21, 2012, in New York, USA.

In addition to the projects discussed in this eNews, the IAASB deliberated issues relating to the following:

• Approval of a new project to consider the audit implications of financial statement disclosures
• The development of an audit quality framework (the Framework), Audit Quality: An International Framework
• Proposed International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information
• Preliminary findings and the planned timetable of Phase 2 of the ISA Implementation Monitoring project relating to the clarified International Standards on Auditing (ISAs)
• The IAASB’s ongoing liaison with the International Accounting Standards Board (IASB)
• The development of a Staff Question & Answer publication addressing the proportionate application 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 Service Engagements 

The IAASB will meet in New York, USA, December 10–14, 2012. As a reminder, all meeting agenda materials are publicly available and posted on the IAASB's website in advance of IAASB meetings. In addition, meeting highlights, a summary podcast, and complete audio recordings are posted after the meetings. Visit the IAASB Meetings page.

2. Approval of Exposure Draft of Proposed International Standard on Auditing (ISA) 720 (Revised)

The IAASB approved for exposure proposed 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 broadens and clarifies the scope of documents to be addressed by the auditor, enhances the auditor’s work effort, and introduces reporting requirements.

The Exposure Draft will be released by the end of October 2012. Comments will be requested by February 28, 2013.

3. Auditor Reporting Invitation to Comment (ITC)—Comment Period Drawing to a Close

In support of its work to enhance, on a global basis, the communicative value of the auditor’s report on financial statements, in June 2012 the IAASB issued Invitation to Comment (ITC): Improving the Auditor’s Report. The ITC sets out the indicative direction of the board’s future standard-setting proposals to improve how and what auditors report in accordance with the International Standards on Auditing (ISAs). Interested stakeholders have the opportunity to submit a formal response to the ITC through October 8, 2012 via this link.

At its most recent meeting, the IAASB received an update on discussions held at its North American and European Auditor Reporting Roundtables and other outreach activities to date; and discussed, on a preliminary basis, the scope and potential structure of the ISAs to be revised as part of its Auditor Reporting project. The IAASB will consider responses received on the ITC, as well as feedback from its Asia Pacific Roundtable and other outreach activities, at its December 2012 meeting. The IAASB’s current timetable anticipates approval of an Exposure Draft on revised auditor reporting standards in June 2013. To follow this project, visit the IAASB’s Auditor Reporting page. 

4. IAASB Continues to Address Assurance Needs of Smaller Entities; Issues Revised Standard on Review Engagements

The IAASB has released International Standard on Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements. ISRE 2400 (Revised) follows the release earlier in 2012 of International Standard on Related Services (ISRS) 4410 (Revised), Compilation Engagements, a standard also addressing services of particular relevance to small- and medium-sized entities (SMEs).

Review engagements are of particular relevance for entities that are not required, or do not elect, to have an audit, but wish to enhance the credibility of, and confidence in, their unaudited financial statements among their users through practitioner involvement. ISRE 2400 (Revised) enhances both the value and performance of review engagements. Through strengthened requirements and additional guidance, it helps ensure there is sufficient appropriate evidential support for the practitioner’s conclusion on the financial statements and further promotes high-quality engagements. The revised standard is effective for reviews of financial statements for periods ending on or after December 31, 2013. An At a Glance publication provides an overview of the revised standard.

In support of its commitment to explore standards for services that meet the unique needs of small- and medium-sized entities (SMEs), the International Auditing and Assurance Standards Board (IAASB) today released International Standard on Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements. ISRE 2400 (Revised) follows the release earlier in 2012 of International Standard on Related Services (ISRS) 4410 (Revised), Compilation Engagements, a standard also addressing services of particular relevance to SMEs.

“An important aspect of the IAASB’s strategic focus in recent years has been our response to the growing demand for assurance services, other than the financial statement audit, that help enhance the credibility of SMEs’ financial statements,” noted Prof. Arnold Schilder, IAASB chairman. “In light of this demand, it is fundamental that there be robust standards to support a diverse range of services for this important stakeholder group. ISRE 2400 (Revised) is an important contribution to this aim.”

Review engagements are of particular relevance for entities that are not required, or do not elect, to have an audit, but wish to enhance the credibility of, and confidence in, their unaudited financial statements among their users through practitioner involvement. The practitioner’s report when a review engagement has been conducted in accordance with ISRE 2400 (Revised) describes whether anything has come to the practitioner's attention that causes the practitioner to believe the financial statements are not prepared, in all material respects, in accordance with the applicable financial reporting framework. A review is a limited assurance engagement, however, and the procedures performed are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing. Accordingly, the practitioner's review engagement report does not express an audit opinion on the financial statements.

“This standard enhances both the value and performance of review engagements. Through strengthened requirements and additional guidance, it helps ensure there is sufficient appropriate evidential support for the practitioner’s conclusion on the financial statements and further promotes high-quality engagements,” explained James Gunn, IAASB technical director.

The revised standard is effective for reviews of financial statements for periods ending on or after December 31, 2013. An At a Glance publication provides an overview of the revised standard.

About the IAASB
The IAASBdevelops 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 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 revised standard deals with the practitioner’s responsibilities when engaged to perform a review of historical financial statements, when the practitioner is not the auditor of the entity’s financial statements, and the form and content of the practitioner’s report on the financial statements. The revised standard is effective for reviews of financial statements for periods ending on or after December 31, 2013.

The Journal of Accountancy covers the IAASB roundtable meeting recently held in New York City.

Dan Montgomery, deputy chairman of the IAASB and chairman of its Auditor Reporting Task Force speaks to Accountancy Age on the IAASB’s call for auditor reporting reform.