The Auditor's Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements
This is an active project.
Cedric Gelard, Chair, IAASB Member (supported by Isabelle Tracq-Sengeissen, IAASB Technical Advisor)
John (Arch) Archambault, IAASB Member
Caithlin McCabe, IAASB Member
Valdir Coscodai, IAASB Member
Marek Grabowski, IAASB Technical Advisor
Susan Jones, KPMG
Objective(s) of project
To revise ISA 720,The Auditor's Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements to ensure that the ISA continues to be capable of enhancing the credibility of financial statements through specifying appropriate responsibilities of the auditor relating to the range of other information in documents containing audited financial information and taking account of how such information is disseminated.
During the Clarity redrafting of ISA 720 Other Information in Documents Containing Audited Financial Statements, and the consultations on the IAASB's Strategy and Work Program, 2009-2011, several stakeholders drew the IAASB's attention to the need to update and revise the ISA to ensure that it is sufficient and fit-for-purpose in the context of today's financial reporting environment. This view was shared by members of the IAASB Consultative Advisory Group. The IAASB considered the input received and agreed to include consideration of a proposal to revise ISA 720 in its 2009-2011 work program.
The IAASB approved a project proposal at its December 2009 meeting. As indicated, key issues are likely to include the following:
- Whether the current definition of "other information" in the ISA is adequate in the current environment or whether, in the context of the range of other information being presented concurrently with audited financial statements, a different definition would be appropriate
- The nature and extent of the auditor's responsibilities in connection with the other information including consideration of whether such responsibilities should remain directed at reading other information for material inconsistencies and material misstatements of fact, or whether it is appropriate to extend the responsibilities of the auditor
- Implications of electronic dissemination of audited financial statements and the auditor's report
- Whether and to what extent specific guidance should be included on the statutory and contractual requirements in some jurisdictions of auditors of public sector entities in relation to non-financial information.
Task Force progress / Board discussions to date
At the December 2009 IAASB meeting, a project proposal to revise ISA 720 was approved by the IAASB.
At its March 2010 meeting, the IAASB considered issues to be addressed in this project, including the following:
- Types of documents that should fall within the scope of ISA 720, in particular whether the scope of ISA 720 should be expanded to address other public documents containing audited financial information in addition to annual reports (or similar documents).
- The auditors' work effort in regard to other information in documents that fall within the scope of ISA 720, in particular the work effort required of the auditor when reading such other information.
- Whether, and to what extent, the matter of electronic dissemination of audited financial information should be addressed in ISA 720.
The IAASB CAG also discussed a number of these issues at its March 2010 meeting.
At its September 2010 meeting, the IAASB continued its consideration of issues to be addressed in this project, including the following:
- Documents in the scope of ISA 720, in particular continued application of the ISA to annual reports and widening its application to other documents.
- The auditor's responsibilities relating to the other information, in particular the nature and extent of work required to achieve the auditor's objectives under ISA 720 with regard to different types of other information.
- The auditor's responsibilities regarding dissemination by the entity of documents on which work has been performed in accordance with ISA 720, in particular electronic dissemination, reproduction, and translation of documents, and documentation.
The IAASB CAG also discussed a number of these issues at its September 2010 meeting.
At its March 2011 meeting, the IAASB considered first drafts of the proposed revised ISA 720 and proposed revised ISA 560, Subsequent Events. Issues discussed by the IAASB include the following:
- Documents in the scope of ISA 720, in particular the documents that are in, and those that are outside of, the scope of proposed revised ISA 720, and how to describe those documents that are in the scope of the ISA.
- Proposals to strengthen the auditor's approach to other information, in particular the auditor's responsibilities and actions to be taken depending on the nature of the other information and whether the matter relates to the audited financial statements or the other information.
- Other matters relevant to the revision of ISA 720 including linkages to other ISAs, audit documentation and auditor reporting.
The IAASB CAG also discussed these issues and the first drafts of the proposed revised ISA 720 and proposed revised ISA 560 at its March 2011 meeting.
At its December 2011 meeting, the IAASB considered a revised draft of ISA 720, The Auditor’s Responsibilities Relating to Other Information in Documents Containing or Accompanying Audited Financial Statements and the Auditor’s Report Thereon. Topics discussed included: the auditor’s procedures when considering financial data in the other information; the concept of “material inconsistency;” the auditor’s action when other information is identified that is inconsistent with the auditor’s understanding of the entity and its environment; the concept of “initial release” in relation to the intended scope of the proposed standard; and documentation.
The IAASB CAG discussed the project at its September 2012 meeting (Agenda Item C).
At its September 2012 meeting, the IAASB approved for exposure proposed ISA 720 (Revised), The Auditor's Responsibilities Relating to Other Information in Documents Containing or Accompanying Audited Financial Statements and the Auditor's Report Thereon. The proposed standard broadens and clarifies the scope of documents to be addressed by the auditor, enhances the auditor's work effort, and introduces reporting requirements.
At its April 2013 meeting, the IAASB received a brief update on the status of comment letter responses received on the Exposure Draft, Proposed ISA 720 (Revised), The Auditor’s Responsibilities Relating to Other Information in Documents Containing or Accompanying Audited Financial Statements and the Auditor’s Report Thereon.
The IAASB will begin its consideration of issues raised in comment letter responses at its June 2013 meeting.