In This Issue:
1. IAASB Meetings
2. IAASB Reports on Clarity ISA Implementation Monitoring
3. New Implementation Resources to Support Implementation of the Clarified ISAs
4. Of Special Interest to Small and Medium Practices (SMPs) - Exposure Draft of International Standard on Related Services (ISRS) 4410, Compilation Engagements
5. Open for Comment - Exposure Draft of International Auditing Practice Statement (IAPS) 1000, Special Considerations in Auditing Complex Financial Instruments
6. Open for Comment - Exposure Draft of ISA 610, Using the Work of Internal Auditors, and ISA 315, Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment, and Proposed Impact Analysis Approach
7. Linda de Beer appointed IAASB Consultative Advisory Group (CAG) Chair
8. European Commission (EC) Issues Green Paper on Auditing
9. Other Relevant IFAC Initiatives
10. Share IAASB eNews with Your Colleagues
1. IAASB Meetings
The most recent IAASB meeting was held on September 20-24, 2010 in St. Julian's, Malta.
In addition to the projects discussed in this eNews, the IAASB deliberated issues relating to the following projects:
- Revision of International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Statements
- Development of ISAE 3410, Assurance on a Greenhouse Gas Statement
- Revision of International Standard on Review Engagements (ISRE) 2400, Engagements to Review Financial Statements
- Revision of International Standard on Auditing (ISA) 720, The Auditor's Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements
- Issues relating to the audit of financial statement disclosures
The IAASB will meet in Orlando, Florida, on December 6-10, 2010. As a reminder, all meeting agenda materials are publicly available and posted on the IAASB's website in advance of IAASB meetings. In addition, audio recordings are posted after the meetings. Visit http://www.iaasb.org/meetings
2. IAASB Reports on Clarity ISA Implementation Monitoring
The IAASB has released a progress report on its project to monitor the implementation of its clarified ISAs. The report, Implementation of the Clarified International Standards on Auditing (ISAs), highlights key findings from the first phase of the IAASB's initiative to develop a process for gathering information to help it evaluate the effective and consistent implementation of the clarified ISAs. Following completion of the Clarity Project, the first phase of this IAASB initiative has focused on learning more about early implementation experiences.
3. New Implementation Resources to Support Implementation of the Clarified ISAs
To further facilitate effective implementation of the clarified ISAs, new resources have been developed to assist auditors as they prepare for the upcoming audit season. These include:
- New ISA Modules. In promoting awareness and understanding of the newly clarified ISAs, the IAASB has released a second series of "ISA Modules" covering ISAs that address materiality in planning and performing an audit of financial statements, the evaluation of identified misstatements, written representations, using the work of an auditor's expert, and auditor reporting. Developed by IAASB staff, each of these modules combines short video presentations and accompanying slides that explain the key principles of, and major changes in, individual ISAs, including the implications for audits of SMEs. The new modules, as well as those developed in 2009, are available to download free of charge from the IAASB Clarity Center on IAASB's website. The IAASB encourages IFAC members, associates, regional accountancy bodies, and firms to use these materials and to promote their availability to their members and employees.
- Staff Q&A on Unusual Transactions. As further support for ISA implementation, IAASB staff has released Auditor Considerations Regarding Significant Unusual or Highly Complex Transactions, a Staff Questions and Answers (Q&A) publication. The Q&A highlights considerations in the ISAs that are relevant to auditing such transactions, often an area that gives rise to risks of material misstatement of the financial statements.
4. Of Special Interest to SMPs - Exposure Draft of International Standard on Related Services (ISRS) 4410, Compilation Engagements
In October, the IAASB released for public exposure proposed ISRS 4410, Compilation Engagements. The proposed standard is the first step in the IAASB'S work to create robust standards for services that can be used by entities that are either not required or do not elect to be audited to meet their business reporting needs. Through a compilation engagement, practitioners can provide significant benefit by applying their expertise in accounting and financial reporting. This expertise is applied to assist the management of an entity in preparing and presenting historical financial information for use by the entity's internal or external stakeholders.
Comments on the exposure draft are requested by March 31, 2011.
5. Open for Comment - Exposure Draft of International Auditing Practice Statement (IAPS) 1000, Special Considerations in Auditing Complex Financial Instruments
In October, the IAASB released for public exposure a new proposed pronouncement-IAPS 1000, Special Considerations in Auditing Complex Financial Instruments that highlights practical considerations for auditors when dealing with complex financial instruments. The pronouncement gives particular emphasis to auditing considerations relating to valuation and disclosure issues for financial statement items measured at fair value.
Along with the proposed IAPS 1000, the IAASB is also exposing for comment proposed changes to the current Preface to the International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services, which explains the authority of this and future IAPSs, as well as proposals to withdraw the six existing IAPS. The IAASB plans to finalize proposed IAPS 1000 and the statement of authority in 2011. Auditors, however, may wish to consider the material in the proposed IAPS 1000 as they plan and perform their upcoming audit engagements.
Comments on the exposure draft are requested by February 11, 2011.
6. Open for Comment - Exposure Draft of ISA 610, Using the Work of Internal Auditors, and ISA 315, Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment, and Proposed Impact Analysis Approach
Recognizing developments in the internal auditing environment and the evolving relationship between internal and external auditors, in July, the IAASB released an exposure draft on a proposed revised standard that addresses the external auditor's responsibilities relating to using internal auditors' work during an audit.
The proposed ISA 610 (Revised), Using the Work of Internal Auditors, aims to enhance the external auditor's performance by providing a stronger framework for evaluating and using the work and assistance of an entity's internal auditors. Related enhancements to the external auditor's required considerations of the internal audit function are also proposed in ISA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment.
Comments on the exposure draft are requested by November 15, 2010.
7. Linda de Beer Appointed IAASB Consultative Advisory Group (CAG) Chair
Prof. Linda de Beer has been appointed chair of the CAG to the IAASB. The IAASB CAG is an independent body and provides the forum in which the representatives of its various member organizations-including regulators, preparers, and others with an interest in international auditing and assurance-provide advice on technical and public interest matters relating to the drafts of IAASB standards and strategy.
As a representative of the Johannesburg Stock Exchange, Prof. de Beer previously represented the World Federation of Exchanges on the CAG. She was elected by the CAG membership to succeed the current CAG chairman, David Damant, who since June 2004 has served as the first independent IAASB CAG chairman. Prof. de Beer's appointment-a three-year term effective October 1, 2010-has been approved by the Public Interest Oversight Board (PIOB).
8. European Commission (EC) Issues Green Paper on Auditing
The EC has issued a Green Paer on auditing that focuses on a number of issues, including the role of auditors, public oversight, concentration in the audit market, SME audits, international collaboration, and auditor independence. The deadline for comment submissions is December 8, 2010. The EU Commission has scheduled a hearing in early February 2011, to present and discuss the results of the consultation procedure. It is expected that proposals in certain areas may be made as early as 2011.
9. Other Relevant IFAC Initiatives
IFAC's SMP Committee has recently released implementation support materials to help practitioners understand and efficiently apply the clarified ISAs. The two volume second edition of the Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities includes various improvements based on feedback from users of the first edition, including two integrated case studies, one of which focuses on an audit of a micro-entity and increased focus on SME audits. A second edition of the Guide to Quality Control for Small- and Medium-Sized Practices was issued in July. The implementation guide is intended to help SMPs understand and efficiently apply the redrafted International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements.
Initiatives of other IFAC Boards and Committees may also be of interest to those who follow the work of the IAASB, including the following:
- Forum of Firms Issues Paper on Client Acceptance and Continuance
- IFAC and United Nations Conference on Trade and Development (UNCTAD) Host Accountancy Summit on Corporate Governance Reform
- Forum of Firms Focuses on Practical Application of Group Audit Standard
- The Prince's Accounting for Sustainability Project (A4S) and the Global Reporting Initiative (GRI) Announce Formation of the International Integrated Reporting Committee
10. Share IAASB eNews with Your Colleagues
The IAASB issues regular eNews updates to keep you appraised of the board's activities and recent publications. Please forward this eNews to any interested colleagues and let them know they can subscribe to this and other eNews bulletins at the eNews sign-up page.
The IAASB invites all stakeholders to comment on its proposals. To access the exposure drafts discussed in this eNews or submit a comment, visit the IAASB's website. For more information about any of the items mentioned above or other information about IFAC, please contact communications@ifac.org.
About the IAASB
The IAASB (www.iaasb.org) develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the PIOB, which oversees the activities of the IAASB, and the IAASB CAG, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by IFAC.
About IFAC
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 159 members and associates in 124 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce. Through its standard-setting boards, IFAC sets international ethics, auditing and assurance, education, and public sector accounting standards. It also issues guidance to encourage high-quality performance by professional accountants in business.