FRC would welcome comments on the IAASB's ED of ISA 720 (Revised), "The Auditor's Responsibilities Relating to Other Information in Documents Containing or Accompanying Audited Financial Statements and the Auditor's Report Thereon", by 15 February 2013, before it finalises its response to the IAASB.
The IAASB issued an exposure draft of International Standard on Auditing (ISA) 720 (Revised) “The Auditor’s Responsibilities Relating to Other Information in Documents Containing or Accompanying Audited Financial Statements and the Auditor’s Report Thereon” on 14 November 2012. This proposes significant revisions to the current ISA, which is used as the basis for the FRC’s equivalent standard, ISA (UK and Ireland) 720 Section A.
The current ISA 720, “The Auditor’s Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements” issued by the IAASB, is used as the basis for the FRC’s ISA (UK and Ireland) 720 Section A which has the same title.
The IAASB is proposing to revise ISA 720 to reflect that there have been a number of developments in the corporate reporting environment that have led to significant changes in the nature and extent of information included in documents containing audited financial statements and the auditor’s report thereon. These developments include:
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Annual reports generally include more narrative and qualitative information, such as descriptions of the entity’s business model, risk exposures and uncertainties, than in the past.
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Movements towards exploring ways to better integrate information in the different parts of an entity’s public reporting package.
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Changes in the manner in which annual reports are distributed, increasingly by electronic means.
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Some entities are making increasing and more divergent use of documents other than the annual report for their external communication purposes in connectionwith the issuance of their audited financial statements – i.e. presenting relevantinformation in documents accompanying the audited financial statements,instead in documents containing the audited financial statements.
Responding to these developments, the IAASB’s proposals will introduce significant changes, including:
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Extending the scope of the standard to include documents accompanying audited financial statements and the auditor’s report thereon;
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Extending the auditor’s responsibilities (i.e., the work effort) to include not only reading the other information for consistency with the audited financialstatements but also reading and considering the other information forconsistency with the auditor’s understanding of the entity and the environmentacquired during the course of the audit; and
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Enhancing transparency of the auditor’s work with respect to other information through new suggested auditor reporting responsibilities - requiring auditors to articulate in their reports their responsibilities under the proposed ISA, and the outcome of their work relating to the other information.
Press release
Invitation to comment
IAASB´s-ED-of-ISA-720 (revised)
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