The International Auditing and Assurance Standards Board (IAASB) today released proposed narrow scope amendments to International Standard on Auditing 700 (Revised), Forming an Opinion and Reporting on Financial Statements and ISA 260 (Revised), Communication with Those Charged with Governance. The proposed amendments will help operationalize recently approved changes to the International Ethics Standards Board for Accountants’ (IESBA) International Code of Ethics for Professional Accountants (including International Independence Standards) related to listed and public interest entities. The changes to the IESBA Code require firms to publicly disclose when the independence requirements for public interest entities have been applied in an audit of financial statements.

“There are heightened expectations about auditor independence for audits of public interest entities. The recent changes to the IESBA Code, reinforced through the IAASB’s proposed changes to the ISAs, will enhance transparency to the public about application of independence requirements for audits of financial statements of public interest entities,” said IAASB Chair Tom Seidenstein. “This is a further sign of enhanced IAASB-IESBA coordination, a strategic commitment of both boards in our joint effort to better serve the public interest.”

This Exposure Draft is part of a broader IAASB project that responds to recent revisions to the IESBA Code related to listed and public interest entities, which are undertaken as two tracks—this is Track 1. Other narrow-scope amendments that may be considered in Track 2, on a separate timeline and with a later effective date, include:

• Aligning to the greatest extent possible the definitions and key concepts underlying the definitions in the International Standards on Quality Management (ISQMs) and International Standards on Auditing (ISAs) related to listed and public interest entities to IESBA’s definitions and key concepts in the revisions to the IESBA Code; and
• Considering the applicability of existing differential requirements for listed entities in the ISQMs and ISAs, and whether these need to be amended in light of IESBA’s revisions that address the definitions of “publicly traded entity” and public interest entities.  

How to Comment
The IAASB invites all stakeholders to comment on the Exposure Draft via the IAASB website. Comments are requested by October 4, 2022. As part of this public consultation, the IESBA invites stakeholders to comment on aspects of the Exposure Draft for its consideration of the need for any further action.

About the IAASB
The International Auditing and Assurance Standards Board 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.

In recent years, technological evolution has changed the way we work and learn—and the pace of change is not slowing. Sponsored by Learnsignal, join IFAC and more than 20 speakers for our three-day virtual summit to hear from a wide-range of experts—including Ben Elder, Meta’s Global Head of Strategic Partnerships; Space Economy’s George Pullen and Samson Williams; Cameron Carr, FinTech Advisor at IOSCO and Dr. Robert Kay, co-founder and Executive Director, Incept Labs—on technology’s impact on the future of our profession.

The IFAC Statements of Membership Obligations (SMOs) provide clear benchmarks to current and potential IFAC member organizations of IFAC’s requirements. The SMOs also serve as the global benchmarking framework and represent the core competencies of strong, credible, high-quality professional accountancy organizations (PAO) that most appropriately serve and function in the public interest.

The IFAC Statements of Membership Obligations (SMOs) provide clear benchmarks to current and potential IFAC member organizations of IFAC’s requirements. The SMOs also serve as the global benchmarking framework and represent the core competencies of strong, credible, high-quality professional accountancy organizations (PAO) that most appropriately serve and function in the public interest.

The fourth industrial revolution is reshaping the world we live and work in. This revolution presents significant opportunities for audit and assurance. The ever-growing availability of data combined with emerging technologies offer new ways for assurance professionals to enhance trust and confidence in their work.

For the audit and broader assurance profession, the emergence of new digital tools represents a real opportunity to attract a new generation of professionals to this noble profession. 

In some ways, the accounting and auditing world is catching up to the digital transformation that many industries have already experienced. Retail, hospitality, transport, entertainment, energy and many, many more have undergone disruption via new entrants and completely improved customer experience. In fact, it’s harder to think of an industry that hasn’t been disrupted by technology than one that has. If an industry hasn’t been disrupted yet, it’s only a matter of time.    

At the International Auditing and Assurance Standards Board (IAASB), we are determined to ensure that our standard-setting keeps pace and is prepared to adapt to disruptive technologies. We do so without losing our focus on setting high quality standards that strengthen public confidence in audits and assurance.

Technology is one of IAASB’s most relevant strategic drivers influencing our standards and future activities. Our technology initiative has three objectives:

1. Build processes and structures to support the IAASB’s disruption initiative;
2. Maintain and improve the IAASB’s knowledge about disruption trends and their implications for standard-setting and the public interest; and
3. Share knowledge and agenda with stakeholders in the reporting community to improve audit and assurance quality and thereby improve reporting quality.

Staying close to new technological developments is key to understanding what’s coming and in 2020 we carried out a research study with support from Founders Intelligence, a leading technology consultancy, to identify the leading disruptive technologies that could impact audit and assurance.

This research included investigating over 100 technology innovator companies and interviewing over 20 organizations across the industry including audit and assurance practitioners, national standard setters, regulators, and professional accounting organizations as well as founders and management of technology startups. We sought to categorize the various technologies we identified into those impacting the way information is accessed, verified, and protected as well as those that impact procedures related to assessing internal controls. We obtained insights into the expected timing of widescale adoption of these technologies within audit and assurance as well as gaining an understanding of their potential impact on the profession.

Based on the research undertaken, we identified four common themes about how technology is, and will continue to, disrupt the audit and assurance profession:

• Audits and assurance procedures performed on a more continuous and real time basis. 
• An audit or assurance engagement that is increasingly analytics based, including making use of artificial intelligence and machine learning in performing analytics. 
• An audit and assurance engagement that is increasingly performed remotely.
• Audit and assurance becoming a more technology-enabled profession, where more professionals can understand, use, and leverage advancements in technology in their day-to-day work.

The IAASB discussed these findings from this research in January 2021. We held two roundtables, in November 2020 and February 2022, where the innovators behind selected technologies were invited to share more about the technology and to answer questions about it from participants representing the global audit and assurance ecosystem.

Our focus did not stop there. We continue to commit dedicated resources to carry on this research and maintain the horizon watch for disruptive technologies that might impact audit and assurance.

We are upskilling IAASB members and staff to ensure we obtain a good understanding of the technologies that have the potential to disrupt audit and assurance and can factor these considerations into our current and future workplan activities.

Our bi-monthly Market Scan publication focuses on a different technology and presents a high-level understanding as well as technology trends, industry and startup driven innovation in audit and assurance and what it might mean for the IAASB.

We are committed to building processes and structures to stay informed about technology and potential disruptions. To this end we have set up a Digital Advisory Group made up of a small number of innovators and business leaders to help influence the IAASB’s thinking about the technology environment, different technologies and how those technologies may require standard setters, including the IAASB, to act. 

This group, comprised mostly of experts from outside the audit and assurance profession, will be asked to comment on technology and innovation topics related to assurance and to bring valuable points of view that may differ from the IAASB’s usual stakeholder outreach. The intelligence obtained from this group will be used to update the IAASB’s research to date and focus other information gathering activities.

Over the coming years, we will translate these lessons into real standard-setting inputs. In our ongoing work on audit evidence, fraud, and going concern, the IAASB will account for the impact of new technologies. Going forward, we will need to think about whether the use of the technology becomes the norm in fulfilling audit and assurance requirements and how that will impact our thinking on the scalability of our standards.

We know from our outreach activities that many national standard setters, regulators, audit firms and professional accounting organizations are similarly committing resources and effort into determining what the impact of technology will mean for auditing standards and for our profession. This is encouraging and crucial. All players in the industry have a responsibility to upskill themselves, engage in the conversations about technology disruption and share their experiences as well as the challenges they are encountering. It is only through our collective commitment to digital transformation that we will be able to move forward as a profession and continue to fulfil the valuable societal role that is our guiding purpose as well as creating an exciting future for our professionals.

This article was originally published in The Chartered Accounant, published by the Instittue of Chartered Accountants of India.

The SMP Advisory Group (SMPAG) is pleased to respond to the IESBA Exposure Draft Proposed Technology-Related Revisions to the Code (ED).