Disclosures

The IAASB discussed and agreed that it was critical to obtain further information and perspectives on audit practice and priorities regarding disclosures in a financial statement audit before proceeding to a project proposal. It was further agreed that the Working Group would develop a Discussion Paper to:

• Validate issues identified by the Working Group and to seek feedback on those issues with the goal of assisting the Working Group in formulating a clear, targeted project plan; and 
• Provide a platform for the IAASB to participate in future discussions and international debate about the future of financial reporting relative to disclosures.

The objective of the Discussion Paper was to further explore the audit implications of financial reporting disclosure requirements. The IAASB agreed the issuance of the Discussion Paper, and in January 2011 the DP, entitled The Evolving Nature of Financial Reporting: Disclosure and Its Audit Implications, was released.

The Disclosures Working Group was of the view that a mechanism to feed back the key messages from the comments received on the Discussion Paper would be useful, and proposed the preparation of a Feedback Statement for the Board’s consideration. The Feedback Statement, released in January 2012, provides an overview of the key messages heard on identified issues from the Discussion Paper, and provides thoughts and recommendations on what can be done to address them.

After issuing the Feedback Statement the IAASB further considered some specific issues identified in relation to auditing disclosures, including related work of others in this area, to assist with the preparation of a project proposal.

At its September 2012 meeting, the IAASB approved a project proposal to further consider the audit implications of financial statement disclosures, and to develop appropriate actions to address these issues.

The IAASB discussed key issues identified by the Task Force on areas where enhancements to the ISAs may be appropriate in relation to auditing financial statement disclosures. This included changes to the ISAs relating to:

• Focus auditors on disclosures during the planning stage of the audit;
• Integrate the existing assertions for presentation and disclosure, with the assertions for account balances and transactions and events;
• The application and other explanatory material addressing risk assessment, evaluating misstatements and forming an opinion on the financial statements for the purposes of auditing quantitative and qualitative disclosures.

At its March 2014 meeting, the IAASB approved the issuance of the exposure draft Proposed Changes to the International Standards on Auditing (ISAs)–Addressing Disclosures in the Audit of Financial Statements. The proposals include new guidance to clarify expectations of auditors when auditing financial statement disclosures.