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Audit & Assurance
Accounting firms offer a wide range of professional services to their clients, including audit, review, other assurance, and related services. These services are regulated, with many jurisdictions requiring compliance with international standards or national requirements that have been based on international ones. The type of service delivered depends both on the statutory requirements and what will provide the most value to the client and users of the financial information.
An independent audit is an important service for providing users with assurance on entities’ historical financial statements. It is widely acknowledged that high-quality audits directly benefit businesses and indirectly benefit the economy and society in general. Company audits can have a significant influence on investment decisions, are integral to investor confidence, and are considered to be vital to the effective functioning of capital markets. The audit is also a highly valued service with the insights provided often making a real difference to entities’ operations, risk management, and internal controls.
As part of an effort to reduce compliance costs with regulation, there is evidence of a global trend toward exempting entities operating within certain thresholds from the requirement to have a statutory audit. It is likely that this changing global landscape will result in a rise in the demand and provision of practitioners offering a wider range of other assurance and related services, particularly among small- and medium-sized practices (SMPs), whose clients are predominately small- and medium-sized entities (SMEs) and often fall within the limits for exemption. These services have an important role in enhancing the credibility of entities’ financial statements and the financial information they provide.
Why Are International Standards Important?
High-quality international standards increase the comparability, consistency, clarity, credibility, and transparency of financial information. And, high-quality financial information, in turn, increases the stability of the global financial infrastructure. It contributes to economic growth and helps maintain fair, orderly, and efficient capital markets. It also fosters confidence in the markets of emerging nations, which encourages international investment.
The International Auditing and Assurance Standards Board (IAASB) is responsible for setting international standards for audit, quality control, review, other assurance, and related services. It also facilitates the convergence of international and national standards. The IAASB’s International Standards on Auditing (ISAs) are in use or are in the process of being adopted or incorporated in over 90 countries.
All of its standards are contained in the IAASB Handbook, including:
International Standard on Quality Control 1 (ISQC 1)
ISQC 1 sets out an accounting firm’s responsibilities for its system of quality control and applies to all audits and reviews of financial statements, and other assurance and related services engagements, performed by the firms‘ professional accountants.
100-999 International Standards on Auditing (ISAs)
ISAs are to be applied in the audit of historical financial information.
2000-2699 International Standards on Review Engagements (ISREs)
ISREs are to be applied in the review of historical financial information.
3000-3699 International Standards on Assurance Engagements (ISAEs)
ISAEs are to be applied in assurance engagements other than audits or reviews of historical financial information.
4000-4699 International Standards on Related Services (ISRSs)
ISRSs are to be applied to compilation engagements, engagements to apply agreed-upon procedures to information, and other related services engagements as specified by the IAASB.
All standards developed by the IAASB are subject to a rigorous due process, which includes thorough research, stakeholder consultation, and consideration of the views of those affected. The process is also overseen by the Public Interest Oversight Board (PIOB).
Adoption and Implementation
The application of the ISAs and ISQC 1 is designed to be proportionate to the size and complexity of the entity, as well as that of the accounting practice. The requirements of the ISAs are not prescriptive; they recognize that every audit is not planned and performed in exactly the same way. There is strong emphasis on applying a risk-based approach to every engagement and that professional judgment is needed to determine the relevant procedures, which are tailored to each particular assignment.
The international standards are designed to be applied in conjunction with the core principles of the International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants—integrity, objectivity, professional competence and due care, confidentiality, and ethical behavior. All professional accountants must comply with these principles. For more details, please see the Ethics section of the Gateway.
Consistent implementation of the standards is a critical part of enhancing the quality and uniformity of practice throughout the world, thereby strengthening public confidence in the global auditing and assurance profession. To help ensure consistent implementation, IFAC has facilitated the translation of international standards, including the IAASB Handbook and IESBA Code, into many languages—see the Translations Database.
Resources are available to help professional accountants understand and apply international standards and perform engagements efficiently and effectively. To access a broad range of reports, guidance, and articles that offer implementation support, explore the Resources tab below.
October 8, 2014 - IAASB
November 9, 2011 - IFAC
July 31, 2011 - IFAC
January 14, 2015 - Accounting Today
December 4, 2014 - American Institute of CPAs
December 2, 2014 - Center for Audit Quality
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