The International Auditing and Assurance Standards Board (IAASB) today released for re-exposure an enhanced International Standard on Auditing (ISA) 720 (Revised), The Auditor’s Responsibilities Relating to Other Information. The proposed standard clarifies and strengthens the scope and focus of auditor efforts on information included in entities’ annual reports, other than the audited financial statements, and introduces new auditor reporting responsibilities.
“There have been significant developments in recent years in corporate reporting, in particular in relation to the information included in entities’ annual reports. The importance ascribed by users to this other information, and the weight they place on it, have notably increased since ISA 720 was originally issued,” commented Prof. Arnold Schilder, IAASB Chairman. “Auditors have certain responsibilities relating to this other information as part of an audit of an entity’s financial statements, and the IAASB is intending to appropriately strengthen them—and users need to know what those responsibilities are.”
Under the proposed ISA, the auditor would now be required to perform limited procedures to evaluate the consistency of the other information with the audited financial statements. In addition, while reading the other information, the auditor would be responsible to consider whether there is a material inconsistency between the other information and the auditor’s knowledge obtained during the course of the audit, and to remain alert for other indications that the other information appears to be materially misstated. The terms ‘other information’ and ‘annual report’ are defined and explained in the standard in order to make the scope of the standard as clear as possible, while also enabling its appropriate application in light of differing corporate reporting regimes and practices in a wide variety of jurisdictions and circumstances.
“Feedback on the IAASB’s first proposals in 2012 indicated broad support for the IAASB’s intention of strengthening the auditor’s responsibilities relating to other information, including new reporting responsibilities. However, commentators across different stakeholder groups believed that the proposals needed to be clearer in a number of areas to prevent potentially divergent practices, both among auditors and between jurisdictions—an outcome that would run contrary to the benefits sought by the IAASB,” noted James Gunn, IAASB Technical Director.
How to Comment
The IAASB invites all stakeholders to comment on the IAASB Exposure Draft of Proposed ISA 720. To access the Exposure Draft or submit a comment, visit the IAASB’s website at www.iaasb.org/publications-resources. Comments are requested by July 18, 2014.
About the IAASB
The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, 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 the International Federation of Accountants (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. It is comprised of 179 members and associates in 130 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.