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Breakout Session 2 – Track B International Standards on Auditing:

Breakout Session 2 – Track B International Standards on Auditing: Adoption and Implementation Challenges and Tools Prof. Arnold Schilder, IAASB Chairman 31 October 2012. Global Adoption of Clarified ISAs– Where Are We Now?. How Far Have We Come?

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Breakout Session 2 – Track B International Standards on Auditing:

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  1. Breakout Session 2 – Track B International Standards on Auditing: Adoption and Implementation Challenges and Tools Prof. Arnold Schilder, IAASB Chairman 31 October 2012

  2. Global Adoption of Clarified ISAs– Where Are We Now?

  3. How Far Have We Come? • 126+ countries adopt or use ISAs and over 80 jurisdictions already use the Clarified ISAs • Significant acceptance of ISAs for financial statement audits of foreign issuers 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,

  4. Key Features of the Clarified ISAs • Principle-based and emphasize the use of professional judgment and professional skepticism, i.e., a “thinking audit” • Greater clarity, understandability and consistency of application • 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)

  5. 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.

  6. 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

  7. 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

  8. 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 SME Needs • Review Engagements (Revised ISRE 2400 (June 2012) • Compilation Engagements (Revised ISRS 4410) (Dec 2011)

  9. 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.

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