26 February 2013

IFAC: IAASB February 2013 meeting highlights

The summary consists of the IAASB's decisions on: auditor reporting, using the work of internal auditors (direct assistance), assurance engagements other than audits or reviews of historical financial information, ISA implementation monitoring, and future strategy and work programme.

Auditor Reporting

The IAASB further deliberated issues relating to the concept of auditor commentary introduced in its June 2012 Invitation to Comment (ITC), 'Improving the Auditor’s Report'. Amongst other matters, the IAASB supported the following:

• A revised objective of the auditor for purposes of determining additional information to be included in the auditor’s report, as follows: “The objective of the auditor, having formed an opinion on the financial statements, is to communicate in the auditor’s report those matters that, in the auditor’s professional judgment, were of most significance in the audit of the financial statements.” The objective would be included in a proposed new ISA, tentatively labelled ISA 701. The IAASB noted that the revised objective is not intended to signal a shift away from significant matters in the financial statements. Rather, it is intended to articulate a focus in the auditor’s thought process of selecting matters to report based on the audit performed, with reference to the disclosures in the financial statements as appropriate, thereby enhancing users’ understanding of the entity based on insights from further information about the audit.
• Presentation of this additional information as a separate section of the auditor’s report under the heading 'Key Audit Matters'.

Amongst other matters, the IAASB noted the following matters for further consideration:

• How proposed ISA 701 should best reflect the IAASB’s view that the auditor’s judgrment of what to report externally is derived from what had been communicated with those charged with governance, and whether any clarifications are needed to the requirements or guidance in ISA 260, 'Communication with Those Charged with Governance'.
• How the introductory language in the illustrative example of the new section in the auditor’s report could be drafted to explain clearly to users that the matters discussed in the auditor’s report is not intended to be a comprehensive list of all matters discussed with those charged with governance.
• Whether the initial list of factors intended to guide the auditor’s decision-making process in relation to external reporting could be further streamlined.
• Whether the proposed requirement for the auditor to include a statement in the auditor’s report when no matters for external reporting had been identified is appropriate.

The IAASB also deliberated stakeholder responses to the remaining suggested improvements included in its June 2012 ITC. Amongst other matters, the IAASB supported the following:

• Inclusion of an explicit statement in the auditor’s report with respect to other information. In this regard, the IAASB acknowledged the need to take into account feedback from respondents to the exposure draft of proposed revised ISA 720, 'The Auditor's Responsibilities Relating to Other Information in Documents Containing or Accompanying the Audited Financial Statements and the Auditor's Report Thereon'.
• Specifying the text to be used in the auditor’s report to describe the auditor’s responsibilities for the audit of the financial statements. To address concerns about the length of this standardised material, the IAASB agreed that auditors could be permitted to include this material in an appendix to the auditor’s report. The IAASB also acknowledged that law, regulation or national auditing standards may explicitly permit the auditor to exclude this material from the auditor’s report and instead refer to a website of an appropriate authority.

In relation to the matter of disclosure of the name of the engagement partner in the auditor’s report, the IAASB noted that further study is needed before concluding on whether the IAASB should require disclosure in all circumstances.

The IAASB also considered proposed revised requirements in ISA 700, 'Forming an Opinion and Reporting on Financial Statements', and a revised illustrative auditor’s report.

Finally, the IAASB received an update about work underway by the IASB and the FASB relating to going concern.

The IAASB will consider drafts of proposed new and revised auditor reporting ISAs and a revised illustrative auditor’s report at its April 2013 meeting. The IAASB will also consider recommendations in relation to auditor reporting on going concern.

Full summary

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