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Audit Evidence

Updated July 2023

In October 2022, the IAASB released an exposure draft on proposed ISA 500 (Revised), Audit Evidence, for public comment until April 24, 2023.

The key changes proposed include:

  • Clarifying the purpose and scope of the standard and explaining its relationship with other standards.
  • A principles-based approach to considering the relevance and reliability of information to be used as audit evidence and evaluating whether sufficient appropriate audit evidence has been obtained, recognizing the changing nature and number of information sources used by auditors in today’s world.
  • Increased recognition of the use of technology by the entity and the auditor, including the use of automated tools and techniques.
  • More emphasis on the role of professional skepticism when making judgments about information to be used as audit evidence and evaluating audit evidence obtained.

The proposed revisions provide a “reference framework” for auditors when making judgments about audit evidence throughout the audit. The next discussion will be in September 2023, when the IAASB will have an initial opportunity to consider respondents feedback to the exposure draft. 

For further information, visit the Audit Evidence project page

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Audits of Financial Statements of Less Complex Entities

Updated July 2023

Since the public consultation on the proposed ISA for Audits of Financial Statements of Less Complex Entities (the ISA for LCE) closed in January 2022, the IAASB has been considering respondents’ feedback and progressing revisions to the text. The work also continues to be informed through the IAASB’s general outreach program and project-specific outreach.

Key matters that have been discussed since the consultation include:

  • Group audits: In the original proposed standard, group audits were excluded from the scope. Based on stakeholder feedback, this was reconsidered and a new part, Part 10, Audits of Group Financial Statements, was developed. It was open for public consultation from January to May 2023.
  • Authority of the proposed standard: Respondents to the initial public consultation expressed concerns that the proposed Authority involved too much judgment and may, therefore, lead to inconsistent or inappropriate use of the standard. To clarify the scope, the IAASB agreed to enhance the description of the qualitative characteristics and include an expectation for jurisdictions to determine quantitative thresholds.
  • Approach to proportionate requirements for LCEs: Respondents to the initial public consultation encouraged the IAASB to further consider how the requirements reflect the principles of scalability and proportionality appropriate to the typical nature and circumstances of LCEs. In response, the IAASB discussed revisions to Part 2, Audit Evidence and Documentation; Part 3, Engagement Quality Management; Part 6, Risk Identification and Assessment; and Part 7, Responding to Assessed Risks of Material Misstatement.
  • Revisions to other remaining parts of the proposed standard have also been discussed.

With the conclusion of the June 2023 IAASB meeting, the IAASB has now considered and provided input on revisions to all parts of the proposed ISA for LCE (the Preface and Parts 1 to 9; the only part outstanding is Part 10 on group audits).

The IAASB will discuss the proposed LCE standard next at its July 2023 meeting, when it will consider the responses to the public consultation on Part 10, including a proposed way forward, and updated versions of Part 10 and the Authority as it relates to group audits. In September 2023 the IAASB will discuss a full draft of the proposed standard and vote on its final approval. Subject to the approval of the standard, the IAASB will then focus on the adoption and implementation of the ISA for LCE.

For further information, visit the ISA for LCE project page.

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Updated July 2023

The IAASB is revising ISA 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. Since the approval of the project proposal in December 2021, the IAASB discussed this project at its March, June, September, and December 2022 meetings and at its June 2023 meeting. Key proposed changes to ISA 240 are aimed at promoting consistent practice and changing auditor behavior. These include:

  • Clarity and emphasis on the auditor’s responsibilities: Changes are being proposed to focus on the auditor’s responsibilities regarding fraud in audits of financial statements and reduce the ambiguity between the inherent limitations of an audit and the auditor’s responsibilities. The proposed changes:
  1. Set the tone for a clear and affirmative articulation of the auditor’s responsibilities specific to fraud at the outset of the standard.
  2. Present the auditor’s responsibilities more succinctly and unencumbered by language that may be perceived to diminish the auditor’s responsibilities.
  • Professional skepticism: Enhancements are being proposed to reinforce the importance of maintaining professional skepticism when performing procedures related to fraud. Proposed changes include:
  1. Remaining alert throughout the audit engagement for information about fraud, suspected fraud or alleged fraud.
  2. Requiring additional procedures when fraud or suspected fraud is identified.
  3. Addressing auditor bias when designing and performing audit procedures when responding to assessed risks of material misstatement due to fraud.
  • Ongoing communications throughout the audit with management and those charged with governance about fraud-related matters: The IAASB is proposing changes that embody the ongoing nature of communications with management and those charged with governance (TCWG) about fraud related matters in all stages of the audit as reflected throughout the standard.
  • Applying a fraud lens on risk identification and assessment: The IAASB is proposing revisions to enhance and clarify requirements and application material to incorporate changes resulting from the revised ISA 315 (Revised 2019), Identifying and Assessing the Risks of Material Misstatement. Applying a fraud lens in risk identification and assessment is a continual and iterative process. The proposed changes are intended to focus on incentives/pressures, opportunities, and attitudes/rationalizations for fraud (i.e., fraud risk factors), including those arising from the entity’s tone at the top and performance measures.
  • Robust work effort requirements when fraud or suspected fraud is identified: The IAASB agreed to designate a separate section for required audit procedures when fraud or suspected fraud is identified, either through developing new requirements, relocating existing requirements, or elevating existing application material to requirements. Proposed changes include:
  1. Obtaining an understanding of the fraud related matter and based on that understanding, determining whether to perform additional risk assessment procedures.
  2. Performing certain required additional audit procedures, such as determining if control deficiencies related to the prevention or detection of fraud exist.
  3. Requirements relating to whether a misstatement due to fraud exists, determining whether identified misstatements due to fraud are material (qualitative or quantitative), and taking appropriate action if the auditor determines that the financial statements are materially misstated.
  4. Addressing circumstances where the auditor is unable to obtain sufficient appropriate audit evidence as it relates to a material misstatement due to fraud.
  • Transparency on Key Audit Matters related to fraud in the auditor’s report: The IAASB agreed that additional disclosures on fraud should be included in the auditor’s report of listed entities and clearly signposted such that the users of the financial statements are readily able to find any key audit matters (KAMs) related to fraud. The IAASB is proposing using the KAM filter in ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report, for determining and communicating KAMs related to fraud.
  • Audit documentation: The IAASB is proposing new or enhanced documentation requirements for specific aspects of the auditor’s work related to fraud.

A progress update was provided to the IAASB’s Consultative Advisory Group in March 2023. The next discussion with the IAASB will be in September 2023, when a near final draft of proposed ISA 240 (Revised), The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, will be presented. The IAASB is working toward approving the exposure draft for public consultation in December 2023.

Concurrently with revisions to ISA 240, in May 2022 the IAASB released non-authoritative guidance that illustrates the relationship between ISA 240 and other ISAs when planning and performing an audit engagement and reporting thereon.

For further information, visit the Fraud project page


Going Concern

Updated July 2023

In April 2023, the IAASB released an exposure draft on proposed ISA 570 (Revised 202X), Going Concern, for public comment until August 24, 2023.

The key proposed enhancements include:

  • Defining the term “material uncertainty” (related to going concern) and providing clarity for other terminology used in the standard (e.g., the intended meaning of the phrase “may cast significant doubt”).
  • Changing the commencement date of the period of management’s assessment of an entity’s ability to continue as a going concern to at least twelve months from the date of approval of the financial statements.
  • Strengthening requirements that:
  1. Drive the auditor to obtain information that is relevant to the timely identification of events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern; and
  2. Require a more robust evaluation of management’s assessment, including evaluating the method, assumptions and data used by management.
  • New requirements when management’s plans for future actions include financial support by third parties or related parties, including the entity’s owner-manager, for the auditor to evaluate the intent and ability of those parties to maintain or provide the necessary financial support.
  • Enhancing requirements and application material to enable a more robust exercise of professional skepticism when performing audit procedures, including when evaluating whether there are indicators of possible management bias.
  • Enhancing application material addressing scalability, which includes examples that demonstrate how the nature and extent of the auditor's procedures may vary based on the nature and circumstances of the entity.
  • With respect to the auditor’s work related to going concern:
  1. Emphasizing how information from sources external to the entity may be leveraged; and
  2. Modernizing the standard for the impact of technology.
  • Strengthening the requirements for timely, two-way communications with those charged with governance and including new requirements for communication with appropriate external parties.
  • Enhancing transparency about going concern in the auditor’s report, including:
  1. Providing explicit statements about going concern in all instances (i.e., for audits of financial statements of all entities); and
  2. For audits of financial statements of listed entities, describing how the auditor evaluated management’s assessment.

For further information, visit the Going Concern project page.


Listed Entities and Public Interest Entities (PIEs)

Updated July 2023

The IAASB is making narrow-scope revisions to the ISAs and ISQMs to respond to recent revisions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) regarding listed and public interest entities (PIEs). The project has two tracks:

  • Track 1: A faster-moving track focused on enhancing transparency about independence in the auditor’s report.
  • Track 2: Exploring revisions to the ISAs and ISQMs regarding the differential requirements for listed entities and the definitions of listed entity and PIE, including whether the extant differential requirements should apply to PIEs.

Track 1

In June 2023, the IAASB approved revisions to ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements, and ISA 260 (Revised), Communication with Those Charged with Governance, as a result of the revisions to the IESBA Code that require a firm to publicly disclose when it has applied the independence requirements for PIEs. The final pronouncement will be released in October 2023, subject to approval of due process by the PIOB. The revisions will be effective for audits of financial statements for periods beginning on or after December 15, 2024.

Track 2

There have been no new developments for Track 2 since the IAASB’s December 2022 meeting. At that time, the IAASB discussed:

  • Adopting the objective in paragraph 400.8 of the IESBA Code, which supports the purpose for establishing differential requirements for PIEs.
  • Extending the differential requirements in the ISQMs and ISAs for listed entities to apply to PIEs. The IAASB agreed to propose extending the differential requirements, with the exception of those in ISA 720 (Revised), The Auditor’s Responsibilities Relating to Other Information.
  • Adopting the IESBA definitions of PIE and “publicly traded entity” in the ISQMs and ISAs.
  • Incorporating a central list of factors and examples in ISQM 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements or Other Assurance or Related Services Engagements, and ISA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing. The factors and examples would be:
  1. Used to guide a firm or auditor in determining whether it is appropriate to apply differential requirements applicable to PIEs to entities other than PIEs.
  2. Relevant to all differential requirements across the ISQMs and ISAs, to support consistency in application and judgment.

For further information, visit the Listed Entities and PIE Track 1 and Track 2 project pages.

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Sustainability Assurance

Breaking News: Proposed International Standard on Sustainability Assurance 5000 was issued for public consultation on August 2. Learn more, access materials and share your feedback on the Exposure Draft here.

Updated September 2023

In June 2023, the IAASB approved an exposure draft (ED) for proposed International Standard on Sustainability Assurance (ISSA)TM 5000, General Requirements for Sustainability Assurance Engagements (ED-5000). The June 2023 IAASB meeting materials include the approved text of ED-5000 (requirements, application material, and appendices in separate documents) and conforming and consequential amendments to the Preface, other standards, and the International Framework for Assurance Engagements (see the “APPROVED” version of Agenda Items 2-D, 2-E, 2-F and 2-G on the meetings web page). ED-5000, along with an Explanatory Memorandum, was issued for public comment by August 2, 2023, with a 120-day comment period.

The IAASB has been developing a new overarching standard for sustainability assurance engagements, since the project proposal was approved in September 2022. In developing ED-5000, key considerations were:

  • Project objectives supporting the public interest: ISSA 5000 has been developed as an overarching standard that is responsive to the public interest need for a timely standard that supports the consistent performance of quality sustainability assurance engagements, and is suitable across all sustainability topics, information disclosed about those topics, and reporting frameworks, and is implementable by all assurance practitioners (i.e., profession agnostic).
  • Identified priority areas in developing the standard: ED-5000 addresses the conduct of an assurance engagement in its entirety (i.e., all elements of an assurance engagement). However, the IAASB specifically considered the requirements and application material for the following six priority areas as identified in the project proposal (i.e., providing more specificity and guidance): difference in work effort between limited and reasonable assurance; suitability of reporting criteria; the scope of the engagement; obtaining and evaluating evidence; the entity's system of internal control; and practitioner’s materiality.
  • Additional areas of focus: In finalizing ED-5000, other areas that required focus included certain key definitions; quality management; consolidated sustainability information; double materiality; fraud; sustainability-specific examples; and reporting, including the form and content of the assurance report.
  • The approach to drafting the new standard: The standard has been developed leveraging existing IAASB standards and guidance. This entailed using material adapted from ISAE 3000 (Revised), ISAE 3410 (Assurance Engagements on Greenhouse Gas Statements) and the IAASB’s non-authoritative guidance on sustainability and other extended external reporting assurance engagements. In addition, certain ISAs were considered, to the extent the material is relevant to sustainability assurance engagements and are deemed necessary to supplement the other sources mentioned in providing an appropriate degree of specificity, but commensurate with proposed ISSA 5000 being an overarching standard.

The IAASB has developed a comprehensive plan for effective global outreach during the ED-5000 comment period that supports the actual and perceived quality of the IAASB’s due process by involving representatives of the broad range of relevant stakeholders across geographic regions and constituencies to enhance the IAASB’s understanding of technical, operational, and regulatory considerations affecting sustainability assurance engagements. The IAASB plans to provide an update and discuss feedback received from the global outreach activities undertaken at the December 2023 IAASB meeting.

For further information, visit the Assurance on Sustainability Reporting project page.

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Technology – Disruptive Technologies

Updated April 2023

The IAASB is taking an ongoing, dual approach to Technology matters:

  • Current and future workplan actions – Exploring how the IAASB can most effectively respond to technology via new or revised international standards or nonauthoritative guidance.
  • Impact of disruptive technologies – Exploring the effect on audit and assurance (in the current and future environments) in order to be prepared for technology disruption and able to respond appropriately to support audit and assurance quality.

The IAASB has released a number of resources, which are available on our technology focus area page. The IAASB meeting in March 2023 included updates on Disruptive Technology, as well as findings related to technology adoption and barriers to adoption from outreach. The IAASB provided their views and feedback, including suggested ways forward.

For further information, visit the Technology project page