FRC: Revised auditing standards to enhance communications to audit committees and auditor reporting

28 September 2012

The FRC has issued revised ISAs (UK and Ireland) to enhance effective company stewardship and stimulate greater transparency about the judgements made by boards and auditors. The revised standards are effective for audits of financial statements for periods commencing on or after 1 October, 2012.

The revised ISAs (UK and Ireland) by the FRC:

260   Communication with those charged with governance
700   The auditor’s report on financial statements (Revised)
705   Modifications to the opinion in the independent auditor’s report
706   Emphasis of matter paragraphs and other matter paragraphs in the independent auditor’s report
720A The auditor’s responsibilities relating to other information in documents containing audited financial statements

The revisions primarily give effect to proposals in 'Effective Company Stewardship: Next Steps' published by the FRC in September 2011 and support changes to the UK Corporate Governance Code and Guidance for Audit Committees.

The changes in the standards are mainly directed at:

• enhancing auditor communications by requiring the auditor to communicate to the audit committee information that the auditor believes the audit committee will need to understand the significant professional judgements made in the audit;
• extending auditor reporting by requiring the auditor to report, by exception, if the board’s statement that the annual report is fair, balanced and understandable is inconsistent with the knowledge acquired by the auditor in the course of performing the audit, or if the matters disclosed in the report from the audit committee do not appropriately address matters communicated by the auditor to the committee.

 Revisions to the auditor reporting standards have also been made to enable those standards to be used by auditors in the Republic of Ireland; and also more fully align the requirements of ISAs (UK and Ireland) 705 and 706 with those of ISA (UK and Ireland) 700.

Press release

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