Audit Risk - Conforming Amendments - Completed
The Audit Risk Conforming Amendments were completed in February 2004.
Objective(s) of project
The objective of this project was to develop amendments as necessary to existing ISAs in order to conform them to the basic principles, essential procedures, guidance and terminology of the Audit Risk ISAs (i.e. ISA 315, ISA 330 and ISA 500 (Revised)). The project was not intended to amend the underlying purpose of the ISAs.
Where a project was underway to develop or revise an ISA, the relevant project task force was requested to address conforming amendments, and consistency with the Audit Risk ISAs. Projects underway that were not included in the Audit Risk - Conforming Amendments Project were:
- ISAE 3000 (previously ISAE 100), Assurance Engagements;
- ISA 120, Framework of International Standards on Auditing;
- ISA 220, Quality Control for Audit Work;
- ISA 240, The Auditor's Responsibility to Consider Fraud and Error in an Audit of Financial Statements;
ISA 300, Planning;
ISA 600, Using the Work of Another Auditor; and
ISA 700, The Auditor's Report on Financial Statements.
The Audit Risk - Conforming Amendments Project focused on all other ISAs; any revisions required to IAPSs will be considered separately. ISAs in the 800 (Specialized Areas) and 900 (Related Services) series are not related to audits of financial statements and were therefore not part of the project.
Some ISAs only required simple terminological amendments while others required more extensive amendments. As conforming amendments do not introduce new basic principles and essential procedures, the audit risk conforming amendments were not discussed by the IAASB. However, they were provided to the IAASB members for their consideration and comments received were considered by the task force.
The audit risk conforming amendments have the same effective date as that of the Audit Risk ISAs, i.e. effective for audits of financial statements for periods beginning on or after December 15, 2004.
The Audit Risk ISAs seek to increase audit quality and include new basic principles, essential procedures, guidance and terminology. Conforming amendments were necessary to provide consistency between the Audit Risk ISAs and other ISAs relevant to audits of financial statements.
Generally, the conforming amendments were not extensive. Although the actual number of amendments to the ISAs varied, the extent of required amendments did not indicate difficulty in conforming to the new approach, or any significant areas of concern. This was not unexpected as conforming amendments were restricted to those required to align terminology and overall concepts to the Audit Risk ISAs.
The more relevant and extensive amendments included:
- Some ISAs, such as ISA 505, External Confirmations, are procedures-based ISAs and provide explanation of how to perform specific types of audit procedure. These ISAs required additional amendments to incorporate guidance on the nature, timing, and extent of procedures and the sufficiency and appropriateness of audit evidence.
- The need to introduce and link significant risks was considered in preparing the conforming amendments. Generally, the task force did not introduce significant risks because the subject matter did not require it or because the existing structure of the ISA did not focus on the risk assessment aspect of the audit. However, the task force anticipates that as ISAs are developed or revised, project task forces will debate the need to incorporate significant risk guidance (as well as structure the ISA as a risk-based standard) in addressing the project subject matter (for example, ISA 540, Audit of Accounting Estimates). The task force, however, did introduce reference to significant risks in ISA 545, Auditing Fair Value Measurements and Disclosures, as ISA 545 is a recent standard unlikely to be revised in the near future.
- Some ISAs contained more references to the separate risks (i.e. inherent risk and control risk) and more extensive editorial amendments were required to reflect the combined risk assessment approach. For example, a number of amendments in ISA 530, Audit Sampling and Other Selective Testing Procedures were necessary to reflect the combined risk assessment approach.
- Some of the guidance introduced in ISA 500 (Revised), Audit Evidence and ISA 330, The Auditor’s Procedures in Response to Assessed Risks has been reflected in conforming amendments to support the essential procedures in the relevant ISA subject to conforming amendments.
Conforming amendments to the other ISAs were more editorial and general in nature.
Task Force progress / Board discussions to date
The Audit Risk Task Force provided the proposed conforming amendments to the IAASB for its information in November 2003. IAASB members were requested to provide their comments to the Audit Risk Task Force. At its December 2003 meeting, the IAASB confirmed the approach to the preparation of conforming amendments.