New Standards in Auditing - Applying High-Quality Standards

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1. New Standards in Auditing – Applying High-Quality Standards Prof. Arnold Schilder Chairman, International Auditing and Assurance Standards Board Concurrent Session 8…
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  • 1. New Standards in Auditing – Applying High-Quality Standards Prof. Arnold Schilder Chairman, International Auditing and Assurance Standards Board Concurrent Session 8
  • 2. CONTENTS 01. Global Adoption of Clarified ISAs 02. Proportionality of ISAs for SME/SMPs 03. Auditor Reporting and Key Audit Matters 04. Enhancing Audit Quality–Areas to be Explored
  • 3. Global Adoption of Clarified ISAs
  • 4. Proportionality of ISAs/ISQC 1 for SME/SMPs • Application of ISAs designed to be proportionate in view of size, nature and complexity of entities • Application material in specific areas highlights SME considerations and alternative procedures • IAASB Staff Questions and Answers: – Applying ISAs Proportionately with the Size and Complexity of an Entity – Applying ISQC 1 Proportionately with the Nature and Size of a Firm • SMP Committee Guides: – Guide to Quality Control for SMPs – Guide to using ISAs in the Audit of SMEs
  • 5. New and Revised Auditor Reporting Standards Key Features
  • 6. Initial Step in Determining KAM The auditor will always consider • Areas of higher assessed risks of material misstatements or significant risks (i.e., risks requiring special audit consideration) • Significant auditor judgments relating to areas of significant management judgment (e.g., complex accounting estimates) • Effect on the audit of significant events or transactions Matters that were communicated with TCWG Matters that required significant auditor attention
  • 7. Other Changes to the Auditor’s Report • More focus on going concern • Auditor’s opinion required to be presented first • Required Basis for Opinion section for unmodified opinions • Statement about independence and other ethical responsibilities • Naming of the engagement partner (listed entities only) • Enhanced description of auditor responsibilities and key features of the audit • Required identification section when TCWG are separate from management
  • 8. Enhancing Audit Quality–Areas to be Explored • Quality Control – Role of the firm in audit quality, both at the engagement and firm levels, including “tone at the top” and monitoring & remediation – Firm governance, including perceived threats to audit quality – Roles and responsibilities of engagement partner as the person taking responsibility for the overall quality of the audit – Engagement quality control reviews (EQCRs) / engagement quality control reviewers and their role in audit quality – Structure of ISQC 1
  • 9. Enhancing Audit Quality–Areas to Be Explored • Involvement of others in performing or supporting the audit engagement, including effects on audit quality – What enhancements may be needed to strengthen or supplement the existing ISAs, including ISA 220 (quality control), ISA 600 (group audits), ISA 620 (experts) and ISA 540 (estimates)? – Planning / executing group audits  Group auditor’s involvement in work of component auditors, including reviewing and evaluating their work  Communications with component auditors  Component materiality
  • 10. Areas to Be Explored (cont.) • Involvement of others (cont.) – Do ISAs sufficiently address way in which audits conducted in a global business environment, including the various audit delivery models used to perform audits or the need for specialists or experts in particular areas? • Obtaining sufficient appropriate audit evidence and documenting conclusions to support the opinion on the financial statements • Professional Skepticism – IAASB undertaking joint work with other SSBs to evaluate what can be done to enhance professional skepticism
  • 11. Areas to be Explored – Financial Institutions • Initial Board discussion to focus on the audit implications of IFRS 9, separate outreach already underway • Broader consideration of issues relevant to ISA 540 (Auditing Accounting Estimates and Fair Value Accounting Estimates, and Related Disclosures) – Professional skepticism; audit evidence; testing management’s assumptions; documentation; using the work of experts, including third-party pricing sources • Other issues relevant to audits of financial institutions – Relationship between supervisors and auditors; implications of accounting standards addressing insurance contracts; other audit considerations relevant to banks
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