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“The annual report is a critical document for investors. It is in the public interest that an auditor undertakes an ‘intelligent read’ of an annual report, in the context of the knowledge obtained in the audit, and perform certain procedures to ensure the annual report is not materially inconsistent with the audited financial statements,” explained Prof. Arnold Schilder, IAASB Chairman.
The standard also includes new requirements related to auditor reporting on other information that complement the changes arising from the IAASB’s new and revised Auditor Reporting standards, issued earlier this year. Concurrent with those standards, ISA 720 (Revised) will be effective for audits of financial statements for periods ending on or after December 15, 2016.
“Which documents have been read and considered by the auditor and the results of the auditor’s work on those documents will now be transparent to auditor report users,” explained Kathleen Healy, IAASB Technical Director. “Specifically articulating the auditor’s responsibilities for other information, including the fact that the auditor’s opinion does not cover this information, will also give users the appropriate context in which to consider an entity’s annual report.” The standard also seeks to address the practical challenges that may arise when some or all of the other information is not available as of the date of the auditor’s report, and prescribes additional communications in auditor’s reports for listed entities in these circumstances.