The International Auditing and Assurance Standards Board (IAASB) today released International Auditing Practice Note (IAPN) 1000, Special Considerations in Auditing Financial Instruments, to provide important practical assistance to auditors when addressing valuation and other considerations pertaining to financial instruments. Financial instruments is an area of financial reporting involving complex issues and which has come under particular focus due to the recent difficult financial market conditions.

“The IAASB remains focused on supporting financial stability and high-quality financial reporting by continuing to help enhance the consistency of audits.  Accordingly, IAPN 1000 provides important material that will assist auditors in understanding the nature of, and risks associated with, financial instruments, and the different valuation techniques and types of controls that may be used by entities in relation to them. It then highlights important audit considerations that may be relevant throughout the audit process,” noted Prof. Arnold Schilder, IAASB Chairman. “The IAPN is relevant to audits of entities of all sizes, as all entities may be subject to risks of material misstatement when using financial instruments.”

IAPNs are non-authoritative documents that do not impose additional requirements on auditors beyond those included in the International Standards on Auditing (ISAs), nor do they change the auditor’s responsibility to comply with all ISAs relevant to the audit. In finalizing IAPN 1000, and in response to stakeholder concerns, the IAASB evaluated the clarity and appropriateness of the authority of the existing International Auditing Practice Statements (IAPSs). The IAASB decided to withdraw the existing category of pronouncements known as IAPSs and to establish IAPNs, as reflected in the amended Preface to the International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements. Accordingly, the six existing IAPSs were also withdrawn as the IAASB determined that they were largely outdated and inconsistent with the text of the clarified ISAs. “The IAASB will be considering in its forward plans matters covered in some of the extant IAPSs, for example the relationship between auditors and banking supervisors, as it develops standards, new IAPNs, or other forms of guidance in the future,” commented Prof. Schilder.

“The IAASB understands that the quality and consistency of audit practice is helped not only through new standards but by other tools that can be used in developing training programs, internal guidance or corresponding national material. New IAPN 1000 helps serve this aim,” explained James Gunn, IAASB Technical Director. “In developing this practical guidance, the IAASB itself gained a deeper understanding of the challenges in this complex area, which will be used to further inform its future work.”

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 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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It is my pleasure to be here today at this important initiative of ESMA. It brings together international and European leaders responsible for standard setting, supervision and enforcement for today’s capital markets.

The International Auditing and Assurance Standards Board (IAASB) is a global independent standard-setting body. It serves the public interest by setting high-quality standards for auditing, review, other assurance, quality control, and related services. Through its standards, the IAASB seeks to enhance the quality and consistency of practice throughout the world and strengthen public confidence in the auditing and assurance profession at the global and local levels.

I was appointed IAASB Chairman in 2009, when work to establish the clarified International Standards on Auditing (clarified ISAs) was just completed. Many had thought the IAASB program would be much more subdued than it had been. Of course, that has not been the case.

Over 60 representatives from 12 Commonwealth of Independent States (CIS) and Baltic countries met with leadership and staff of the International Auditing and Assurance Standards Board (IAASB), the International Accounting Standards Board (IASB), and the International Federation of Accountants (IFAC) to discuss adoption and implementation of International Standards on Auditing (ISAs) and International Financial Reporting Standards (IFRSs).

The event—jointly hosted by IFAC and the International Financial Reporting Standards Foundation (IFRS Foundation) on November 28 and 29, 2011, in London, with the support of the Institute of Chartered Accountants of England and Wales (ICAEW)—was an excellent example of the constructive cooperation in regard to the development, adoption, and implementation of high-quality auditing, assurance, and financial reporting standards. The event involved a series of meetings to discuss areas of particular interest for each country delegation, including translation and adoption of standards and membership of IFAC. These meetings were preceded by a half-day seminar with presentations by key IAASB and IASB members. The event was attended by representatives from Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Latvia, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. Delegates included IFAC member bodies and associates, professional accountancy organizations, national standard setters, ministries of finance, regulators and securities market authorities, national banks, donor organizations, and other key stakeholders. The meeting was convened under the leadership of Mr. David Damant, former chair of the IAASB Consultative Advisory Group and former board member of the International Accounting Standards Committee (predecessor to the IASB).

During his presentation on the IAASB’s activities, Chairman Arnold Schilder spoke about development of audit and assurance standards and audit quality. He said, “In developing high-quality audit standards, achieving effective implementation, and enhancing audit quality, we need to have a strong dialogue and cooperation with users and with regulators.” Prof. Schilder highlighted the constructive relationship between the IAASB and the IASB, and gave examples of this cooperation, including mutual attendance at meetings and commenting on relevant exposure drafts. Prof. Schilder also discussed the activities of the IAASB to respond to the needs of small- and medium-sized entities (SMEs); current initiatives in areas including auditor reporting, reviews and compilation engagements, disclosures, and reporting on greenhouse gases; possible future efforts addressing professional skepticism and proportionality of International Standard on Quality Control 1; and the IAASB’s monitoring of emerging developments on integrated reporting. 

Jon Grant, IAASB member, discussed the adoption and implementation of the ISAs and some key success factors, including effective planning, cooperation with relevant stakeholders, and high-quality translations.

IASB Vice Chair Ian Mackintosh presented an overview of the IASB’s current work plan and its ongoing consultation on the future agenda. Over 100 countries now require or permit the use of IFRSs. Russia is expected to adopt IFRSs in the very near future. Mr. Mackintosh also discussed the recently signed Memorandum of Understanding between the IASB and IFAC, which outlines the bodies’ commitment to continue to work together and further their constructive dialogue.

Wei-Guo Zhang, IASB member responsible for the relationship with the CIS, discussed ongoing IASB projects in the areas of revenue, leases, financial instruments, and insurance. 

Paul Pacter, IASB member, informed the group about the IFRS for SMEs. Released in 2009, this self-contained International Financial Reporting Standard is designed to meet the needs and capabilities of SMEs.  To date more than 70 jurisdictions have adopted the standard.

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 IFAC.

About the IASB
The IASB was established in 2001 and is the standard-setting body of the IFRS Foundation, an independent, private sector, not-for-profit organization. The IASB is committed to developing, in the public interest, a single set of high quality global accounting standards that provide high quality transparent and comparable information in general purpose financial statements. In pursuit of this objective the IASB conducts extensive public consultations and seeks the co-operation of international and national bodies around the world. The IASB has 15 full-time members drawn from 11 countries and a variety of professional backgrounds. By July 2012 the Board will be expanded to 16 members. Board members are appointed by and accountable to the Trustees of the IFRS Foundation, who are required to select the best available combination of technical expertise and diversity of international business and market experience. In their work the Trustees are accountable to a Monitoring Board of public authorities. For more information visit www.ifrs.org.

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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The International Auditing and Assurance Standards Board (IAASB) today released its plan for a post-implementation review of the clarified International Standards on Auditing (ISAs). In 2009 the IAASB concluded its five-year Clarity project to redraft and revise the ISAs. The post-implementation review is the second phase of the IAASB’s efforts to monitor the implementation of these standards. The review is focused on whether the clarified ISAs are being consistently understood and implemented in a way that achieves the IAASB’s goals in revising and redrafting them.

“With extensive uptake of the clarified ISAs throughout the world, in already more than seventy-five countries, now is the time to gain a deeper understanding of how the clarified ISAs are being used and implemented,” said Prof. Arnold Schilder, Chairman of the IAASB. “When this review is completed in 2013, the IAASB will be better able to assess whether there is need for further changes to the ISAs. Timely feedback on the clarified ISAs from a variety of stakeholders is therefore essential for this purpose and the IAASB’s objective of ensuring that its standards continue to be of the highest quality.”

Features of the post-implementation review, which involves gathering information about the use of the clarified ISAs during 2012, are set out in the IAASB’s Plan for a Post-Implementation Review of the Clarified International Standards on Auditing.

Recognizing the broad range of stakeholders that may be interested in providing feedback to the IAASB about the clarified ISAs and their implementation, the IAASB encourages and welcomes input from all interested parties for the purpose of the review.

How to Comment

To access the plan and details on how to provide input, visit the IAASB’s website. Input for the purpose of the review is requested by no later than October 31, 2012.

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 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 164 members and associates in 125 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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This plan is the second phase of the IAASB’s efforts to monitor the implementation of clarified ISAs. The review is focused on whether these standards are being consistently understood and implemented in a way that achieves the IAASB’s goals in revising and redrafting them. Recognizing the broad range of stakeholders that may be interested in providing feedback to the IAASB about the clarified ISAs and their implementation, the IAASB encourages and welcomes input from all interested parties for the purpose of the review.

Objective

To review the appropriateness of the content of the IAPSs and determine whether they should be withdrawn or revised and the authority of IAPSs and any other implementation guidance that the IAASB may develop.

Background

Six IAPSs are currently effective:

Objective

To develop guidance for auditors dealing with complex financial instruments.

Wolfgang Böhm is Technical Director Assurance Standards, Director International Affairs, at the Institut der Wirtschaftsprüfer (IDW) in Germany. Among other roles, Mr. Böhm supports the Assurance Board of the IDW, and other IDW committees and working groups, in their development of IDW assurance and related services pronouncements, including the adoption of International Standards on Auditing (ISAs) into German auditing standards and quality control over the translation of ISAs.

He has also served on numerous IAASB/IAPC subcommittees, working groups, and task forces over the last 22 years and previously served as a technical advisor for the International Accounting Education Standards Board.

Mr. Böhm is a member of, and for most of the last decade was also secretary to, the Steering Group (the governing body) of the Common Content Project, which seeks to harmonize the education of professional accountants within the EU and internationally.

Prior to joining the IDW, Mr. Böhm worked for 14 years in primarily small- and mid-sized accounting firms in Canada and Germany, largely in assurance and related services. He obtained his B.Com. degree from the University of British Columbia (Canada), is qualified as a Chartered Professional Accountant in Canada, as a Chartered Accountant in the UK, and as a Certified Public Accountant in the US.

This report highlights the progress made to date and key findings from the first phase (Pre-Implementation Monitoring) of a two-phase initiative to evaluate whether the IAASB needs to make further changes to the 36 clarified International Standards on Auditing (ISAs) and clarified International Standard on Quality Control (ISQC) 1, which became effective January 15, 2009. 

Phase 1 began in June 2009 with the an information-gathering exercise to learn about the experiences of practitioners in preparing to implement the clarified ISAs.