The project objectives are to:
- Determine whether revisions (in the form of new or revised requirements, or additional application material) to the ISAs with respect to auditing disclosures are required and, if so, develop such revisions.
- Consider how such revisions should be presented, for example within the relevant ISAs or in a separate ISA.
- Determine whether other types of non-authoritative guidance, such as an International Auditing Practice Note (IAPN) or Staff Questions and Answers (Staff Q&A) publication should be developed and, if so, develop the content of such a publication.
The above objectives are not mutually exclusive, and deliberations on each will inform the overall project.
At its March 2015 meeting, the IAASB approved changes to ten International Standards on Auditing (ISAs) to address the audit implications of disclosures in the audit of financial statements with related conforming amendments. The changes clarify the concept of disclosures as an integral part of the financial statements and emphasize the need for auditor consideration of disclosures earlier in the audit process. Strengthened requirements and new guidance focuses on requiring the auditor to understand relevant aspects of the information system relating to information disclosed in the financial statements, identifying and assessing the risks of material misstatements in quantitative and qualitative disclosures, obtaining sufficient appropriate audit evidence relating to disclosures, and evaluating the overall presentation of the financial statements, including their relevance and understandability.
The changes are effective for audits of financial statements for periods ending on or after December 15, 2016. An updated Staff Publication has also been published at the same time to highlight the importance and evolving nature of financial statement disclosures and articulate for auditors and others how the ISAs, including these changes, specifically address disclosures.