The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), has agreed to amend the following International Standards on Review Engagements (ISREs) to clarify to which engagements each respectively is to be applied:

• ISRE 2400, Engagements to Review Financial Statements; and
• ISRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity.

The issue that had been brought to the IAASB's attention is that ISRE 2410 applies in the case of a review by the entity's auditor of interim financial information only, while ISRE 2400 applies to all reviews of historical financial information excluding those conducted by the entity's auditor. Thus, there would appear to be no directly relevant standard for reviews by the entity's auditor of historical financial information other than interim financial information.

To resolve the issue, the IAASB has amended ISRE 2410 to apply also to such reviews. This reflects the principal distinction between ISRE 2400 and ISRE 2410, which is that ISRE 2410 is written on the basis that the entity's auditor is able to use his or her audit-based knowledge of the entity when carrying out a review of any historical financial information. The most common example of a review engagement that might be undertaken by an entity's auditor is the review of interim financial information issued by a public company; other examples have arisen in practice, however, and the change makes clear that these also fall within ISRE 2410. When approving ISRE 2410, the IAASB did not intend to remove auditor's reviews of historical financial information (other than interim financial information) from the scope of the ISREs.

Furthermore, to align the application of ISRE 2400, ISRE 2410 and International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, the IAASB agreed to restrict the application of ISRE 2400 to a review of any historical financial information performed by a practitioner who is not the entity's auditor. Before this amendment, ISRE 2400 indicated that it may be applied "to the extent practicable" to engagements to review other information.

"These minor amendments, which are effective immediately, clarify the application of the ISREs and ISAE 3000 by eliminating a small gap in the apparent scope of the ISREs and ensuring that, as intended, there is no overlap in the scopes of the ISREs and ISAE 3000. As a result, practitioners will have no doubt about which standard is to be applied to a review engagement," explains John Kellas, IAASB Chairman.

The amendments to ISREs 2400 and 2410 can be downloaded free-of-charge from the IFAC online bookstore.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), is releasing the last two exposure drafts written in accordance with the new clarity drafting conventions. It approved the exposure drafts of proposed International Standard on Auditing (ISA) 210 (Redrafted), Agreeing the Terms of Audit Engagements, and proposed ISA 710 (Redrafted), Comparative Information - Corresponding Figures and Comparative Financial Statements, at its meeting in Washington, D.C. in December 2007. Subject to any comments on exposure, the final standards will become effective for audits of financial statements for periods beginning on or after December 15, 2009.

The release of these exposure drafts marks the completion of the first phase of the IAASB's ambitious 18-month program to redraft existing standards and to develop new and revised standards following the new drafting conventions.*

"This is a major milestone on the IAASB's path to develop high quality international standards that are more readily understood, applied and enforced," emphasizes IAASB Chairman John Kellas, adding, "The redrafted ISAs provide more clarity as to the requirements which should contribute to improving the consistency of their application by auditors around the world."

"The IAASB is on track to complete the Clarity project by the end of 2008. When completed, 21 extant ISAs will have been fully revised, or updated and redrafted, in the last five years, and the remaining 11 will have been redrafted in accordance with the new conventions. In addition, International Standard on Quality Control 1 will have been redrafted and a new ISA on communicating deficiencies in internal control completed," explains Jim Sylph, Executive Director, Professional Standards.

How to Comment
Comments on the exposure drafts are requested by April 15, 2008. The exposure drafts may be viewed by going to https://www.ifac.org/EDs. Comments may be submitted by email to EDComments@ifac.org. They can also be faxed to the attention of the Executive Director, Professional Standards at +1 (212) 286-9570 or mailed to IFAC, 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA. All comments will be considered a matter of public record and will ultimately be posted on IFAC's website.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business. 

*For more information about the IAASB Clarity Project, go to https://www.ifac.org/IAASB/ProjectHistory.php?ProjID=0024.

At its recent meeting in Washington, D.C., the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), approved three new proposed standards: two focus on enhancing the auditors’ consideration of controls at service organizations, and the third addresses the communication of deficiencies in internal control to those charged with governance. These standards reflect the importance of internal control within audited entities and at their service organizations, and of the auditor’s responsibility to make significant findings available to those charged with governance. The IAASB is also releasing two exposure drafts written in accordance with the new clarity drafting conventions.

Third Party Service Organizations
Many entities outsource aspects of their businesses to organizations that provide services ranging from performing a specific task under the direction of the entity to replacing one or more of the entity’s business units or functions. Frequently, services provided by such organizations are integral to the entity’s information system relevant to financial reporting.

Following a risk-based approach, proposed International Standard on Auditing (ISA) 402 (Revised and Redrafted), Audit Considerations Relating to an Entity Using a Third Party Service Organization, deals with the auditor’s responsibilities to obtain audit evidence when an entity uses one or more service organizations. This may include obtaining reports prepared by the auditors of those organizations.

Proposed International Standard on Assurance Engagements (ISAE) 3402, Assurance Reports on Controls at a Third Party Service Organization, is the first subject matter-specific standard developed under the IAASB’s International Framework for Assurance Engagements. It complements proposed ISA 402 (Revised and Redrafted) in that reports prepared in accordance with proposed ISAE 3402 will be capable of providing appropriate audit evidence under the proposed ISA. It will help to bring consistency in reporting on controls at service organizations, thereby assisting such organizations to meet the needs of clients (“user entities”) and their auditors. In particular, it should ensure that reports issued in one country are likely to meet the requirements of the auditors of user entities in other countries.

“The proposed standards reflect the IAASB’s recognition of the increasing use of service organizations worldwide. In revising our existing standard for the auditors of user entities, and complementing it with a new standard for the auditors of service organizations, we are proposing consistent and comprehensive guidance for this important aspect of auditing,” says John Kellas, Chairman of the IAASB.

Communicating Deficiencies in Internal Control
The IAASB also seeks comments on proposed ISA 265, Communicating Deficiencies in Internal Control. This deals with the auditor’s responsibility to communicate to management and those charged with governance deficiencies in internal control that have been identified by the auditor. It distinguishes between significant and other deficiencies in order to establish requirements to communicate to the appropriate levels within the audited entity. It also requires the former to be communicated in writing to those charged with governance.

“This new proposed standard is intended to enhance the effectiveness of the auditor’s communication of deficiencies in internal control by requiring a clearer focus on what is important to those taking ultimate responsibility for control over financial reporting. The proposed standard will require these matters to be communicated in writing, and on a timely basis so that those charged with governance can take steps to strengthen internal control,” explains Mr. Kellas.

New Clarity Exposure Drafts
The IAASB has also approved the following exposure drafts of proposed ISAs:

• ISA 501 (Redrafted), Audit Evidence Regarding Specific Financial Statement Account Balances and Disclosures; and
• ISA 520 (Redrafted), Analytical Procedures.

These exposure drafts form part of the IAASB’s ambitious 18-month program to redraft existing standards and to develop new and revised standards following the new clarity drafting conventions. Subject to any comments on exposure, the final standards will become effective for audits of financial statements for periods beginning on or after December 15, 2009.

How to Comment
Comments on the exposure drafts are requested as follows:

• Proposed redrafted ISAs 501 and 520 by March 31, 2008;
• Proposed ISA 402 (Revised and Redrafted) and proposed ISA 265 by April 30, 2008; and
• Proposed ISAE 3402 by May 31, 2008.

The exposure drafts may be viewed by going to https://www.ifac.org/EDs. Comments may be submitted by email to EDComments@ifac.org. They can also be faxed to the attention of the Executive Director, Professional Standards at +1 (212) 286-9570 or mailed to IFAC, 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA. All comments will be considered a matter of public record and will ultimately be posted on IFAC’s website.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

Founded in 1977, IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 158 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), has reached another milestone in its Clarity Project. Following the consideration and approval of due process by the Public Interest Oversight Board (PIOB), the IAASB issued three final standards that reflect its new clarity drafting conventions:

• International Standard on Auditing (ISA) 230 (Redrafted), Audit Documentation;
• ISA 260 (Revised and Redrafted), Communication with Those Charged with Governance; and
• ISA 720 (Redrafted), The Auditor's Responsibility in Relation to Other Information in Documents Containing Audited Financial Statements.

The standards form part of the IAASB's ambitious 18-month program to redraft existing standards and to develop new and revised standards following the clarity drafting conventions.¹
 
"The complete set of clarified ISAs, including some newly revised standards also under development, will be effective for audits of financial statements for periods beginning on or after December 15, 2009. We are releasing standards as they are approved in order to provide standard setters, regulators and auditors with sufficient time to plan for the adoption and implementation of the standards," explains John Kellas, IAASB Chairman.

Audit Documentation
ISA 230 (Redrafted) incorporates several enhancements and additional guidance to clarify the auditor's documentation obligations. In particular, it explains in clearer terms what is expected of the auditor in fulfilling the requirement to document compliance with ISAs, and provides clarifying guidance regarding the circumstances in which it is appropriate for the auditor to prepare audit documentation relating to the use of professional judgment. The flow of the requirements in the redrafted ISA, particularly in relation to changes to audit documentation after the date of the auditor's report, has also been simplified and clarified.

Communication with Those Charged with Governance
ISA 260 (Revised and Redrafted) has been fully revised. It sets out an overarching framework for communication with those charged with governance; it also identifies specific matters to be communicated by the auditor, including a requirement to communicate in writing about auditor independence. It acknowledges that law or regulation or an agreement with the entity, for example, may require that other matters be communicated. The ISA contains new requirements and guidance dealing with the communication process, including a specific requirement for the auditor to evaluate the adequacy of the two-way communication between the auditor and those charged with governance.

"The quality of the relationship between auditors and directors, audit committees and others charged with governance is one of the most important factors in achieving an effective audit. That is why the IAASB has emphasized the importance of two-way communication. A constructive and open working relationship between the auditor and those charged with governance not only assists the auditor in obtaining relevant information, but also assists those charged with governance in fulfilling their responsibility to oversee the financial reporting process," notes Mr. Kellas.

The Auditor's Responsibility in Relation to Other Information
ISA 720 (Redrafted) deals with the auditor's responsibility in relation to other information in documents containing audited financial statements and the corresponding auditor's report. It requires the auditor to read this other information and to respond appropriately when such information could undermine the credibility of the financial statements.

The clarified ISAs can be downloaded from the IFAC online bookstore at https://www.ifac.org/store.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

Founded in 1977, IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 158 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

Further information about IAASB may be obtained from its website: https://www.iaasb.org. The PIOB website address is https://www.ipiob.org.

¹ Key elements of the clarity drafting conventions include: establishing an objective for the auditor with respect to the subject matter of each standard; clearly distinguishing requirements from guidance on their application; avoiding ambiguity through eliminating the present tense to describe actions by the auditor and using more imperative language where a requirement was intended; and other structural and drafting improvements to enhance the overall readability and understandability of the standards.

The International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), is seeking candidates for the position of IAASB Chair for a three-year term commencing January 1, 2009. The chair is appointed by the IFAC Board with the approval of the Public Interest Oversight Board (PIOB)*.

The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in financial reporting and auditing. The chair provides leadership in the fulfillment of these objectives.

One of the primary responsibilities of the chair is to promote and develop a greater understanding of the IAASB’s strategy and objectives with key stakeholders. The chair provides leadership in the implementation of the IAASB’s strategy, including promoting its International Standards on Auditing as a global benchmark for audit quality, and in the development of international standards. He or she chairs meetings of the IAASB and proactively leads debate and seeks consensus from among its members. The chair is also responsible for establishing and maintaining effective and constructive relationships with key stakeholders, including international and national standard setters and regulators. In addition, the chair serves as the IAASB’s primary spokesperson and primary liaison with the IFAC Board, other boards and committees of IFAC, and the PIOB.

The successful candidate should have significant senior-level experience and be well recognized within the accountancy profession. Strong leadership and effective communication and strategic skill, as well as technical and professional competence are also required. The chair must possess the highest integrity, be dedicated to protecting the public interest, and be committed to the IAASB’s mission.

Candidates should submit their résumé (CV) via email. All submissions must be received by February 15, 2008. For further details on the role of the IAASB Chair and the selection process, see the Call for Nominations/Applications on the IFAC website. Further information about IAASB may be obtained from its website: https://www.iaasb.org.

About IFAC
Founded in 1977, IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 155 members and associates in 118 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

* Note to Editors:
The Public Interest Oversight Board (PIOB) was established in February 2005 to oversee IFAC’s auditing and assurance, ethics, and education standard-setting activities, as well as the IFAC Member Body Compliance Program. The PIOB oversees the activities of the IAASB and, as one element of that oversight, approves its membership (including the chair), its due process and its working procedures. The PIOB website address is https://www.ipiob.org.

At its most recent meeting in Madrid, Spain in September, the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), approved two sets of new proposals. The first exposure draft addresses concerns about the use and reliability of external confirmations as audit evidence. External confirmations are written responses to the auditor from a third party. The second exposure draft proposes stricter requirements when an auditor uses an expert to obtain audit evidence.

"The proposed standards represent significant steps by the IAASB designed to enhance auditor performance in important areas of the audit of financial statements. Confirmations have sometimes proved to be less reliable than expected and the proposals are intended to assist in making them effective when an auditor decides to use them. In a more complex world, especially where fair values feature in financial reporting, the auditor may have more need of the assistance of experts in other disciplines for the purposes of the audit. The new proposals are therefore timely," explains John Kellas, IAASB Chairman.

These proposed International Standards on Auditing (ISAs) are drafted in accordance with the IAASB's new conventions designed to improve the clarity of its pronouncements. They may be viewed by going to https://www.ifac.org/eds.  

External Confirmations
Recent experience has indicated that external confirmations may not always be as reliable as expected as audit evidence, giving rise to requests for more rigorous requirements governing the auditor's use of external confirmations. The auditor's decision about whether to use external confirmation procedures is based upon the identification and assessment of risks of material misstatement in accordance with other ISAs. Proposed ISA 505 (Revised and Redrafted), External Confirmations, is directed at the effective performance of external confirmation procedures when the auditor determines that such procedures are an appropriate response to an assessed risk of material misstatement.

Use of the Work of an Auditor's Expert
Proposed ISA 620 (Revised and Redrafted), Using the Work of an Auditor's Expert, deals with the auditor's use of the work of a person or organization possessing expertise in a field other than accounting or auditing, employed or engaged by the auditor to assist the auditor to obtain sufficient appropriate audit evidence. It places particular emphasis on the need for the auditor to evaluate the expert's objectivity, and to establish a proper understanding with the expert of the expert's responsibilities for the purposes of the audit.

How to Comment
Comments on the exposure drafts are requested by February 15, 2008. Comments should be submitted by email to EDComments@ifac.org. They may also be faxed to IAASB ED Comments at +1-212-286-9570 or mailed to IAASB ED Comments at 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA. All comments will be considered a matter of public record and will ultimately be posted on the IFAC website.

About the IAASB and IFAC
The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.

Founded in 1977, IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 155 members and associates in 118 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.

Further information about IAASB may be obtained from its website: https://www.iaasb.org. The PIOB website address is https://www.ipiob.org.

New requirements designed to enhance the quality of audits of group financial statements were released today by the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC). International Standard on Auditing (ISA) 600 (Revised and Redrafted), Special Considerations - The Audit of Group Financial Statement (Including the Work of Component Auditors), assists the group engagement partner in taking responsibility for the direction, supervision and performance of the group audit and the issue of an auditor's report that is appropriate in the circumstances.

To assist the group engagement team to obtain sufficient appropriate audit evidence on which to base the group audit opinion, the ISA specifies the types of work that the group engagement team, or component auditors on its behalf, should perform on the financial information of significant components. It also requires the group engagement team to be appropriately involved in the work that component auditors perform. The ISA is effective for audits of financial periods commencing on or after December 15, 2009. This date is consistent with the effective date for all the standards being redrafted under the IAASB's Clarity project.

The ISA, which was developed over a period of five years, was influenced by the responses to three exposure drafts. The new ISA takes account of regulatory and standard-setting developments around the world, the interests of small entities, and the expectations of various stakeholders, including those represented on the IAASB Consultative Advisory Group.

John Kellas, Chairman of the IAASB, explains: "The new standard clearly explains the responsibility of the group engagement partner to direct and control the group audit, even when component auditors may be involved. It responds to public expectations for continuous improvement in auditing standards. The project has not been an easy one, but we are confident that the standard will enhance current practice and promote consistency worldwide."

ISA 600 (Revised and Redrafted) can be downloaded free-of-charge from the IFAC online bookstore at https://www.ifac.org/store.

About the IAASB and IFAC

The objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures. Founded in 1977, IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies.

IFAC is comprised of 155 members and associates in 118 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business. Further information about IAASB may be obtained from its website: https://www.iaasb.org.

The PIOB website address is https://www.ipiob.org.