At its most recent meeting in Madrid, Spain in September, the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), approved two sets of new proposals. The first exposure draft addresses concerns about the use and reliability of external confirmations as audit evidence. External confirmations are written responses to the auditor from a third party. The second exposure draft proposes stricter requirements when an auditor uses an expert to obtain audit evidence.
"The proposed standards represent significant steps by the IAASB designed to enhance auditor performance in important areas of the audit of financial statements. Confirmations have sometimes proved to be less reliable than expected and the proposals are intended to assist in making them effective when an auditor decides to use them. In a more complex world, especially where fair values feature in financial reporting, the auditor may have more need of the assistance of experts in other disciplines for the purposes of the audit. The new proposals are therefore timely," explains John Kellas, IAASB Chairman.
These proposed International Standards on Auditing (ISAs) are drafted in accordance with the IAASB's new conventions designed to improve the clarity of its pronouncements. They may be viewed by going to http://www.ifac.org/eds.
External Confirmations
Recent experience has indicated that external confirmations may not always be as reliable as expected as audit evidence, giving rise to requests for more rigorous requirements governing the auditor's use of external confirmations. The auditor's decision about whether to use external confirmation procedures is based upon the identification and assessment of risks of material misstatement in accordance with other ISAs. Proposed ISA 505 (Revised and Redrafted), External Confirmations, is directed at the effective performance of external confirmation procedures when the auditor determines that such procedures are an appropriate response to an assessed risk of material misstatement.
Use of the Work of an Auditor's Expert
Proposed ISA 620 (Revised and Redrafted), Using the Work of an Auditor's Expert, deals with the auditor's use of the work of a person or organization possessing expertise in a field other than accounting or auditing, employed or engaged by the auditor to assist the auditor to obtain sufficient appropriate audit evidence. It places particular emphasis on the need for the auditor to evaluate the expert's objectivity, and to establish a proper understanding with the expert of the expert's responsibilities for the purposes of the audit.
How to Comment
Comments on the exposure drafts are requested by February 15, 2008. Comments should be submitted by email to EDComments@ifac.org. They may also be faxed to IAASB ED Comments at +1-212-286-9570 or mailed to IAASB ED Comments at 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA. All comments will be considered a matter of public record and will ultimately be posted on the IFAC website.
About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.
Founded in 1977, IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 155 members and associates in 118 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.
Further information about IAASB may be obtained from its website: http://www.iaasb.org. The PIOB website address is http://www.ipiob.org.
