As the effective date for the revised ISAs (UK and Ireland) is later than that used by the IAASB, the Financial Reporting Council (FRC) proposes to permit early adoption of those ISAs amended by the IAASB following the Reporting, Other Information and Disclosures projects.
ISA (UK and Ireland) 700 ‘Forming an Opinion and Reporting on Financial Statements’ and ISA (UK and Ireland) 701 ‘Communicating Key Audit Matters in the Independent Auditor’s Report’
The FRC has reviewed the language included its earlier draft and sought to simplify and clarify it, including better signposting of which requirements apply in which circumstances. It has decided not to adopt a single standard approach but rather to retain its existing proposal which is intended to maximise flexibility for auditors.
In relation to ISA 701, the Key Audit Matters definition contained in a UK plus, has been moved to the application material.
The FRC recognises that there remains ambiguity over the regulation requirement for the auditor to “explain to what extent the audit was considered capable of detecting irregularities, including fraud”, and whether this requirement should be applied in an entity specific way, or generically. The FRC continues to work with other European regulators to monitor how this requirement is to be applied.
ISA (UK and Ireland) 720 ‘The Auditor’s Responsibilities Relating to Other Information’
The FRC has sought to better signpost requirements in ISA 720 that are not new requirements, but are existing requirements transferred from ISA (UK and Ireland) 700. They have also sought to simplify the language, and expanded the application material to better explain the inter-relationship between the requirements of the ISA and those of the Directive.
The FRC will withdraw ISA (UK and Ireland) 720 B, and integrate the requirements into a single standard.
Reporting on Going Concern ISA 700 and ISA 570 ‘Going Concern’
The FRC has retained its proposal which it considers requires no additional auditor’s work-effort, other than addressing reporting requirements that will occur in only a small proportion of audit engagements.
The text of the standard has been reviewed to reduce the current overlap between the requirements in ISA 570 and those in ISA 700 (paragraph 29), and to clarify the positioning of reporting on material uncertainty within the auditor’s report. The FRC has also sought to simplify and clarify certain aspects of the standard.
ISA (UK and Ireland) 250 Section B ‘The Auditor’s Statutory Right and Duty to Report to Regulators of Public Interest Entities and Regulators of Other Entities in the Financial Sector’
The FRC has decided to retain its proposed requirement i.e. that auditors of Public Interest Entities (PIEs) and financial services entities that are already subject to a regulatory requirement to report certain information in certain circumstances to the regulator be required to report certain material.
The standard has been renamed ‘The Auditor’s Statutory Right and Duty to Report to Regulators of Public Interest Entities and Regulators of Other Entities in the Financial Sector’.
Retention Period – Audit Working Papers ‘ISA (UK and Ireland) 230 ‘Audit Documentation
The FRC will require the minimum retention period for documentation of six years from the date of the auditor’s report to apply to all audit engagements.
This applies to all audit documentation and not just those sections referred to in the EU Audit Legislation.
Bulletin 2008/4 – Special Auditor’s Report on Abbreviated Accounts
The FRC will with draw this bulletin.
It will not issue a bulletin in relation to auditors’ reports on micro-entity accounts.
It will retain the additional application material (paragraph A34-1) in ISA (UK and Ireland) 210 (Revised): Agreeing the terms of audit engagements.
Definition of Listed Company (Glossary of Terms)
The FRC has aligned the definition of a listed company in the ISAs (UK and Ireland) with that used in the FRC’S Ethical Standard.
It has clarified that the definition of a listed entity for the purpose of the standards excludes entities whose securities are technically listed but which are not in substance freely transferrable or tradeable. Therefore such entities do not need to comply with the listed entity requirements in the auditing standards.