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Update of ISAs from 2003 to 2008

Update of ISAs from 2003 to 2008. Andreas Mikromastoras Grant Thornton Greece. Introduction and objectives- ISAs from 2003-2008. Presentation Objective.

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Update of ISAs from 2003 to 2008

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  1. Update of ISAs from 2003 to 2008 Andreas Mikromastoras Grant Thornton Greece

  2. Introduction and objectives- ISAs from 2003-2008

  3. Presentation Objective The presentation is referred in the development of ISAs from 2003 until 2008. These years were so important for the development of International Standards on Auditing. The reasons are turned mainly round the development of world economy as much as in considerably fact which marked the audit profession in the same period. The presentation will begin with few introductive information about IAASB and it will be continued with the presentation by year of important changes in ISAs.

  4. Presentation Objective Objective of presentation is the comprehension of developments in the Standards as well as that the objectives of Standards have been changed and the same time auditor’s profession have been changed also.

  5. About IAASB International Auditing and Assurance Standards Board (IAASB) is a standard –setting body designated by and operating under the auspices of the International Federation of Accountants (IFAC).

  6. About IAASB • What is the objective of IAASB? • Serving the public interest • by setting, independently and under its own authority high-quality auditing, assurance, quality control and related services standards. • by facilitating the convergence of national an international standards.

  7. About IAASB There by, enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. IASB objective:"to develop a single set of high quality, understandable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statements …."

  8. About Clarity Project In 2003, the IAASB undertook a review of its drafting conventions to identify ways to improve the clarity of its Standards and the consistency of their application (the Clarity Project). The Clarity Project is one of the IAASB’s most significant projects aimed at improving the clarity and understandability of International Standards on Auditing. This was necessary due to suggestions of Regulators.

  9. About Clarity Project • The improvements which are into the Clarity Project broadly comprise as follows: • Setting an objective for the professional accountant in respect of each Standard. • Clarifying the obligations imposed on professional accountants by the requirements of the Standards, using revised language. • Eliminating any ambiguity about whether the use of • the present tense in Standards imposed any • obligation on the professional accountant; and

  10. About Clarity Project • Improving the overall readability and understandability of the Standards through structural and drafting improvements, including clarifying the application material in the Standards. • Makes the Standards clearer • Leading to more consistent application • Promote their adoption and • Facilitate international convergence How Clarity Project improves ISAs?

  11. UpDated Of ISAs -2003

  12. Updated of ISAs - 2003 • How was the world economy at 2003? • Weak global economy (Asian crisis) • Financial reporting scandals (e.g. Enron, Parmalat) • Concernabout the role of preparers, management, those charged with governance and finally of course the role of Auditors. • All these factors they created a frame of doubt.

  13. Updated of ISAs - 2003 • Furthermore, there is the establishment of the US Public Company Accounting Oversight Board (PCAOB) and worldwide critical discussion regarding the consequences of the US Sarbanes-Oxley Act. • Focus on the development of high- quality standards on auditing. • Focus on standards addressing audit risk, quality control responsibilities at both the firm-wide and engagement levels. RESPONSES OF IAASB

  14. Updated of ISAs - 2003 • Develops an assurance framework • Issues a revised standard for assurance engagements other than audits or reviews of historical financial information. • In 2003, more than 70 countries have indicated that they either have adopted ISAs or noted that there are no significant differences between their national Standards and ISAs.

  15. Updated of ISAs - 2003 • In 2003, the IAASB: • successfully finalized its standardson audit risk. • successfully finalized its assurance framework and its first standard for assurance engagements other than audits.

  16. Updated of ISAs - 2003 • Approved and issued ISAs on 2003: • International Standards on Auditing • ISA 315- Understanding the entity and its environment and assessing the risk of Material Misstatement (October 2003). • ISA 330- The auditor’s procedures in response to Assessed Risks (October 2003). • ISA 500- Audit Evidence (Revised October 2003).

  17. Updated of ISAs - 2003 • Approved and issued ISAs on 2003: • International Standards on Auditing • ISA 200- Objective and General Principles governing an Audit of financial statements. (amendment October 2003).

  18. Updated of ISAs - 2003 • Assurance Standards issued on 2003: • International Framework for Assurance Engagements (Revised –December 2003). • International Standard on Assurance Engagements (ISAE 3000)- Assurance Engagements other than audits (December 2003).

  19. UpDated Of ISAs -2004

  20. Updated of ISAs - 2004 In 2004, the IAASB successfully finalized and issued five new or revised standards.

  21. Updated of ISAs - 2004 • Approved and issued ISAs on 2004 • International Standards on Auditing • ISA 220- Quality Control for Audits of Historical Financial Information (Revised-February 2004) • ISA 240- Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements (Revised –February 2004)

  22. Updated of ISAs - 2004 • Approved and issued ISAs on 2004 • International Standards on Auditing • ISA 300- Planning an Audit of Financial Statements (Revised – June 2004) • ISA 700- The Independent Auditor’s Report on a Complete Set of General Purpose Financial Statements

  23. Updated of ISAs - 2004 • Approved and issued ISAs on 2004 • International Standards on Quality Control • ISQC 1- Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information and Other Assurance and Related Services Engagements (February 2004).

  24. Quality Control Standards - 2004 • Significant objective of IAASB is the quality control. • Quality control is fundamental to high quality audit work. • IAASB approved two standards on quality control. • ISQC 1- Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements.

  25. Quality Control Standards - 2004 • ISQC1 establishes a firm’s responsibilities to set up and maintain a system of quality control for all audits, other assurance and related services agreements. • The revised International Standard on Auditing (ISA 220) Quality Control for Audits of Historical Information, which establishes standards for the specific responsibilities of firm personnel for an individual audit engagement and is premised upon the requirements of the firm-wide quality control standards set out in ISQC 1.

  26. Quality Control Standards- 2004 • The quality control standards are designed: • to help restore public confidence in auditing following the corporate financial scandals of prior years and • to ensure the highest level of quality in the delivery of other assurance services by professional accountants. Why focus on Quality Control Standards?

  27. Revised ISA 240 Fraud - 2004 • The revised ISA 240: • requires the auditor to direct more focused efforts on areas where there is a risk of material misstatement of financial statement due to fraud, including management fraud. • requires the auditor to design and perform audit procedures responsive to identified risks of material misstatement due to fraud, including procedures to address the risk of management override of controls.

  28. Revised ISA 240 Fraud- 2004 While management fraud will always be difficult to detect, the revised Standard reinforces the auditor’s responsibilities to identify and address the risk of material misstatement due to fraud. These new requirements will result in an increased work effort for auditors.

  29. Revised ISA 300- Audit Planning -2004 The revised ISA 300 requires auditors to be more rigorous in planning their audits so that their engagements will be performed in an effective matter. The revised ISA 300 requires the auditor to establish an overall strategy that sets the scope, timing and direction of the audit.

  30. Revised ISA 300- Audit Planning -2004 • KEY ROLE OF OVERALL STRATEGY • Allocation of the auditor’s resources to the higher risk areas. • Auditor plan risk assessment procedures. • Further audit procedures focused on the areas of greatest audit risk.

  31. Revised ISA 700- Auditor’s Report-2004 • The revised ISA 700 establish a new form of audit report. • The Standard sets out a framework to separate audit reporting requirements in connection with an ISA audit from additional reporting responsibilities required in some jurisdictions. • The new form of audit report is: • comparable across jurisdictions • flexible to accommodate specific local • reporting requirements.

  32. UpDated Of ISAs -2005

  33. Updated of ISAs - 2005 Primary focus of IAASB remains on restoring confidence in the audit of financial statements. In 2005, IAASB makes significant steps for the improvement of International Standards on Auditing.

  34. Updated of ISAs - 2005 • Improving Readability and Understandability • New terms or expressions were defined in a Definitions section of a Standard. All Standards containedthe following four principal sections: • Introduction: the scope and effective date of the Standard; • Objective: the objective to be achieved by the professional accountants;

  35. Updated of ISAs - 2005 • Improving Readability and Understandability • Requirements: the requirements to be complied with, together with explanatory material necessary to make the section understandable by an experienced professional accountant; • Application material- material, supplemented in some cases by appendices, that provides further explanation and guidance supporting proper application of the Standard.

  36. Updated of ISAs - 2005 • The IAASB finalized two (2) Standards in 2005. • International Standards on Auditing • ISA 230, Audit Documentation (Revised- September 2005). • International Standards on Review Engagements • ISRE 2410, Review of Interim Financial Information performed by the Independent Auditor of the Entity (June 2005). • Also, IAASB approved amendments to ISQC 1.

  37. ISA 230- Audit Documentation- 2005 Audit Documentation is a critical element of an audit. It provides a record of audit work and audit evidence that supports the auditor’s report. The revised Standard introduces important changes designed to improve the quality of audit documentation.

  38. ISA 230- Audit Documentation- 2005 • The Standard requires the auditor to prepare audit documentation sufficient to allow an experienced auditor, having no previous connection with the audit, to understand: • The audit work • The audit evidence • Significant Matters arising during the audit and • The Auditor’s conclusions.

  39. ISA 230- Audit Documentation- 2005 • The revised Standard establishes: • New requirements for the auditor to prepare audit documentation promptly. • New requirements for the auditor to close the audit files within a reasonable time. • New documentation requirements when an auditor finds it necessary to depart from the requirement of an ISA to achieve the objective of the audit.

  40. ISRE 2410- Review of Interim Information -2005 The new Standard assists auditors, in carrying out their professional responsibilities when reviewing the interim financial information of an audit client. The Standard outlines the general principles of a review of interim financial information, provides guidance on the inquiries and the analytical and other review procedures the auditor is to perform, and prescribes the content of the review report.

  41. ISRE 2410- Review of Interim Information -2005 • The Standard also, provides guidance on the engagement and management representation letters the auditor may obtain when performing the review and includes illustrative review reports.

  42. UpDated Of ISAs -2006

  43. Updated of ISAs – 2006- Road to Clarity • In 2006, the IAASB made substantial progress on its work program . • Four final redrafted standards and an amended Preface approved under the clarity project. • Seven redrafted standards issued as exposure drafts under the clarity drafting conventions. • Three revised standards issued for • exposure or re-exposure.

  44. Updated of ISAs -2006 • The four final Standards are analyzed as follows: • ISA 240- The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. (Redrafted–October 2006). • ISA 300- Planning an Audit of Financial Statements (Redrafted – September 2006). • ISA 315- Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and Its Environment (Revised –September 2006).

  45. Updated of ISAs -2006 • International Standards on Auditing • ISA 330- The Auditor’s Responses to Assessed Risks. (Redrafted–September 2006). • Furthermore, IAASB made amendments under the “Clarity Project” to the “Preface to the International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services” that establish the new drafting conventions it will use in developing future ISAs, and the authority and obligation attaching to those conventions.

  46. Updated of ISAs -2006 International Standards on Auditing and finally IAASB publishes a Policy Statement, Modifications to International Standards of the International Auditing and Assurance Standards Board (IAASB) – A Guide for National Standard Setters that Adopt IAASB’s International Standards but find it necessary to make limited modifications.

  47. Updated of ISAs -2006 International Standards on Auditing All the aforementioned ISAs have been redrafted under the “Clarity Project” which makes the ISAs clearer and, by clarifying that previous guidance contained some requirements, stronger. This will lead to more consistent application of ISAs, and assist in their adoption in jurisdictions around the world.

  48. UpDated Of ISAs -2007

  49. Updated of ISAs -2007 During 2007, IAASB made significant progress on its work program. Priority of the IAASB has been the development of high quality ISAs that are accepted globally and that facilitate convergence. ISAs are becoming more widely accepted throughout the world. Many national standard setters have recognized the benefits of consistent auditing standards and have adopted ISAs.

  50. Updated of ISAs -2007 Up to date more than 100 countries have Indicated that they either have adopted ISAs or noted that there no significant changes between their national standards of auditing and ISAs.

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