IAASB’s Revised Standard ISA 720 Enhances Auditor Focus on Annual Reports in Light of Increased Investor Focus on Qualitative Disclosures
Apr 08, 2015 | New York, New York | English
The International Auditing and Assurance Standards Board® (IAASB®) today released International Standard on AuditingTM (ISATM) 720 (Revised), The Auditor’s Responsibilities Relating to Other Information. The revisions aim to clarify and increase the auditor’s involvement with “other information”—defined in the standard as financial and non-financial information, other than the audited financial statements, that is included in entities’ annual reports.
“The annual report is a critical document for investors. It is in the public interest that an auditor undertakes an ‘intelligent read’ of an annual report, in the context of the knowledge obtained in the audit, and perform certain procedures to ensure the annual report is not materially inconsistent with the audited financial statements,” explained Prof. Arnold Schilder, IAASB Chairman.
The standard also includes new requirements related to auditor reporting on other information that complement the changes arising from the IAASB’s new and revised Auditor Reporting standards, issued earlier this year. Concurrent with those standards, ISA 720 (Revised) will be effective for audits of financial statements for periods ending on or after December 15, 2016.
“Which documents have been read and considered by the auditor and the results of the auditor’s work on those documents will now be transparent to auditor report users,” explained Kathleen Healy, IAASB Technical Director. “Specifically articulating the auditor’s responsibilities for other information, including the fact that the auditor’s opinion does not cover this information, will also give users the appropriate context in which to consider an entity’s annual report.” The standard also seeks to address the practical challenges that may arise when some or all of the other information is not available as of the date of the auditor’s report, and prescribes additional communications in auditor’s reports for listed entities in these circumstances.
The staff-prepared Basis for Conclusions, which explains the IAASB’s rationale for its decisions, and an At a Glance document, which explains the main changes from the extant ISA, are also now available.
About the International Auditing and Assurance Standards Board
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. IFAC is comprised of over 175 members and associates in 130 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.