Status and Authority of the International Auditing Practice Statements
John Fogarty, Chair, former IAASB Deputy Chair
Jon Grant, IAASB Member
David Swanney, IAASB Member
Marc Pickeur, External Member (Basel Committee on Banking Supervision)
Greg Shields, IAASB Technical Advisor
Objective(s) of project
To review the appropriateness of the content of the IAPSs and determine whether they should be withdrawn or revised and the authority of IAPSs and any other implementation guidance that the IAASB may develop.
Six IAPSs are currently effective:
- IAPS 1000, Inter-bank Confirmation Procedures
- IAPS 1004, The Relationship Between Banking Supervisors and Banks' External Auditors
- IAPS 1006, Audits of the Financial Statements of Banks
- IAPS 1010, The Consideration of Environmental Matters in the Audit of Financial Statements
- IAPS 1012, Auditing Derivative Financial Instruments
- IAPS 1013, Electronic Commerce-Effect on the Audit of Financial Statements
In general, all of the IAPSs are largely now out-of-date and inconsistent with the text of the clarified ISAs. The IAASBs Strategy and Work Program, 2009-2011, acknowledged the IAASB should determine whether these IAPSs should be revised or withdrawn and what status and authority should be afforded to any new IAPSs the IAASB may develop.
IAPS 1005, The Special Considerations in the Audit of Small Entities , and IAPS 1014, Reporting by Auditors on Compliance with International Financial Reporting Standards, were withdrawn when the clarified ISAs became effective. Guidance in these IAPSs has been included, as appropriate, in the body of the relevant clarified ISAs.
Task Force progress / Board discussions to date
At its December 2009 meeting, the IAASB discussed a proposal that IAPSs should have a status and authority equivalent to application and other explanatory material in the ISAs. While the IAASB was supportive of having a mechanism for issuing guidance material, there were mixed views on the question of status and authority.
At its March 2010 meeting, the IAASB discussed how it could clarify its position on how auditors should consider this material in performing audits, as previous input has indicated there is inconsistency in practice as to how IAPSs are used. The Task Force also recommended withdrawing the six current IAPSs, subject to the results of the planned consultation. The IAASB agreed to reconvene via teleconference in advance of its June 2010 meeting to continue its deliberation of these issues.
At its May 2010 meeting, the IAASB deliberated issues relating to the status and authority of its IAPSs. It considered a revised proposal to clarify how auditors should consider material in future IAPSs, including proposed revised IAPS 1012, Auditing Complex Financial Instruments, when performing audits. The IAASB also discussed where such wording to clarify the auditor's obligations should be placed.
At its June 2010 meeting, the IAASB approved for exposure a proposed statement of authority for new IAPSs, for inclusion in the Preface to the International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services, together with the proposal to withdraw existing IAPSs.
These proposals were issued contemporaneously with proposed revised IAPS 1000, Special Considerations in Auditing Complex Financial Instruments, which was approved as an exposure draft at the September 2010 IAASB meeting. The Exposure Draft was open to comment through February 11, 2011.
At its March 2011 meeting, the IAASB received an update on comments received on the exposure draft of the proposals.
At its June 2011 meeting, the IAASB was provided with an overview of the significant issues raised by respondents on the Exposure Draft (ED) of proposals. The IAASB considered and provided preliminary views on the proposed Preface to the International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services, the proposal to withdrawn the existing IAPSs and the factors that the IAASB is to consider in developing future IAPSs.
The IAASB approved the amended Preface to the International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services at its September 2011 meeting. The amended Preface created a new category of pronouncements, International Auditing Practice Notes (IAPNs) which are non-authoritative documents that do not impose additional requirements on auditors beyond those included in the International Standards on Auditing (ISAs) and do not change the auditor’s responsibility to comply with all ISAs relevant to the audit. The IAASB decided to withdraw the existing category of pronouncements known as IAPSs and the six existing IAPSs. A Basis for Conclusions provides background to the project, main comments received on the exposure draft, and the IAASB's conclusions regarding these comments in developing the final Preface.
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