Session 2B International Audit and Assurance Standards (ISA) Adoption and Implementation Challenges and Tools for the Region - Arnold Schilder - English
Breakout Session 2 – Track BInternational Standards on Auditing:Adoption and Implementation Challenges and ToolsProf. Arnold Schilder, IAASB Chairman31 October 2012
Global Adoption of Clarified ISAs– Where Are We Now?
How Far Have We Come?•126+ countries adopt or use ISAs and over 80 jurisdictions alreadyuse the Clarified ISAs•Significant acceptance of ISAs for financial statement audits of foreignissuers among the world’s largest stock exchanges•Endorsement/expression of support for Clarified ISAs: − IOSCO, Financial Stability Board (FSB), Basel Committee, UNCTAD, World Bank, World Federation of Exchanges, European Commission (EC) − Public Sector: INTOSI (‘ISSAIs’)•Top 24 global auditing networks’ methodologies align•Translation into one “Spanish” version•International liaison activity: IASB, IFIAR, INTOSAI, FSB, NSSs, US PCAOB,
Key Features of the Clarified ISAs•Principle-based and emphasize the use of professionaljudgment and professional skepticism, i.e., a “thinking audit”•Greater clarity, understandability and consistency ofapplication – New structure, conventions and obligations•More robust with strengthened requirements in key areas: – Risk assessment (e.g., estimates and related parties) – Materiality and its use in evaluating misstatements – Audit evidence (e.g., confirmations and representations) – Using the work of others (e.g., group audits and experts) – Auditor reporting and communications (including with those charged with governance)
Proportionality of ISAs for SME/SMPs•Application of ISAs designed to be proportionate in view of size,nature and complexity of entities − Proportionality ≠ modification of requirements•Requirements are not prescriptive − Application material highlights specific SME considerations and alternative procedures•IAASB Staff Questions and Answers (Staff Q&A) • Applying ISAs Proportionately with the Size and Complexity of an Entity • Applying ISQC 1 Proportionately with the Nature and Size of a Firm (to be released end of October/early November 2012)•IFAC SMP Committee’s Guides − Using ISAs in the Audits of SMEs − Quality Control for SMPs, etc.
ISA Implementation Challenges•“Year one” costs highlighted by SMP’s – Training of firm personnel – Changes to methodologies and audit work papers – Increase in documentation•Need for additional guidance for SMPs – Practice aids, guides, e-learning modules, educational events and software tools•Translation considerations – Use of complex language – Long and difficult sentences – Use of words with differing interpretations
ISA Implementation Resources•ISA video modules and slides – Raise awareness and understanding of main thrust of clarified ISAs and significant changes – free to download and translate•Staff Q&A: Professional Skepticism in an Audit•International Auditing Practice Note 1000: Auditing Financial Instruments•Staff publications, FAQs, etc. at IAASB Clarity Center (www.iaasb.org)•ISAs available in single “Spanish” translation and in other languages ISA Implementation Monitoring Project • Initiative to gather information about the implementation of ISAs − Key areas of focus are consistency, effectiveness, efficiency − Findings will inform future strategy
Recent New or Revised Standards and Releases•Audits of Financial Statements – Using the Work of Internal Auditors (Revised ISA 610)(Dec 2011) – Disclosures (Feedback Statement) (Jan 2012)•Assurance Engagements and Related Services – Compilation of Pro Forma Information Included in a Prospectus (New ISAE 3420) (Sept 2011) – Greenhouse Gas Statements (New ISAE 3410) (March 2012)•Other Assurance and Related Services Focused on SMENeeds – Review Engagements (Revised ISRE 2400 (June 2012) – Compilation Engagements (Revised ISRS 4410) (Dec 2011)
IAASB Projects and Initiatives•Current Projects – Auditor Reporting: key priority for 2012 - 2014 – Auditing Disclosures (project proposal Q3 2012) – Auditor Responsibilities relating to Other information (ED Q3 2012) – Audit Quality (consultation paper Q4 2012) – ISA Implementation Monitoring – Assurance Engagements (“ISAE 3000”) (post-ED, first read Q4 2012) • IAASB Strategy and Work Program 2012-2014 – Revision of agreed-upon procedures (ISRE 4400) – Estimates/fair values (ISAs 540/500), Banking, etc. – Working group to monitor developments in integrated reporting, corporate governance, internal control, etc.