international standards on auditing: taking isas...
TRANSCRIPT
International Standards on Auditing:
Taking ISAs into the National Context
Prof. Arnold Schilder, IAASB Chairman
World Bank REPARIS Conference
Amsterdam
April 5, 2011
IAASB’s Role, Objectives and Structure
• Independent standard-setting board that serves the public
interest by:
– Setting high-quality standards dealing with auditing, review,
other assurance, quality control and related services
– Facilitating the convergence of national and international
standards
• Contributes to enhanced audit quality throughout the world,
and strengthened public confidence in financial reporting
Role and Objectives of the IAASB
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• IAASB:
– Meets for a full week, four times per year
– Broad-based membership: 17 members, full-time Chair,
Technical Advisors and three permanent observers with
speaking rights
• Consultative Advisory Group
– Meets twice per year, 30 Member Organizations
• Standard-Setting Process
– Global consultation, transparent due process, open meetings
and oversight via the International Public Interest Oversight
Board (PIOB)
IAASB Structure and Standard-Setting
Process
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IAASB’s Role, Objectives and Structure
IAASB’s Role, Objectives and Structure
• Rigorous and transparent due process
– Protects public interest and ensures global acceptance
• Global consultation and responsiveness
– Dialogue with key stakeholders
National auditing standard-setters
Basel Committee, EC, Financial Stability Board, IAIS,
IFIAR, IOSCO, World Bank
Investors and preparers (via IAASB CAG and outreach)
Other key stakeholders: IASB, FEE, Forum of Firms,
ICGN, IFAC member bodies, PCAOB
Developing High-Quality Pronouncements
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IAASB’s Role, Objectives and Structure
• International Standards on Auditing (ISAs)
• International Standards on Assurance Engagements
(ISAEs)
• International Standards on Review Engagements
(ISREs)
• International Standards on Related Services (ISRSs)
• International Auditing Practice Statements (IAPSs)
Developing High-Quality Pronouncements
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• A significant development in auditing standards internationally
• Redrafting of 36 ISAs and ISQC 1
• Greater clarity, understandability and consistency of application
– New structure, conventions and obligations
• Half of the ISAs fundamentally revised
– Strengthen the „thinking audit‟
– Enhanced quality of performance in many areas
• Now effective! (from 2010 calendar year audits)
• Minimum 2 year moratorium on new standards
The Clarified ISAs
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Clarified ISAs
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ISAs
General Principles
and
Responsibilities
Risk Assessment
and Response to
Assessed Risks
Audit
Evidence
Using Work
of Others
Audit
Conclusions and
Reporting
Specialized
Areas
ISA 200
ISA 210
ISA 220
ISA 230
ISA 240
ISA 250
ISA 260
ISA 265
ISA 300
ISA 315
ISA 320
ISA 330
ISA 402
ISA 450
ISA 500
ISA 501
ISA 505
ISA 510
ISA 520
ISA 530
ISA 540
ISA 550
ISA 560
ISA 570
ISA 580
ISA 600
ISA 610
ISA 620
ISA 700
ISA 705
ISA 706
ISA 710
ISA 720
ISA 800
ISA 805
ISA 810
Revised and Redrafted
Clarified ISAs
Redrafted only
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New
Post Clarity (2009 → )
revision of ISAs 610 and 720
Clarity Project: Legend
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• Principles-based and emphasize the use of professional
judgment and professional skepticism
• More robust featuring 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)
Key Changes from the Clarity Project
Clarified ISAs
Global Auditing Standards: Where Are We Now?
• International Organization of Securities Commissions (IOSCO)
• Basel Committee on Banking Supervision
• Financial Stability Board
• International Organization of Supreme Audit Institutions (INTOSAI)
• United Nations Conference on Trade and Development (UNCTAD)
• World Bank
• World Federation of Exchanges
Expressed support for Clarified ISAs:
Other uses of Clarified ISAs globally:
• INTOSAI Congress (INCOSAI) through International Standards of
Supreme Audit Institutions (ISSAIs)
• Top 22 global auditing networks‟ methodologies align
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Clarified ISAs
Global Auditing Standards: Where Are We Now?
Europe:
Albania, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia,
Finland, Georgia, Greece, Hungary, Iceland, Ireland, Kosovo, Latvia, Lithuania,
Malta, Netherlands, Norway, Serbia, Slovakia, Slovenia, Sweden, Switzerland,
Turkey, United Kingdom
Asia/ Pacific:
Australia, Bangladesh, China, Hong Kong, India, Japan, Kazakhstan, Malaysia,
Mongolia, Nepal, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri
Lanka,
Americas:
Brazil, Canada, Guatemala, Guyana, Mexico, Nicaragua, Panama, Trinidad and
Tobago, USA (private companies)
Africa/ Middle East:
Botswana, Kenya, Lebanon, Lesotho, Malawi, Mauritius, Namibia, South Africa,
Swaziland, Tanzania, Tunisia, Uganda, United Arab Emirates (Abu Dhabi and
Dubai), Zambia, Zimbabwe
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Countries Using Clarified ISAs already, or Committed to
Using them in the near future:
Clarified ISAs
• Support for ISA Adoption – Support from Professional
Bodies, Firms, Public Authorities, Academics, Investors;
mixed views preparers/companies
• Impact on SMEs/SMPs: “We must first avoid causing SMEs
and small and medium audit firms additional cost …”
– IFAC‟s “An Audit is an Audit” well-understood; IAASB
Staff Publication on proportionality often quoted; SMP
Committee Implementation Guides important; EDs for
reviews/compilations: may be used by audit-exempt entities
• Governance: Need to emphasize independence, due process,
transparency of the standard-setting process
– Governance and nominations; public interest; Investor
participation – how can this be strengthened?11
EC Green Paper – ISA Adoption
Adoption and Implementation into the National Context
Adoption and Implementation into the National Context
• Dialogue between IAASB and audit regulators
important:
– Interpretation of standards; importance of professional
judgment
– Proportionate audit documentation
– Learning from inspections findings
• Regular contact between IAASB and IFIAR
– Plenary, working groups, ad hoc meetings
• Europe: from EGAOB to European Audit Inspection
Group
– First meeting IAASB-EAIG June 2011 (and ad hoc)
Relationship with Audit Regulators
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Adoption and Implementation into the National Context
• Effective implementation key to realizing full benefits
• Need to fully adopt ISAs including relevant
pronouncements; ISQC 1, Code of Ethics for Professional
Accountants
• Understand and communicate how ISAs can be applied
proportionately to the size and complexity of the entity
– Projects to assist SMEs/SMPs; Reviews and Compilations
• Practical implementation challenges not underestimated
– Education/training; audit methodologies; monitoring and
enforcement
Key Success Factors
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• IAASB support
– IAASB Clarity Center (http://web.ifac.org/clarity-
center/index)
– ISA modules (11 videos + slide packs re revised ISAs)
– IAASB Staff Alerts, Q&A and FAQs
– Clarity ISA Modules
– Implementation Monitoring Project
• IFAC SMP Committee:
– ISAs and Quality Control Guides
– IFAC Translation support
Implementation of Clarified ISAs
Adoption and Implementation into the National Context
“Robust audit is key to re-establishing trust and
market confidence; it contributes to investor
protection and reduces the cost of capital for
companies”
EC Green Paper, October 2010
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