James R. Dalkin has been re-appointed as the chair of the Consultative Advisory Group (CAG) to the International Auditing and Assurance Standards Board (IAASB), effective October 1, 2020. His appointment, approved by the Public Interest Oversight Board, follows his election by IAASB CAG members at its September 2020 meeting.

The CAG is an independent body comprising regulators, preparers, international investor and user groups, and other stakeholders with an interest in international auditing and assurance. Mr. Dalkin will continue to play a key role ensuring the CAG’s views are included in the IAASB’s deliberations. In addition, Mr. Dalkin’s past leadership and experience will be increasingly valuable as the role of the IAASB CAG may change pending possible changes to the IAASB’s governance structure following the Monitoring Group’s recommendations published in July 2020.

“It is an honor to be re-elected by my colleagues to lead the IAASB CAG,” said Mr. Dalkin. “Recognizing the ongoing review of the IAASB’s governance and operating arrangements, I look forward to the challenges and opportunities in continuing to serve the public interest in this capacity.”

“Under Jim’s leadership, the CAG worked effectively and provided valuable input to the IAASB’s standard-setting activities,” said Tom Seidenstein, IAASB Chair. “I look forward to continuing our constructive working relationship as we execute our strategy and strive to serve the public interest.”

About Mr. Dalkin
Mr. Dalkin is a Director in the Financial Management and Assurance Team with the US Government Accountability Office (GAO). He is also an observer to the Committee of Sponsoring Organizations of the Treadway Commission Advisory Board (COSO) and an adjunct professor at Georgetown University. He has previously served as a board member of the American Institute of CPAs’ Auditing Standards Board.

At the GAO, Mr. Dalkin directs work to develop and maintain government auditing standards (the Yellow Book); internal control standards for the US federal government (the Green Book); and the GAO’s work with the accounting and auditing profession. He is also responsible for the audits of the US Securities Exchange Commission and the Federal Deposit Insurance Corporation.

About the IAASB and the IAASB CAG
The IAASB is an independent standard-setting body that serves the public interest by setting high-quality international standards for auditing, quality control, review, other assurance, and related services, and by facilitating the convergence of international and national standards. In doing so, the IAASB enhances the quality and uniformity of practice throughout the world and strengthens public confidence in the global auditing and assurance profession.

The IAASB follows a rigorous due process in developing its pronouncements. Input is obtained from a wide range of stakeholders including the IAASB's CAG. Representatives of the CAG member organizations provide advice on numerous areas, including:

• The IAASB’s agenda and project timetable (work program), including project priorities;
• Technical projects; and
• Other matters of relevance to the IAASB’s activities.

Climate change is increasingly front of mind for investors and other stakeholders of the International Auditing and Assurance Standards Board (IAASB) as its effects are increasingly visible. Given climate change’s potential to impact most, if not all entities, directly or indirectly, the IAASB issued a Staff Audit Practice Alert, The Consideration of Climate-Related Risks in an Audit of Financial Statement.

This Staff Audit Practice Alert assists auditors in understanding what already exists in the International Standards on Auditing (ISA) today and how it relates to auditors’ considerations of climate-related risks in an audit of financial statements.

“Climate-related events or conditions are impacting entities worldwide as global and local policy actions continue to evolve and given the growing demand by investors for climate-related information for their economic decision making,” said IAASB Technical Director Willie Botha. “This Staff Audit Practice Alert shows that while the phrase ‘climate change’ does not feature in the ISAs, the auditor’s responsibilities under the ISAs encapsulate the consideration of events or conditions relevant to the susceptibility to misstatement of amounts and disclosures in an entity’s financial statements, which would include climate-change risk.”

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). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

Climate change is increasingly front of mind for investors and other IAASB stakeholders as its effects are increasingly visible. Given climate change’s potential to impact most, if not all entities, directly or indirectly, the IAASB issued this Staff Audit Practice Alert, which assists auditors in understanding what already exists in the International Standards on Auditing today and how it relates to auditors’ considerations of climate-related risks in an audit of financial statements.

I would like to wish the PIOB a happy 15^th anniversary and thank the many people who have volunteered time to the PIOB for their service. You have created an important institution, one whose relevance to the external reporting architecture should continue to grow. 

I joined the IAASB last year, as a non auditor, with the firm conviction that the public interest is best served when market participants have confidence in reported information and those that provide assurance. At its best, the audit profession is at the heart of driving market confidence. However, despite the good work of many auditors, recent corporate failures do raise questions regarding the relevance and quality of audits. Together regulators, oversight bodies such as the PIOB, independent standard-setters, and practitioners can be constructive forces in addressing those questions.

In my brief remarks today, I want to:

1. Emphasize the value of independent, publicly accountable standard-setting and therefore the PIOB’s role
2. Describe the IAASB’s effort to be more responsive, agile, and connected to our key partners, including IESBA
3. Highlight a recent accomplishment that should form a foundation to support audit quality

Let me turn to the importance of independent standard-setting. I strongly believe that setting standards at the international level is the most effective way to respond to the relentless globalization of business and avoid the economic costs and regulatory arbitrage that come with a fragmentation in rules. At the same time, international standards are best set by an independent standard-setting body with appropriate expertise and perspective, free of undue influence, and committed to a thorough due process.

However, independence is not omnipotence. With the privilege of independence, the system requires appropriate accountability mechanisms and standard setters constantly willing to prove that the public interest comes first. I commend the Monitoring Group for recently completing its reform recommendations. The reforms end a period of uncertainty and should produce positive change by bolstering the independence of the standard-setting boards. The changes also should improve public accountability. I particularly highlight the PIOB’s critical oversight role now clearly articulated through a Public Interest Framework. I am also pleased that the recommendations preserve the two-board structure, IESBA and IAASB, and the technical competence of the two standard-setters. The standard-setting boards look forward to work closely with the Monitoring Group, the PIOB, IFAC, and other key stakeholders to implement those changes.

While the Monitoring Group was deliberating the proposed reform, the IAASB took the position that our best contribution to the public interest is to take the proverbial bull by its horns. The IAASB instituted a new strategy, after PIOB review, aimed at putting the public interest front and center of all that we do. After completing foundational standards, we are now pivoting our workplan to focus on the most pressing emerging challenges facing audit and assurance. This shift includes dedicated efforts to reduce the growing complexity of our standards, where appropriate, and workstreams on fraud, going concern, assurance of non-financial information, and the impact of technology. Those topics are raised in nearly every conversation that I have had since becoming chair and the IAASB is now acting.

A common complaint of standard setters is that we move too slowly. While respecting due process, our strategy calls for us to make the standard-setting setting process more agile. For example, we heard that our standards have stood up well during the Covid 19 crisis. At the same time, we recognized that practitioners and others needed help. We responded quickly with a series of Staff Alerts aimed at applying our standards under the current environment and coordinated closely with National Standard-Setters and IFAC to disseminate our work.

Our strategy seeks tighter coordination with the broader ecosystem—including securities regulators, inspection regimes, and standard-setters. Our reporting system will work better when the different parts of the system speak together. Indeed, the level of consultation has intensified over recent months and has allowed us to identity the public interest better on key topics.

Maybe the most intense coordination has occurred with my partners at IESBA, a path forged by my predecessor, Arnold Schilder, and Stavros. Indeed, the completion of our recent Quality Management standards benefited from alignment on many topics, including the key public interest issue of a mandatory cooling off period where both boards are aligned. I can honestly say that IESBA and IAASB are working together in all aspects of their work these days.

Finally, I highlight a reason for optimism that our collective efforts will generate greater trust in audit engagements. IAASB approved its new and revised suite of Quality Management standards last week. In doing so, we addressed the PIOB’s public interest issues and now await PIOB approval. The resulting suite of standards is aimed at a more robust System of Quality Management for firms using the IAASB’s standards, and is a significant evolution from a traditional, more linear approach to quality control.  What I think is maybe most significant about the new the standards is that they greatly enhance the expectations and accountability of firm leadership for quality management and create an appropriate culture committed to the consistent performance of quality engagements.

The new requirements reinforce firm leadership’s responsibility for ensuring the system operates efficiently and effectively. The standards require more rigorous monitoring of the system of quality management, understanding the root causes of deficiencies, and swift remediation of those deficiencies. A culture that facilitates proactive and regular self-scrutiny will help engagement teams feel supported in their goals for quality engagements and enable continual improvements in quality.

The PIOB has come a long way in 15 years. From my life at the IFRS Foundation and now at the IAASB, I recognize how challenging and crucial oversight is—it is an essential ingredient to an independent standard-setting process. I look forward to participating and working closely with the PIOB as it takes on its next 15.

The publication assists auditors in understanding whether a procedure involving automated tools and techniques may be both a risk assessment procedure and a further audit procedure. It also provides specific considerations when using automated tools and techniques in performing substantive analytical procedures in accordance with International Standard on Auditing 520, Analytical Procedures. 

This publication does not amend or override the ISAs, the texts of which alone are authoritative. Reading the publication is not a substitute for reading the ISAs.

The Technology Working Group of the International Auditing and Assurance Standards Board (IAASB) today released non-authoritative support for using automated tools and techniques when performing audit procedures. 

The publication assists auditors in understanding whether a procedure involving automated tools and techniques may be both a risk assessment procedure and a further audit procedure. It also provides specific considerations when using automated tools and techniques in performing substantive analytical procedures in accordance with International Standard on Auditing 520, Analytical Procedures.

This publication does not amend or override the ISAs, the texts of which alone are authoritative. Reading the publication is not a substitute for reading the ISAs.

Following a vote by the IAASB during the last day of the September meeting, IAASB Chair Tom Seidenstein explains why the new quality management standards respond to:

• The changing environment;
• Challenge the effectiveness of the IAASB’s pre-existing quality control standards; and
• Growing market participant needs.

The resulting suite of standards are aimed at a more robust system of quality management for firms using the IAASB’s standards, and marks an evolution from a traditional, more linear approach to quality control.

     Read the Article on LinkedIn     

The International Auditing and Assurance Standards Board (IAASB) today opened a public consultation, Fraud and Going Concern in an Audit of Financial Statements: Exploring the Differences Between Public Perceptions About the Role of the Auditor and the Auditor’s Responsibilities in a Financial Statement Audit. The consultation will remain open until January 12, 2021. [Please note the comment period deadline has changed. The consultation will now remain open until Feb. 1, 2021.]

As the auditor’s role in relation to fraud and going concern in audits of financial statements continues to receive heightened public attention, amplified by high-profile corporate failures in recent years, the IAASB has recognized the need to further explore these topics. This Discussion Paper is aimed at gathering perspectives from a broad range of stakeholders across the financial reporting ecosystem about the role of the auditor in relation to fraud and going concern in an audit of financial statements. Stakeholders are asked for their perspectives on whether the auditing standards related to fraud and going concern need to be updated to reflect the rapidly evolving external reporting landscape, and, if so, in what areas.

“Issues related to fraud and going concern are consistently raised as areas requiring attention and potential improvement in order to enhance confidence in audits. These two topics are priorities in our recently issued strategy and work plan,” said IAASB Chair Tom Seidenstein. “This Discussion Paper is an important step in understanding the needs of users of financial reports, how changes in the financial reporting environment impact the role of the audit in terms of fraud and going concern, and the limitations of the existing standards.”

The feedback collected will inform decisions about possible further actions on these topics. The IAASB is also hosting a roundtable discussion on September 28 that will explore fraud and going concern expectations. The roundtable discussion will be live streamed on the IAASB’s YouTube channel, with un-aired breakout sessions shared via YouTube in October.

The IAASB invites all interested stakeholders to respond to this Discussion Paper, including, but not limited to, investors and other users of financial statements, those charged with governance of entities, preparers of financial statements, national standard setters, professional accountancy organizations, academics, regulators and audit oversight bodies, and auditors and audit firms.

Stakeholders can submit responses through the “Submit a Comment” button online.

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). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

The IAASB invites you to listen in to a high-level roundtable discussion between global leaders, stakeholder groups and the IAASB addressing differences between public perceptions and the auditor’s responsibilities as well as feedback on the new and revised auditor reporting standards on September 28 at 8:15 am live streaming on YouTube. This roundtable, the second in part of an IAASB series, will:

• Consider the “expectation gap” with regards to fraud and going concern, which includes (among others) knowledge, performance, and evolution gaps;
• Stimulate discussions with stakeholders to better understand expectations for auditors in relation to fraud and going concern in financial statement audits, and explore how this “expectation gap” may be narrowed; and
• Gather stakeholder views on the implementation of the IAASB’s new and revised auditor reporting standards, including how practical challenges and concerns are being address and whether there is global demand for additional information in the auditor’s report to improve transparency.

Moderated by IAASB Deputy Chair Fiona Campbell, the September 28 roundtable participants, including governance experts, corporate directors, academics, auditors and audit profession leaders, audit regulators, and representatives from banking, investor and ratings groups will address, among other topics:

• The main causes of differences between public perception and auditor’s responsibilities with regard to fraud and going concern in audits of financial statements;
• What can be done across the external reporting ecosystem to address these differences; and
• New auditor’s reports, including Key Audit Matters (KAM) and if the IAASB standards issued in 2016 have increased confidence in audits.

This discussion will help the IAASB determine appropriate responses to global conversations on audit and the direction of future projects. It will also feed into the IAASB’s post-implementation review of the auditor reporting standards released in 2016, which includes the current auditor reporting survey for stakeholders. Stakeholders who are interested in these issues are encouraged to respond to the survey as well as read the recently released Discussion Paper on fraud and going concern.

We hope you are able to listen in to the group sessions on YouTube. We will also post the full sessions, including breakout small group discussion we aren’t able to live stream, online following the event—follow us on Twitter and YouTube or register/subscribe for updates and announcements.

Roundtable Agenda
September 28, 2020, 8:15-8:45 am EDT and 9:30-10:00 am EDT
IAASB YouTube

Save the date for the final IAASB roundtable in this series: