"The recession uncovers what the auditor missed" - Warren Buffet.
Now more than ever, the users of financial statements are scrutinising every figure. Analysts, banks, potential investors, creditors, journalists, regulators and many other individuals have a very good reason to pay close attention to the results reported in the Financial Statements. While we all may be familiar with the "Bannerman" paragraph in the audit report, this does not remove audit risk and our obligation, in the public interest, to provide an appropriate audit opinion.
Chartered Accountants are well aware of the challenges that have arisen as a result of the economic crisis. Current issues require an increased focus on property valuation; investment and debtor recoverabilities; and going concern issues arising from the availability of finance, and the ability of the company to sustain existence and so on. Other considerations would include the reviewing of provisions and accruals for reasonableness; assessing the appropriateness of prior year adjustments; and identifying and reviewing disclosures relating to post balance sheet events. Particular issues may arise also in relation to property management companies and audits of organisations to which other legislation applies, e.g. Credit Unions, Insurance Brokers etc.
On 13th October 2009 the APB issued new Clarified International Standards on Auditing (United Kingdom and Ireland) - [Clarified ISAs] - to replace the existing ISAs (UK and Ireland) and ISQC (UK and Ireland)1. These will apply to audits of financial statements for periods ending on or after 15 December 2010. Although the Clarified ISAs are a good deal clearer, they contain a number of new requirements that are somewhat more prescriptive and will affect the nature, extent and recording of audit work. The newly issued standards include 33 Clarified ISAs, a new ISQC 1 and a revised Statement of the Scope and Authority of APB Pronouncements. For audits of accounting periods ending before 15 December, 2010, the existing standards continue to apply.
Recent changes in company legislation have also taken effect. Auditors need to be aware of the new requirements in relation to disclosure of directors' loans and loans to connected parties of directors. In the Republic of Ireland, we are awaiting the commencement order for the Charities Act 2009, and auditors will need to aware of its requirements in order to be prepared to audit charities. Additionally, the Financial Regulator in the Republic has issued Statutory Instrument 344 in 2009 imposing new rules on credit unions to keep a minimum amount of reserves in relation to their total assets. In Northern Ireland the Companies Act 2006 has now been fully implemented with the final draft of legislation in effect since October 2009. These are just some examples of new legislation that will affect your clients. Auditors will need to start planning NOW to ensure that audit staff, and clients, are aware of, and can deal efficiently with, the new requirements.
As well as remaining up to date on current audit, legislative and regulatory issues affecting audit clients, members may also wish to ensure that they are providing value in respect of the audit fee charged, while maintaining a high standard of compliance and overall audit efficiency. The application of a suitable audit proprietary system, such as "Procedures for Quality Audit 2008", can assist the auditor in achieving these goals. The use of more specific audit toolkits, such as "Audit Procedures for Credit Unions 2009 (ROI)" and the recently launched "Property Management Companies Procedures for Quality Audit 2009 (ROI)" will provide a more focussed approach on the particular issues and risks associated with these entities, allowing for a more efficient and effective audit.
Niall Fitzgerald
Practice Consulting Team
Chartered Accountants Ireland
Chartered Accountants Ireland has responded by developing a number of practical courses for members including a "Practical Auditing Roadshow" in early 2010. Further information on this will be available on the website in January.
Other audit courses taking place in November and December 2009 include:
For further information please click on the links above or contact the CPD Department.
Details of all upcoming CPD courses are available on the Chartered Accountants Ireland website at www.charteredaccountants.ie/cpd