Transcript GETTING BEHIND THE FRC

Relevant IAASB Developments
Theoretical arguments for and against
Harmonisation of Auditing Standards
FOR
• Aids consistency of group
audits and international
monitoring of quality
• National standard setting a
costly process
AGAINST
• Over complicates standards
for small audits
• Legal requirements differ
between countries
• Competition in standards is
a ‘good thing’
Practical forces leading to
harmonisation of Auditing Standards
Statutory Audit
Directive (EC)
Securities regulators
want higher quality
(IOSCO)
IAASB
New audit monitoring
activities in many
countries needing to
work together
(IFIAR)
Large firms have
difficulty with different
audit standards in
different countries.
UK already harmonised with
existing ISAs
• APB issued ISAs (UK & Ireland) in
December 2004 for audits of accounting
periods commencing on or after 15
December 2004
• Based on ISAs
• Includes ‘+’s’ from existing UK auditing
standards
But ISAs are going to change!
1. Clarity Project
2. Revisions
IAASB Clarity Project
Origins
• Status of ‘present tense’ guidance
• Disquiet about length and complexity of
latest ISAs
• Questions as to the usability of new ISAs
(especially small practitioners)
• Difficulties of linking ISAs to law
Main features of Clarity Project
Set an objective in each standard
• Clarify Professional Requirements
– Use ‘shall’ to identify requirements
– Eliminate the use of the present tense to
describe actions
• Improve the structure and readability
Structural Improvements
Four principal sections:
• Introduction
• Objective
• Requirements
• Application material
ISAs to be ‘revised and clarified’
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Groups
Qualified opinions
Related parties
Communication with
those charged with
governance
Materiality
Accounting
estimates/fair values
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Management
representations
Experts
External confirmations
Terms of engagement
Service organisations
ISAs to be ‘clarified’
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Recently revised
Audit risk
Fraud
Quality Control
Planning
Auditor’s Reports
Documentation
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Not revised for some time
Laws and regulations
Analytical procedures
Sampling
Subsequent events
Comparatives
Likely Timetable
IAASB
completes
Clarity Project
2007
2008
2009
Likely
IAASB
Effective
Date
2010
Statutory Audit Directive – Article 26
The EC may decide on the applicability of international auditing
standards only if they:
a)
b)
c)
have been developed with proper due process, public
oversight and transparency and are generally accepted
intentionally,
contribute a high level of credibility and quality to the
annual accounts, and
are conducive to the European public good.
EU Member States may impose additional requirements relating to
statutory audits for a period expiring on 29 June 2010.