Audit and Assurance news

In November 2020, the Irish Auditing and Accounting Supervisory Authority (IAASA) issued revised ethical and auditing standards in a bid to support the delivery of high-quality audit and strengthen confidence in audit in Ireland. These new amendments, which were the subject of a formal consultation earlier in 2020, are effective for audits of financial statements for periods beginning on or after 15 July 2021, with early adoption permitted This article,  from the recent Accountancy Ireland, summarises the main changes in the Ethical Standard (Ireland) for Auditors, the International Standards on Auditing (Ireland), and International Standard on Quality Control (Ireland) 1. The standards are available on IAASA's website.    

In 2015, the International Auditing and Assurance Standards Board (IAASB) released new auditor reporting standards to enhance the communicative value, transparency and relevance of the auditor’s report in the public interest. The IAASB has now published a feedback statement after a public consultation. Stakeholders expressed broad support for the standards, and the resulting auditor’s report, and indicated that the standards have met the IAASB’s objectives. The stakeholder feedback statement summarizes key themes and views shared with the IAASB through the 2020 Auditor Reporting Post-Implementation Survey as well as a roundtable discussion held in September 2020. The survey, roundtable, and related outreach solicited perspectives on implementation and specific aspects of the revised auditor reporting standards. Three of the key areas of focus for stakeholders were key audit matters, going concern and other information in the auditor’s report. The IAASB’s Auditor Reporting Implementation Working Group is considering the feedback in developing its post-implementation review recommendations for the IAASB’s consideration in September 2021

The IAASB in collaboration with IFAC have announced a webinar series, which will take a deep dive into aspects of the IAASB’s International Standard on Quality Management 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements.

The Financial Reporting Council (FRC) has today issued a revision of its UK auditing standard on the responsibilities of auditors relating to fraud - ISA (UK) 240 (Revised May 2021) - The Auditor's responsibilities Relating to Fraud in an Audit of Financial Statements.   The revisions to the standard are designed to provide increased clarity as to the auditor's obligations, addressing the concern raised by Sir Donald Brydon in his review of the quality and effectiveness of audit. The revisions include enhancements to the requirements for the identification and assessment of risk of material misstatement due to fraud and the procedures to respond to those risks.   The revised UK standard is effective for audits of periods beginning on or after 15 December 2021 with early adoption permitted.

The Financial Reporting Council has issued revised International Standard for Review Engagement (UK) 2410 (ISRE (UK) 2410) Review of Interim Financial Information Performed by the Independent Auditor of the Entity. The revised standard provides additional clarity on auditor responsibilities, strengthens the review procedures required on management’s going concern assessment and strengthens reporting requirements in relation to going concern.  This ISRE (UK) is effective for reviews of interim financial information for periods commencing on or after 15th December 2021. Early adoption is permitted.

The Financial Reporting Council (FRC) has published a Thematic Briefing: The audit of cash flow statements. The briefing document highlights the results of the FRC's Constructive Engagement key findings and the steps taken by audit firms to strengthen the audit of cash flow statements. The cash flow statement provides users of the financial statements with an understanding of the generation, availability, and use of cash, and in supporting analysis of future expectations. The cash flow statement is a primary statement, but it does not always get the necessary amount of audit input as other primary statements.  As the cash flow statement movements are linked to other audited primary financial statements, this can manifest itself in the amount of audit work performed not being sufficient to reach an appropriate audit opinion or to identify matters that should be corrected/reported to those charged with governance. A common root cause is: • Internal consistency checks by the audit team across the financial statements are not picking up basic errors in the cash flow statement. This may also result in classification errors between sections of the cash flow statement. Other root causes include: • The audit team did not always adequately challenge management on the accounting policies applied and disclosures made affecting the cash flow statement. • Guidance available to the audit team to deal with technical and complex judgements was not always sufficient or embedded through staff awareness methods and training. • The review process did not always identify and adequately respond to matters identified in the audit. • The use of spreadsheets and the manual nature of cash flow workings by companies increases the complexity of auditing the consolidated cash flow statement.