Following the consideration and approval of due process by the Public Interest Oversight Board (PIOB), the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), today released International Standard on Auditing (ISA) 580 (Revised and Redrafted), Written Representations, and ISA 560 (Redrafted), Subsequent Events.

Written Representations
ISA 580 (Revised and Redrafted) contains new requirements designed to improve the auditors' practice in relation to the written statements that management provides to auditors to confirm certain matters or to support other audit evidence (referred to as "written representations"). During the development of the standard, the IAASB considered matters such as the reasons for requesting written representations, the value of the evidence that they provide, and from whom they should be requested.

The standard requires the auditor to request management to provide written representations on two fundamental matters:

• That it has fulfilled its responsibility for the preparation and presentation of the financial statements; and
• That it has provided the auditor with all relevant information and that all transactions have been recorded and are reflected in the financial statements.

The auditor may deem it appropriate to request other written representations during the course of the audit. Other ISAs also include requirements for the auditor to request certain written representations in respect of specific matters. In addition, ISA 580 (Revised and Redrafted) includes requirements for appropriate action by the auditor when written representations are not provided by management or are considered to be unreliable.

The ISA makes clear that, although written representations provide necessary audit evidence, they do not provide sufficient appropriate audit evidence on their own about any matters. Furthermore, the fact that management has provided written representations does not affect the nature or extent of other audit evidence that the auditor obtains about the fulfillment of management's responsibilities, or about specific assertions.

"The aim of the new requirements is to enhance the quality and appropriateness of written representations sought by the auditor by a focus on what is really necessary and, in particular, to deal with concerns that auditors may over-rely on representations at the expense of other evidence," explains John Kellas, IAASB Chairman.

Subsequent Events
ISA 560 (Redrafted) forms part of the IAASB's ambitious 18-month program to redraft existing standards following the clarity drafting conventions.[1] The standard, which deals with the auditor's responsibilities relating to subsequent events in an audit of financial statements, provides more clarity as to the requirements, but does not incorporate any substantive changes thereto. ISA 560 (Redrafted) will contribute to improving the consistency of its application by auditors around the world.

The complete set of clarified ISAs, including newly revised standards such as ISA 580 (Revised and Redrafted), is effective for audits of financial statements for periods beginning on or after December 15, 2009.

The ISAs can be downloaded free-of-charge from the IFAC online bookstore.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures. 

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 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

[1]       Key elements of the clarity drafting conventions include: establishing an objective for the auditor with respect to the subject matter of each standard; clearly distinguishing requirements from guidance on their application; avoiding ambiguity through eliminating the present tense to describe actions by the auditor and using more imperative language where a requirement was intended; and other structural and drafting improvements to enhance the overall readability and understandability of the standards.

The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), has released its 2007 annual report which highlights its work in enhancing the clarity of international standards and notes progress in achieving global convergence to international auditing standards. The report also details the IAASB's consultation and outreach program and offers a preview of its proposed future strategy.

A central part of the IAASB's work program over the past year has been the redrafting of its international standards to make them clearer and to promote their adoption and translation. During 2007, the IAASB approved seven final International Standards on Auditing (ISAs) and 21 exposure drafts as part of its Clarity project. It also announced that the effective date for all final redrafted ISAs will be for periods beginning on or after December 15, 2009. The IAASB plans to complete the redrafting of all ISAs by the end of 2008.

To further promote international convergence of standards, the IAASB engaged in extensive consultation and coordination activities in 2007 with international regulators and organizations, national auditing standard setters, and other stakeholders. The IAASB also continued to receive oversight from the Public Interest Oversight Board and obtained input to its work program and technical projects from the IAASB Consultative Advisory Group (CAG). A report from David Damant, Chairman of the IAASB CAG, is included in the annual report.

Throughout 2007, the IAASB actively consulted with stakeholders and users of its standards regarding the development of its proposed future technical strategy and work program. The annual report presents highlights of the proposed future strategy, which the IAASB is reviewing at its meeting in New York City this week.

The 2007 IAASB annual report can be downloaded from its website.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

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 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

The International Federation of Accountants (IFAC) has released its 2008 Handbook of International Auditing, Assurance, and Ethics Pronouncements. The handbook can be downloaded in PDF format from the IFAC online bookstore (http://www.ifac.org/store), and print copies can be ordered now for shipment in mid-March. In addition, the 2008 Handbook of International Public Sector Accounting Pronouncements is currently being finalized and will be available for download from the IFAC bookstore later in March.

Auditing and Assurance Handbook
The 2008 auditing and assurance handbook is presented in two parts. The first part contains pronouncements on auditing, review, other assurance, and related services issued by the International Auditing and Assurance Standards Board (IAASB) as of January 1, 2008. It also includes the IFAC Code of Ethics for Professional Accountants, issued by the International Ethics Standards Board for Accountants, along with new definitions for "firm," "network," and "network firm." The second part of the handbook features nine International Standards on Auditing redrafted by the IAASB to improve their clarity, as well as background information on the IAASB's Clarity project.

Print copies of the handbook can be ordered for US$150.00 plus shipping. Discounts are available for students, academics, and individuals living in developing countries, as well as for orders of 10 or more copies.

Public Sector Accounting Handbook
The 2008 Handbook of International Public Sector Accounting Pronouncements will contain all pronouncements of the International Public Sector Accounting Standards Board (IPSASB) as of December 31, 2007. It will also feature two new standards - International Public Sector Accounting Standard (IPSAS) 25, Employee Benefits, and IPSAS 26, Impairment of Cash-Generating Assets - as well as an updated Cash-Basis IPSAS, Financial Reporting under the Cash Basis of Accounting. Print copies of the public sector handbook can be ordered for no charge, except for a US$25.00 shipping cost, for shipment in late-March.

How to Order
The 2008 Handbook of International Auditing, Assurance, and Ethics Pronouncements can be downloaded or ordered from the IFAC online bookstore. Orders can also be placed by calling 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 157 members and associates in 123 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. Through its independent standard-setting boards, IFAC sets international standards on ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high quality performance by professional accountants in business.

New requirements designed to enhance the rigor applied to auditing accounting estimates, including fair value accounting estimates, were released today by the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC). International Standard on Auditing (ISA) 540 (Revised and Redrafted), Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, requires the auditor to focus attention on areas of higher risk, accounting judgment, and possible bias, thereby assisting the auditor to form appropriate conclusions about the reasonableness of estimates in the context of an entity's financial reporting framework.

ISA 540 (Revised and Redrafted) adopts a risk-based approach to the audit of accounting estimates including fair value accounting estimates. It addresses matters such as the auditor's evaluation of the effect of estimation uncertainty on risk assessments, management's methods for making estimates, the reasonableness of assumptions used by management, and the adequacy of disclosures. The ISA provides expanded guidance on auditing fair value accounting estimates, including audit considerations relating to the proper application of the requirements of the financial reporting framework relevant to such estimates and the use of models in valuations.

"We are clearly in an environment where the measurement and disclosure of fair values are of great importance, with recent market experience highlighting the difficulties that arise in valuing financial instruments. It is, therefore, timely that the IAASB has issued its revised standard to provide enhanced guidance on auditing accounting estimates, particularly fair value ones determined on the basis of a complex valuation model or significant unobservable inputs," states John Kellas, Chairman of the IAASB, adding, "We are confident that the standard will enhance current practice and promote consistency worldwide."

ISA 540 (Revised and Redrafted) combines ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures (Other Than Those Involving Fair Value Measurements and Disclosures), and ISA 545, Auditing Fair Value Measurements and Disclosures. The IAASB concluded that the similarities between estimates and fair value estimates could be emphasized, and redundancy eliminated, by combining these two standards. The new standard forms part of the IAASB's ambitious 18-month program to redraft existing standards and to develop new and revised standards following the clarity drafting conventions.¹

Mr. Kellas explains: "Although ISA 540 (Revised and Redrafted) is effective for audits of financial periods commencing on or after December 15, 2009, the date when all the standards redrafted under the IAASB's Clarity project become effective, it deals with a subject of considerable current concern. In this climate, auditors will be well aware of the need to understand the accounting principles and rules relating to accounting on the basis of fair value, and to give appropriate consideration to their application. Auditors may therefore wish to consider the material in the new standard as they complete their 2007 audits, and plan and perform those for 2008 and 2009 engagements. Other existing standards may also be particularly relevant, for example, those on the use of experts by the auditor and on the auditor's consideration of the going concern basis of accounting."

The IAASB also recommends that auditors be alert for relevant guidance that has been, or may be, issued by other organizations: for example, the paper, Determining Fair Value of Financial Instruments under International Financial Reporting Standards (IFRS) in Current Market Conditions, issued in December 2007 by the world's six largest accounting firms (under the auspices of the Global Public Policy Committee); the US Public Company Accounting Oversight Board's Staff Audit Practice Alert No. 2, Matters Related to Auditing Fair Value Measurements of Financial Instruments and the Use of Specialists, also released in December; and the UK Auditing Practices Board's (APB) Bulletin 2008/01, Audit Issues when Financial Market Conditions are Difficult and Credit Facilities may be Restricted.

ISA 540 (Revised and Redrafted) can be downloaded free-of-charge from the IFAC online bookstore at http://www.ifac.org/store.

Task Force on Fair Value Auditing Guidance
To address some of the valuation difficulties highlighted by the problems in the world's major financial markets, the IAASB plans to explore whether and how to supplement ISA 540 (Revised and Redrafted) as soon as practicable with implementation guidance on auditing fair value estimates. Any such guidance would have the aim of raising awareness of issues and best practice on a timely basis and further promoting audit consistency. Accordingly, the IAASB agreed in December 2007 to establish a Task Force to consider how best to approach the development of possible further fair value auditing guidance.

The demand for implementation guidance from a number of constituencies, including regulators, was recognized in the IAASB Consultation Paper, Proposed Strategy for 2009-2011. That paper raised the possibility that the IAASB might develop guidance for auditors on the audit of complex valuation models. However, recent developments in the financial markets, in particular the current lack of market liquidity, have persuaded the IAASB to create the Task Force now to take this idea further even though the responses to the Consultation Paper have yet to be fully analyzed.

The Task Force, chaired by a member of the IAASB and to comprise interested parties with relevant perspectives and expertise, will consider aspects of the audit of financial statement items measured at fair value and make recommendations to the IAASB for matters that require priority attention.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

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 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

¹Key elements of the clarity drafting conventions include: establishing an objective for the auditor with respect to the subject matter of each standard; clearly distinguishing requirements from guidance on their application; avoiding ambiguity through eliminating the present tense to describe actions by the auditor and using more imperative language where a requirement was intended; and other structural and drafting improvements to enhance the overall readability and understandability of the standards.

The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), has agreed to amend the following International Standards on Review Engagements (ISREs) to clarify to which engagements each respectively is to be applied:

• ISRE 2400, Engagements to Review Financial Statements; and
• ISRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity.

The issue that had been brought to the IAASB's attention is that ISRE 2410 applies in the case of a review by the entity's auditor of interim financial information only, while ISRE 2400 applies to all reviews of historical financial information excluding those conducted by the entity's auditor. Thus, there would appear to be no directly relevant standard for reviews by the entity's auditor of historical financial information other than interim financial information.

To resolve the issue, the IAASB has amended ISRE 2410 to apply also to such reviews. This reflects the principal distinction between ISRE 2400 and ISRE 2410, which is that ISRE 2410 is written on the basis that the entity's auditor is able to use his or her audit-based knowledge of the entity when carrying out a review of any historical financial information. The most common example of a review engagement that might be undertaken by an entity's auditor is the review of interim financial information issued by a public company; other examples have arisen in practice, however, and the change makes clear that these also fall within ISRE 2410. When approving ISRE 2410, the IAASB did not intend to remove auditor's reviews of historical financial information (other than interim financial information) from the scope of the ISREs.

Furthermore, to align the application of ISRE 2400, ISRE 2410 and International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, the IAASB agreed to restrict the application of ISRE 2400 to a review of any historical financial information performed by a practitioner who is not the entity's auditor. Before this amendment, ISRE 2400 indicated that it may be applied "to the extent practicable" to engagements to review other information.

"These minor amendments, which are effective immediately, clarify the application of the ISREs and ISAE 3000 by eliminating a small gap in the apparent scope of the ISREs and ensuring that, as intended, there is no overlap in the scopes of the ISREs and ISAE 3000. As a result, practitioners will have no doubt about which standard is to be applied to a review engagement," explains John Kellas, IAASB Chairman.

The amendments to ISREs 2400 and 2410 can be downloaded free-of-charge from the IFAC online bookstore (http://www.ifac.org/store).

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

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 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), is releasing the last two exposure drafts written in accordance with the new clarity drafting conventions. It approved the exposure drafts of proposed International Standard on Auditing (ISA) 210 (Redrafted), Agreeing the Terms of Audit Engagements, and proposed ISA 710 (Redrafted), Comparative Information - Corresponding Figures and Comparative Financial Statements, at its meeting in Washington, D.C. in December 2007. Subject to any comments on exposure, the final standards will become effective for audits of financial statements for periods beginning on or after December 15, 2009.

The release of these exposure drafts marks the completion of the first phase of the IAASB's ambitious 18-month program to redraft existing standards and to develop new and revised standards following the new drafting conventions.*

"This is a major milestone on the IAASB's path to develop high quality international standards that are more readily understood, applied and enforced," emphasizes IAASB Chairman John Kellas, adding, "The redrafted ISAs provide more clarity as to the requirements which should contribute to improving the consistency of their application by auditors around the world."

"The IAASB is on track to complete the Clarity project by the end of 2008. When completed, 21 extant ISAs will have been fully revised, or updated and redrafted, in the last five years, and the remaining 11 will have been redrafted in accordance with the new conventions. In addition, International Standard on Quality Control 1 will have been redrafted and a new ISA on communicating deficiencies in internal control completed," explains Jim Sylph, Executive Director, Professional Standards.

How to Comment
Comments on the exposure drafts are requested by April 15, 2008. The exposure drafts may be viewed by going to http://www.ifac.org/EDs. Comments may be submitted by email to EDComments@ifac.org. They can also be faxed to the attention of the Executive Director, Professional Standards at +1 (212) 286-9570 or mailed to IFAC, 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA. All comments will be considered a matter of public record and will ultimately be posted on IFAC's website.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

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 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business. 

*For more information about the IAASB Clarity Project, go to http://www.ifac.org/IAASB/ProjectHistory.php?ProjID=0024.

At its recent meeting in Washington, D.C., the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), approved three new proposed standards: two focus on enhancing the auditors’ consideration of controls at service organizations, and the third addresses the communication of deficiencies in internal control to those charged with governance. These standards reflect the importance of internal control within audited entities and at their service organizations, and of the auditor’s responsibility to make significant findings available to those charged with governance. The IAASB is also releasing two exposure drafts written in accordance with the new clarity drafting conventions.

Third Party Service Organizations
Many entities outsource aspects of their businesses to organizations that provide services ranging from performing a specific task under the direction of the entity to replacing one or more of the entity’s business units or functions. Frequently, services provided by such organizations are integral to the entity’s information system relevant to financial reporting.

Following a risk-based approach, proposed International Standard on Auditing (ISA) 402 (Revised and Redrafted), Audit Considerations Relating to an Entity Using a Third Party Service Organization, deals with the auditor’s responsibilities to obtain audit evidence when an entity uses one or more service organizations. This may include obtaining reports prepared by the auditors of those organizations.

Proposed International Standard on Assurance Engagements (ISAE) 3402, Assurance Reports on Controls at a Third Party Service Organization, is the first subject matter-specific standard developed under the IAASB’s International Framework for Assurance Engagements. It complements proposed ISA 402 (Revised and Redrafted) in that reports prepared in accordance with proposed ISAE 3402 will be capable of providing appropriate audit evidence under the proposed ISA. It will help to bring consistency in reporting on controls at service organizations, thereby assisting such organizations to meet the needs of clients (“user entities”) and their auditors. In particular, it should ensure that reports issued in one country are likely to meet the requirements of the auditors of user entities in other countries.

“The proposed standards reflect the IAASB’s recognition of the increasing use of service organizations worldwide. In revising our existing standard for the auditors of user entities, and complementing it with a new standard for the auditors of service organizations, we are proposing consistent and comprehensive guidance for this important aspect of auditing,” says John Kellas, Chairman of the IAASB.

Communicating Deficiencies in Internal Control
The IAASB also seeks comments on proposed ISA 265, Communicating Deficiencies in Internal Control. This deals with the auditor’s responsibility to communicate to management and those charged with governance deficiencies in internal control that have been identified by the auditor. It distinguishes between significant and other deficiencies in order to establish requirements to communicate to the appropriate levels within the audited entity. It also requires the former to be communicated in writing to those charged with governance.

“This new proposed standard is intended to enhance the effectiveness of the auditor’s communication of deficiencies in internal control by requiring a clearer focus on what is important to those taking ultimate responsibility for control over financial reporting. The proposed standard will require these matters to be communicated in writing, and on a timely basis so that those charged with governance can take steps to strengthen internal control,” explains Mr. Kellas.

New Clarity Exposure Drafts
The IAASB has also approved the following exposure drafts of proposed ISAs:

• ISA 501 (Redrafted), Audit Evidence Regarding Specific Financial Statement Account Balances and Disclosures; and
• ISA 520 (Redrafted), Analytical Procedures.

These exposure drafts form part of the IAASB’s ambitious 18-month program to redraft existing standards and to develop new and revised standards following the new clarity drafting conventions. Subject to any comments on exposure, the final standards will become effective for audits of financial statements for periods beginning on or after December 15, 2009.

How to Comment
Comments on the exposure drafts are requested as follows:

• Proposed redrafted ISAs 501 and 520 by March 31, 2008;
• Proposed ISA 402 (Revised and Redrafted) and proposed ISA 265 by April 30, 2008; and
• Proposed ISAE 3402 by May 31, 2008.

The exposure drafts may be viewed by going to http://www.ifac.org/EDs. Comments may be submitted by email to EDComments@ifac.org. They can also be faxed to the attention of the Executive Director, Professional Standards at +1 (212) 286-9570 or mailed to IFAC, 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA. All comments will be considered a matter of public record and will ultimately be posted on IFAC’s website.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

Founded in 1977, 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 158 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), has reached another milestone in its Clarity Project. Following the consideration and approval of due process by the Public Interest Oversight Board (PIOB), the IAASB issued three final standards that reflect its new clarity drafting conventions:

• International Standard on Auditing (ISA) 230 (Redrafted), Audit Documentation;
• ISA 260 (Revised and Redrafted), Communication with Those Charged with Governance; and
• ISA 720 (Redrafted), The Auditor's Responsibility in Relation to Other Information in Documents Containing Audited Financial Statements.

The standards form part of the IAASB's ambitious 18-month program to redraft existing standards and to develop new and revised standards following the clarity drafting conventions.¹
 
"The complete set of clarified ISAs, including some newly revised standards also under development, will be effective for audits of financial statements for periods beginning on or after December 15, 2009. We are releasing standards as they are approved in order to provide standard setters, regulators and auditors with sufficient time to plan for the adoption and implementation of the standards," explains John Kellas, IAASB Chairman.

Audit Documentation
ISA 230 (Redrafted) incorporates several enhancements and additional guidance to clarify the auditor's documentation obligations. In particular, it explains in clearer terms what is expected of the auditor in fulfilling the requirement to document compliance with ISAs, and provides clarifying guidance regarding the circumstances in which it is appropriate for the auditor to prepare audit documentation relating to the use of professional judgment. The flow of the requirements in the redrafted ISA, particularly in relation to changes to audit documentation after the date of the auditor's report, has also been simplified and clarified.

Communication with Those Charged with Governance
ISA 260 (Revised and Redrafted) has been fully revised. It sets out an overarching framework for communication with those charged with governance; it also identifies specific matters to be communicated by the auditor, including a requirement to communicate in writing about auditor independence. It acknowledges that law or regulation or an agreement with the entity, for example, may require that other matters be communicated. The ISA contains new requirements and guidance dealing with the communication process, including a specific requirement for the auditor to evaluate the adequacy of the two-way communication between the auditor and those charged with governance.

"The quality of the relationship between auditors and directors, audit committees and others charged with governance is one of the most important factors in achieving an effective audit. That is why the IAASB has emphasized the importance of two-way communication. A constructive and open working relationship between the auditor and those charged with governance not only assists the auditor in obtaining relevant information, but also assists those charged with governance in fulfilling their responsibility to oversee the financial reporting process," notes Mr. Kellas.

The Auditor's Responsibility in Relation to Other Information
ISA 720 (Redrafted) deals with the auditor's responsibility in relation to other information in documents containing audited financial statements and the corresponding auditor's report. It requires the auditor to read this other information and to respond appropriately when such information could undermine the credibility of the financial statements.

The clarified ISAs can be downloaded from the IFAC online bookstore at http://www.ifac.org/store.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

Founded in 1977, 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 158 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

Further information about IAASB may be obtained from its website: http://www.iaasb.org. The PIOB website address is http://www.ipiob.org.

¹ Key elements of the clarity drafting conventions include: establishing an objective for the auditor with respect to the subject matter of each standard; clearly distinguishing requirements from guidance on their application; avoiding ambiguity through eliminating the present tense to describe actions by the auditor and using more imperative language where a requirement was intended; and other structural and drafting improvements to enhance the overall readability and understandability of the standards.