The International Federation of Accountants (IFAC) has submitted a comment letter to the International Auditing and Assurance Standards Board (IAASB) on its exposure draft for proposed revisions to ISA 240, which covers fraud.

IFAC supports the IAASB’s focus on fraud, but the proposals raise several concerns for the global profession. Any approach to these issues should reflect the fact that the primary responsibility for preventing and detecting fraud rests with management. Extant requirements within the standard provide an effective basis for dealing with the auditor’s responsibilities in relation to fraud, so the IAASB should take an evidence-based approach to amendments, ensuring that any changes in approach that increase costs for auditors and clients can be justified through added value.

Some of the proposals may lead to a widening of the existing expectation gap—especially the changes related to transparency in the auditor’s report. The proposed requirements may also result in extra work and effort on all audits regardless of whether specific fraud risks have been identified, and without corresponding increases in value. The resulting approach might not be practical or cost effective for many audits and is unlikely to make a meaningful difference to audit quality in many cases.  

IFAC will remain engaged with the IAASB’s consultation process until the publication of a final standard and supporting guidance materials.

The International Federation of Accountants (IFAC) has submitted a comment letter to the International Ethics Standards Board for Accountants (IESBA) on its exposure draft for proposed revisions to the IESBA Code relating to the use of external experts.

External experts can improve the quality of reporting and assurance. They are an important resource, especially for small- and medium-sized practices, where there is often less in-house specialist knowledge. Standards in this area should not discourage the use of experts, and any requirements should be clear—and consistent with the corresponding reporting and assurance standards.

IFAC’s response highlights the potential that proposed revisions could undermine the quality of reporting and assurance engagements by creating inappropriate barriers to the use of external experts. Proposals for subjective evaluation of competence, capability, and objectivity could prevent the use of experts based on perceived, rather than meaningful, challenges to ethical behavior. New requirements for information gathering in some areas appear excessive and impractical. The exposure draft also has notable inconsistencies in approach and terminology with the International Auditing and Assurance Standards Board's (IAASB) proposed International Standard on Sustainability Assurance (ISSA) 5000.

IFAC will remain engaged with the IESBA’s consultation process until the publication of a final revision and supporting guidance materials.

The International Federation of Accountants (IFAC) has submitted a comment letter to the International Ethics Standards Board for Accountants (IESBA) on its exposure draft for the proposed revisions to the Code of Ethics related to sustainability.

The global business community and the accountancy profession are making a significant transformation with respect to sustainability disclosures. The IESBA has an important role, like other standard setters, in this transformation.

IFAC appreciates the significant resources and effort the IESBA has devoted to this important project. However, the actions of standard setters, regulators, and policy makers must be undertaken and calibrated with priority for both being an effective influence on the sustainably transformation and bringing along relevant stakeholders in the business community, including the accountancy profession, on the journey. It is important for the IESBA to be a positive influence in this transformation through the creation of practical, easily understandable, and sufficiently flexible standards.

IFAC has raised three key areas in which the IESBA can enhance the practicality of implementation:

• Reduce complexity and call for transparency from practitioners with respect to relevant, jurisdiction-specific sustainability assurance oversight, as well as enforcement where they conduct engagements.
• Remove barriers to financial statement auditors providing sustainability assurance to the same client.
• Revise or remove proposed requirements related to value chain considerations.

IFAC will remain engaged with the IESBA’s consultation process until the publication of a final standard and supporting guidance materials.