Prof. Arnold Schilder has been reappointed as chairman of the International Auditing and Assurance Standards Board (IAASB) for the period 2015–2017.

As chairman, Prof. Schilder will continue to lead the IAASB as it works to set high-quality international auditing, assurance, and related services standards. Since his appointment in 2009, he has played a key role in guiding the IAASB as it strives to enhance the quality and consistency of practice throughout the world. With 90 jurisdictions around the world already using or in the process of adopting or incorporating International Standards on Auditing (ISAs), his leadership will be critical in expanding this broadly based acceptance more widely.

Additionally, he will steer the board into the future as it works to enhance public confidence in financial reporting. Part of this agenda includes the IAASB’s leading edge proposals for significant changes to the content of the auditor’s report and considering the results of the implementation reviews of the ISAs. Also, the IAASB will closely monitor new developments, such as integrated reporting, and their implications for assurance and related services standards.

"It has been my great pleasure to chair the IAASB, and I am honored to have been reappointed to continue to lead the board,” said Prof. Schilder. “We are now preparing a global consultation for the IAASB’s Strategy and Work Program for 2015-2019. I look forward to the dialogue with many key stakeholders. As a result, I expect a challenging program in my third term to serve the public interest with high-quality standards, ongoing implementation support, and cooperation with regulators, other standard setters, and more.”

Prof. Schilder's appointment to a third three-year term as IAASB chairman begins on January 1, 2015. The Public Interest Oversight Board (PIOB) approved the appointment at its last meeting in Madrid, Spain.

From 1998 to 2008, Prof. Schilder was a member of the Managing Board of the Dutch Central Bank, responsible in particular for banking regulation and supervision. He served as the chairman of the Basel Committee on Banking Supervision's Accounting Task Force from 1999–2006, and from 2005–2008 as a member of the PIOB. During 1994 and 1995 he served also as president of Royal NIVRA (now Nederlandse Beroepsorganisatie van Accountants).

From 1972 to 1998 he worked with PricewaterhouseCoopers, first in the small- and medium-sized entities practice and since 1985 as an international audit partner. Prof. Schilder served as part-time professor of auditing at the Universities of Amsterdam and Maastricht from 1988 to 2009.

For more information about the work of the IAASB, visit its homepage at www.iaasb.org.

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).

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. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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Welcome to IFAC’s International Auditing and Assurance Standards Board (IAASB) eNews.

In This Issue:

1. IAASB June Meeting
2. Auditor Reporting Exposure Draft
3. Auditor Reporting in the News
4. Post-Implementation Review of the Clarified ISAs
5. IAASB Chairman Speaks at CReCER 2013
6. IAASB 2012 Annual Report
7. Constructive Cooperation for International Standards
8. Other Relevant Standard-Setting Board and IFAC Initiatives
9. The IAASB is Hiring
10. Share IAASB eNews with Your Colleagues
11. World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

1. IAASB June Meeting

The IAASB met June 24-28, 2013, in New York, USA. Please visit the IAASB Meeting Page for relevant agenda items. Meeting highlights and an audio podcast are also available. For more detailed information about IAASB projects, please refer to the project summaries under Active Projects.

2. Auditor Reporting Exposure Draft

At its June Meeting, the IAASB approved Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs). This exposure draft includes proposed new ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report, proposed revised ISA 700, Forming an Opinion and Reporting on Financial Statements, and revisions to ISAs 260, 570, 705, and 706. Example reports illustrating various circumstances are included.

The Staff of the IAASB has provided additional, non-authoritative documents: an At A Glance; guidance to audit firms for field-testing proposed ISA 701; and two supplements to illustrate the changes made to ISA 700 and ISA 705 to assist those translating the exposure draft.

Comments are due by:  November 22, 2013.

3. Auditor Reporting in the News

The IAASB’s Auditor Reporting exposure draft has been highlighted in a number of news articles, including:

• The Accountant
• Bloomberg BNA
• CFO.com
• CorporateCounsel.net (podcast)
• Financial Executive

4. Post-Implementation Review of the Clarified ISAs
The IAASB recently released its final report on the Post-Implementation Review of the Clarified ISAs. This report summarizes feedback and the main themes that have emerged, and will be an important input to the IAASB’s future planning process, including its 2015–2019 strategy deliberations.

5. IAASB Chairman Speaks at CReCER 2013

In “The Evolving Role of Auditors and Auditor Reporting,” at CReCER in Cartagena, Colombia (August 2013), Prof. Arnold Schilder highlighted key aspects of the auditor reporting proposals.

6. IAASB 2012 Annual Report

The IAASB’s 2012 Annual Report, Responding to the Needs of an Interconnected World, highlights the board’s work in the public interest to enhance the quality and consistency of practice throughout the world, and thereby strengthen the public’s confidence in the global auditing and assurance profession. The report covers new and enhanced international standards issued by the IAASB during the year, the board’s progress on its current standard-setting projects and related initiatives, and its outreach activities to obtain input on its deliberations and to keep stakeholders informed of its activities. 

7. Constructive Cooperation for International Standards
In May, the IAASB joined IFAC and the International Accounting Standards Board (IASB) to gather more than 70 representatives from over 10 national organizations from former Soviet republics in Europe and Central Asia in London at a two-day conference. Hosted by the Association of Chartered Certified Accountants (ACCA), the event brought together organizations with responsibilities relating to the adoption or implementation of ISAs and IFRS.

The IAASB and IASB have been actively liaising on other initiatives of mutual interest. In March 2013, the IAASB submitted further comments concerning the auditability of recent IASB exposure drafts. The IAASB also welcomed IASB and IASB Staff representatives to its June 2013 Board meeting to discuss current developments, including in relation to going concern

8. Other Relevant Standard-Setting Board and IFAC Initiatives

Initiatives of IFAC committees and other independent standard-setting boards supported by IFAC may be of interest to those who follow the work of the IAASB, including the following:

• Kristian Koktvedgaard Appointed Chair of Ethics Board Consultative Advisory Group
• IPSASB Publishes Public Sector Conceptual Framework Exposure Draft
• IFAC Global Forum Focuses on Innovations to Support the Growth of Small Businesses and the Accountants That Serve Them
• IFAC Signs Strategic Agreement with The IIA
• Integrating ASEAN Capital Markets: Need for Strong Financial Reporting Environment and Building Investor Confidence

9. The IAASB is Hiring

The IAASB has open positions within its technical staff team. Interested individuals are invited to submit their resumes to: jobs@ifac.org. Further information about the positions is available on the IAASB home page.

10. Share IAASB eNews with Your Colleagues

The IAASB issues regular eNews updates to keep you apprised of the board's activities and recent publications. Please forward this eNews to any interested colleagues and let them know they can register and subscribe to this and other eNews bulletins on the IFAC website.

11. World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

The next World Congress of Accountants (WCOA) will be hosted by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili (CNDCEC) in Rome, Italy in 2014. Themed 2020 Vision: Learning from the Past, Building the Future, the 2014 WCOA will be held November 10-13 at the Auditorium Parco della Musica. More than 4,000 professionals from all over the world will convene at this IFAC event, which is held every four years. WCOA 2014 will look back to explore the evolution of the accountancy profession and forward to showcase the innovations that will shape the future of the profession.

The WCOA also provides a global platform for organizations and firms to share their projects and visions via various sponsorship opportunities. For more information, please contact info@wcoa2014rome.com or Dimarco@wcoa2014rome.com.

Good afternoon ladies and gentlemen, it is my pleasure to be with you again. I say ‘again’ as there are many familiar faces in the audience from the 2012 CReCER Conference in Nicaragua. For me, this in and of itself is a clear signal of the commitment of stakeholders in Latin America to engage in dialogue on international developments.

At last year’s conference, I noted a number of important challenges in financial reporting and auditing, and in the surrounding environment. For example, today’s financial reporting involves more complexity, more areas of judgment, and more qualitative disclosures; and users have higher expectations than ever before, with many saying “We want to hear more.” Perhaps most importantly, the global financial crisis has triggered questions concerning the quality of audits, their effectiveness, and the role of professional judgment and skepticism – which have given way to fundamental questions to the profession about relevance and trust.

So why change the auditor’s report now? What we learned from research is a positive message: the auditor’s opinion is valued, and users want to hear more from the auditor – more pertinent, and more tailored, information about the specific audit performed on an entity’s financial statements. There is symbolic value in the current report, but little communicative value – and users see the potential for the auditor to provide more value and more transparency. So, now is the time to lay the foundation for the auditor’s report of the future.

The International Auditing and Assurance Standards Board (IAASB), the audit profession's peak global standard setter, has just released a blueprint for the most significant changes to the audit profession's communication with investors in decades.

The proposals include a new standard, ISA 701 Communicating Key Audit Matters in the Independent Auditor's Report and a number of revisions to existing ISAs, including ISA 700, Forming an Opinion and Reporting on Financial Statements.

The exposure draft has been years in the making and is the result of the IAASB's outreach with investors and other key stakeholders. But what does this really mean for investors and what can they expect from the proposed changes?

Far from being an end point, a new set of auditor reporting standards will mark the beginning of the most challenging part of this journey - implementation. While offering much promise, the IAASB's proposals are a stretch for a profession which has already undergone extensive regulation and re-regulation in recent times.

The crux of the draft standards is that auditors would no longer solely attest to a company's financial report, but they would take on the role of providing their own narrative on key matters in the audit. In adopting this change, the IAASB essentially provides a blank canvas within the audit report. The value and effectiveness of these changes for investors will depend on how that canvas is painted - a fundamental shift and challenging undertaking for auditors who are handed the palette and brush.

Enhanced auditor reporting could go toward addressing expectation gaps related to the audit role from both sides: providing more accessible insights into the work of auditors, and an enhancement in the role itself. At the same time, in removing the simplicity of the current binary form audit report - which provides a 'yes' or 'no' on the financial statements - there is a risk that misaligned expectations could be exacerbated. Once again, the proof will be in the pudding, or on how the additional narrative space within the audit report is used.

A recent enquiry of the UK Competition Commission into the UK statutory audit market highlighted the importance of shareholder engagement in the appointment of auditors. Enhancing auditor reporting may serve to enable a greater degree of engagement, and could see firms competing to provide in their report more relevant, understandable and clearer information for shareholders.

The auditor's core role, their opinion on financial statements, comes attached to significant legal and professional accountabilities. There is a precision in the language used within current standardised auditor reports that could be impacted by introducing a more freeform model. Auditors will face the challenge of balancing their accountabilities whilst also presenting reports that are not only informative, but which bridge from often technical language to communicate in a way that is accessible to a diverse range of stakeholders.

The audit profession in Australia has already begun field testing the draft standards. To be at this point is a mark of the auditing profession's strength. As firms in Australia complete their 2013 June year-end audits, there is already a swelling of activity that anticipates how the exposure drafts would apply, and what potential issues and practical complications could arise.

This is a clear effort by IAASB to enhance how investors are informed and a genuine step forward. The ultimate measure of this shift will be the value investors place on these enhancements. With the consultation period set to close on 22 November 2013, I urge the profession to use this time to focus on how to overcome the challenges and how to enhance auditor reporting toward the needs and perspective of those using the reports.

Originally published in The Accountant

This guidance has been prepared by Staff of the International Auditing and Assurance Standards Board (IAASB) to highlight considerations that may be of assistance to audit firms as they plan their field testing of proposed ISA 701. This document is not intended to be prescriptive in terms of an approach to field testing.

This summary provides an overview of the IAASB’s July 2013 Exposure Draft, Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing. An illustrative auditor’s report for an audit of a listed entity’s consolidated financial statements, showing the result of the IAASB’s proposals, is included as an Appendix.

The International Auditing and Assurance Standards Board (IAASB) today released proposals to enhance the future auditor’s report. The IAASB’s Exposure Draft, Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs), responds to calls from investors, analysts, and other users of audited financial statements in the wake of the global financial crisis for the auditor to provide more relevant information in the auditor’s report based on the audit that was performed.

“We expect the proposed new and revised standards will result in substantive changes to how auditors contemplate and approach communication to users of their reports—the beneficiaries of a financial statement audit,” explained Prof. Arnold Schilder, IAASB Chairman. “These changes are critical to the perceived value of the financial statement audit and thus to the continued relevance of the auditing profession.”

The IAASB’s deliberations on the proposed new and revised ISAs were informed by international research, two public consultations, stakeholder outreach including three public roundtables held in 2012, and the 165 responses to the June 2012 Invitation to Comment: Improving the Auditor’s Report. “The signals from these inputs were clear: Change is essential. There is support for the IAASB’s direction, and for a global solution. Challenges exist, but they can be overcome,” added Prof. Schilder.

The Exposure Draft includes a new proposed ISA titled Communicating Key Audit Matters in the Independent Auditor’s Report. This proposed ISA directs auditors of financial statements of listed entities to communicate in their report those matters that, in the auditor’s professional judgment, were of most significance in the audit of the financial statements. “The intended outcome of this proposal is more informative audit reports, with information about the audit of the financial statements that is unique and more specific to the entity that has been audited,” noted James Gunn, IAASB Technical Director.

Among other enhancements, the IAASB is also proposing requirements for auditors to include specific statements about going concern in their reports, to make an explicit statement about the auditor’s independence from the audited entity and, for listed entities, to disclose the name of the engagement partner in the auditor’s report. The Exposure Draft includes example reports that illustrate the application of the proposed new and revised ISAs in various circumstances.

How to Comment
The IAASB invites all stakeholders to respond to this Exposure Draft, which includes specific questions for respondents on key aspects of the proposals and highlights areas of focus for various stakeholders in responding to the Exposure Draft. To access the Exposure Draft and submit a comment, visit the IAASB’s website at www.iaasb.org. Comments on the Exposure Draft are requested by November 22, 2013.

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).

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. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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The International Auditing and Assurance Standards Board (IAASB) today released its Post-Implementation Review—a Report that highlights the results of the IAASB’s efforts to learn whether the clarified International Standards on Auditing (ISAs) are being consistently understood and implemented in a way that achieves the IAASB’s goals in clarifying and revising them. 

The Report summarizes feedback from those most directly involved in the audit process in jurisdictions that have implemented the clarified ISAs. It describes the IAASB’s process in summarizing the comments and identifies the main themes that have emerged.

“I am pleased to note the many informative and useful comments received in response to the post-implementation review,” said IAASB chairman Prof. Arnold Schilder. “The IAASB issued the clarified ISAs in 2009 as an essential input to audit quality, and the IAASB is committed to their continuous improvement. The Report, therefore, is an important input to the IAASB’s planning process, both in the short term and in the context of its 2015–2019 strategy deliberations.”

Input was received from independent audit inspection bodies, other regulators, and audit committee members, and from the larger accounting firms, smaller practices, and International Federation of Accountants (IFAC) member bodies.

The post-implementation review is the second phase of the IAASB’s efforts to monitor the implementation of the clarified ISAs. The report on the first phase of IAASB’s work, undertaken in 2009 and 2010, was published in November 2010.

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).

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. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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Listen to the podcast below. See the June 2013 meeting page for additional materials, including meeting highlights, agenda papers, and full audio recordings.