“The quality of work performed by SAIs affects their reputation and credibility, and ultimately their ability to fulfill their mandate” – ISSAI40 (Introduction)
This is a new section which will feature each month in the PASAI update to alert our members to (i) changes in International Standards of Supreme Audit Institutions (ISSAIs) due to updates or amendments to International Standards of Auditing (ISAs) or changes in professional standards which will affect the Generally Accepted Auditing Standards (GAGAS) and (ii) any other relevant issues or matters of interest that may impact on SAI member’s ability to fulfill their audit mandates.
This update is not meant to be exhaustive and reading this update is not a substitute for reading and fully understanding the requirements of ISSAIs or GAGAS. This update also does not address the responsibilities of the auditor that may exist in law, regulation or national standards, which may contain requirements in addition to those established by these standards.
The New Auditor’s Report (ISSAI1701) effective date on or after December 15, 2016
International Auditing and Assurance Standards Board’s (IAASB) issued the new and revised Auditor Reporting standards and related conforming amendments relating to auditor’s reports. In particular a new standard ISA701
Communicating Key Audit Matters in the Independent Auditor’s Report.
IAASB’s deliberations in development of these standards have been informed by international research, public consultation and stakeholder outreach since 2011. Enhanced auditor reporting is viewed as critical to the perceived value of the financial statement audit and thus to the continued relevant of the auditing process. This new and revised Auditor Reporting standard lays the foundation for the future of global auditor reporting and improved auditor communications.
The objectives of the IAASB’s Auditor Reporting project were to:
• Appropriately enhance the communicative value and relevance of the auditor’s report through revisions to the International Standards on Auditing (ISAs) that address its structure and content; and
• Modify, in their design, the IAASB’s reporting ISAs to accommodate evolving national financial reporting regimes, while at the same time ensuring that common and essential content is being communicated.
The other ISA’s that have been revised comprise of:
• ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements;
• ISA 705 (Revised), Modifications to the Opinion in the Independent Auditor’s Report;
• ISA 706 (Revised), Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report;
• ISA 570 (Revised), Going Concern;
• ISA 260 (Revised), Communication with Those Charged with Governance; and
• ISA 720 (Revised), The Auditor’s Responsibilities Relating to Other information
Consequently, INTOSAI has developed the equivalent ISSAI1701 which is a Practice Note to ISA 701 Communicating Key Audit Matters (KAM) in the Independent Auditor’s Report. In particular paragraph P3 states:
“Application of ISA 701 is mandatory for the audit of general purpose financial statements of listed entities and may also be applied on a voluntary basis for other audits. The rationale for only requiring the reporting of KAM for listed entities is derived from the material impact that such entities have on markets and economies as a whole. Given that the public sector is a significant participant of any economy and is responsible for maintaining and providing important functions that affect citizens, public sector auditors should also consider reporting KAM for auditees other than listed entities.”
IAASB has published a few different guidance documents to help practitioners apply the new ISA 701. Refer to links provided below for more information or technical support.
Practice Notes have also been developed for the all the revised ISA’s and these were endorsed at XXII-INCOSAI.
North SAIs that follow GAGAS
Please ensure you take note of Professional Standards Update No.66 issued 19 January 2017 on the GAO website which alerts you to changes in professional standards which relates to:
• New accounting and auditing guidance related to derivative and hedging, service concession agreements, discontinued operations and stock compensation.
• Changes in audits performed under the OMB Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance)
• Review engagements – issuance of SSARS No.22 and No.23
• A guide to provide practical assistance for auditors in developing an effective audit approach to address risks related to financial instruments
• And much much more……….
Proposal on the INTOSAI Framework of Professional Pronouncements – effective 2019
At the XXII-INCOSAI the proposal on the revised INTOSAI Framework of Professional Pronouncements was endorsed. The purpose for this revision was to improve the credibility of INTOSAI’s professional pronouncements, assist in making them an authoritative framework for public sector auditing and enhance their technical quality. The proposal entails a series of changes in the current framework of ISSAIs and INTOSAI GOVs. These changes recognise the central importance of ISSAI 100, the fundamental principles of public sector auditing within the framework.
More information on the changes will be provided in future Technical Support Updates.
For more Information or technical assistance:
Visit INTOSAIs ISSAI website www.issai.org
Visit the IAASB's website at www.iaasb.org/auditor-reporting
Visit the AICPA (American Institute of CPAs (Auditing Standards Board) www.aicpa.org
Visit GAO (US Government Accountability Office) www.gao.gov/yellowbook/overview
Contact PASAI’s Director of Technical Support email@example.com