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Assurance

FRC consults on enhanced ethical and auditing standards

Jul 15, 2019

On July 15, 2019, the Financial Reporting Council (FRC) issued a consultation proposing important changes to the UK’s Ethical and Auditing Standards. The FRC proposes to set more stringent ethical rules for auditors, in response to findings from recent audit enforcement cases and from audit inspections. Comments are request by September 27, 2019.

In response to feedback from investors, the FRC also proposes to enhance the quality and content of auditor’s reports in order to improve transparency about what is found in the course of an audit.

Key changes proposed include:

  • A clearer and stronger ‘objective, reasonable and informed third party test’ which requires audit firms to consider whether a proposed action would affect their independence from the perspective of public interest stakeholders rather than another auditor.
  • Enhancing the authority of the Ethics Partner function within audit firms, in order to ensure firm wide focus on ethical matters and the public interest, and to require reporting to those charged with governance where an audit firm does not follow the Ethics Partner’s advice.
  • The list of prohibited non-audit services that auditors of Public Interest Entities (PIEs) can provide to audited bodies has been replaced with a much shorter list of permitted services, all of which are ‘closely related’ to an audit or required by law and/or regulation. No other services can be provided.
  • The requirement for the auditors of all UK listed entities to include in their published auditor’s reports the performance materiality threshold used in the audit.

Review the press release and consultation paper on the FRC's website.

PCAOB posts CAM resources for investors and audit committees

Jul 11, 2019

On July 11, 2019, the Public Company Accounting Oversight Board (PCAOB) released two new resources on critical audit matters (CAMs), one specifically for investors and the other for audit committees.

These resources advance the PCAOB’s strategic priority of cultivating effective communications with stakeholders, as well as providing timely, relevant, and useful information to them.

In May, Erin Dwyer joined the PCAOB as a direct point of contact for and liaison to investors, audit committees, and preparers. Erin shares some additional information about her role and these CAMs-related resources in this short video.

Review the resources on the PCAOB's website:

Investor relations: Get up to speed now on critical audit matters

Jul 09, 2019

On July 9, 2019, the Center for Audit Quality (CAQ) released a list of frequently asked questions about critical audit matters (CAMs) to help inform investor relations (IR) professionals as they prepare for those conversations

Starting in the summer of 2019, auditors will be required to communicate CAMs in their auditor’s reports. Investors with questions about CAMs may turn to a company’s IR group for answers.

Review the publication on the CAQ's website.

Global Ethics Board Launches eCode; Takes Usability and Accessibility of Code of Ethics to Next Level

Jun 26, 2019

On June 26, 2019, the In­ter­na­tional Ethics Stan­dards Board for Ac­coun­tants (IESBA) launched the eCode – a web-based tool that delivers the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) on a digital platform.

The eCode represents the outcome of a strategic initiative to leverage modern technologies, including mobile access, to make the content of the Code as widely accessible and visible and as user-friendly as possible. In addition to enhanced search and navigation, the eCode includes links to non-authoritative resources that provide contextual information or explain the rationale for particular provisions in the Code.

Re­view the IESBA’s  press release and a copy of the eCode on the IESBA's web­site.

AICPA issues proposed SAS on audit evidence

Jun 21, 2019

On June 21, 2019, the American Institute of CPA’s (AICPA) issued a proposed Statement on Auditing Standards (SAS), “Audit Evidence.”

The proposed SAS is intended to address “the evolving nature of business and audit services and issues that have arisen during the standard-setting activities of the [Auditing Standards Board, including] use of emerging technologies by both preparers and auditors, audit data analytics (ADA), the application of professional skepticism, the expanding use of external information sources as audit evidence, and more broadly, the accuracy, completeness, and reliability of audit evidence.”

If finalized, the proposed SAS would supersede Section 500, Audit Evidence, of SAS 122, Statements on Auditing Standards: Clarification and Recodification, as amended.

Comments on the proposed SAS are due by September 18, 2019. For more information, see the proposed SAS on the AICPA’s Web site.

AICPA proposes amendments to converge concepts in SSARS with global assurance standards

Jun 20, 2019

On June 20, 2019, the Accounting and Review Services Committee of the American Institute of CPA’s (AICPA) issued a proposed Statement on Standards for Accounting and Review Services (SSARS), “Materiality in a Review of Financial Statements, Adverse Conclusions, and Special Purpose Frameworks.”

The proposed amendments are intended to more closely align SSARS with International Standard on Review Engagements 2400 (Revised), Engagements to Review Historical Financial Statements, and thereby “facilitate the accountant’s ability to perform and report on engagements in accordance with both sets of standards.”

Comments on the proposed SSARS are due by September 20, 2019.

For more information, see the proposed SSARS on the AICPA’s Web site.

IAASB and IESBA increase collaboration with National Standards Setters

Jun 20, 2019

On June 20, 2019, the In­ter­na­tional Au­dit­ing and As­sur­ance Stan­dards Board (IAASB) and the In­ter­na­tional Ethics Stan­dards Board for Ac­coun­tants (IESBA) shared a brief update on their latest initiative to support global standard setting and to better leverage the coordination opportunities between their two boards.

With global regulatory fragmentation risk on the rise, and greater international collaboration on the forthcoming G20 agenda, they announced that, in May 2019, they convened a meeting in Paris with national audit and ethics standard-setting organizations representing 17 jurisdictions.

The IAASB and IESBA dubbed this four-way dialogue (IAASB + IESBA + national audit & assurance + ethics standards setters) a “quadrilogue”.

The discussions marked the beginning of an exploratory and evolutionary process for the IAASB and IESBA to work with national standard setters, and for national standard setters to work with each other, to consider new ideas in pursuit of mutually shared objectives.

The meeting advanced already-significant IAASB and IESBA coordination efforts, which acknowledge the importance of audit and ethics standards to audit quality. The meeting facilitated further collaboration between a number of national audit & assurance standard setters and the IAASB, as well as identifying ways national standard setters can work more effectively together in the interests of international standard setting.

Some important themes emerged from the “quadrilogue”:

  • the value of continued IAASB and IESBA coordination, the significant advances made to-date, and how it serves as a catalyst for national coordination;
  • the importance of early coordination between our two boards, and increased stakeholder communications about it;
  • recognition that it is important to identify the areas where four-way engagement makes most sense; and
  • quality management within accountancy firms, implications of technology developments, stakeholder engagement, and enhanced implementations activities are possible topics for further exploration.

Re­view the announcement on the IAASB’s web­site.

CPA Canada Article – Auditing crypto-assets: be bold but recognize the risks, say experts

Jun 10, 2019

On June 10, 2019, CPA Canada is­sued an ar­ti­cle writ­ten by Taryn Abate, director of audit and assurance with the research, guidance and support department at CPA Canada which informs read­ers about auditing crypto-assets, including that CPA Canada has set up a new working group that is looking at how best to approach this new service area.

Read the ar­ti­cle on the CPA Canada web­site.

Joint IAASB IESBA Comment Letter in Response to the UK’s Brydon Review

Jun 03, 2019

On June 3, 2019, the International Auditing and Assurance Standards Board (IAASB) and the In­ter­na­tional Ethics Stan­dards Board for Ac­coun­tants (IESBA) issued a joint response to the UK's Brydon review. In addition to responding to the Brydon review's proposals, the letter highlights how both Boards act in the public interest to support public confidence in audits of financial statements and other assurance engagements, and also serve to reinforce the important ethical responsibilities of professional accountants in business in the external reporting ecosystem.

The Brydon review is an independent review, established by the UK government in late 2018 and led by Sir Donald Brydon; it is looking at audits as a product and what audits should be in the future. It will address the audit expectation gap: the difference between what people think an audit does and what it actually does. It will also look at the scope of an audit, any changes that may need to be made to it and how it can better serve the public interest. The independent review will be supported by advisory groups that will provide advice and challenge emerging findings and recommendations.

Re­view the joint response on the IAASB’s website.

Tom Seidenstein to Lead the International Auditing and Assurance Standards Board

Jun 03, 2019

On June 3, 2019, the In­ter­na­tional Au­dit­ing and As­sur­ance Stan­dards Board (IAASB) announced that Mr. Thomas R. Seidenstein will become the new chair of the IAASB for a three-year term commencing July 1, 2019. He succeeds Prof. Arnold Schilder, who has led the IAASB since 2009.

Mr. Seidenstein’s career spans both international standard setting and the private sector. He is currently senior vice president for Strategy, Innovation and Capital Management at Fannie Mae, a leading source of US housing market liquidity. He previously served as the chief operating officer at the International Financial Reporting Standards Foundation, where he led the organization’s governance review and reform process and worked closely with regulators to support global adoption of International Financial Reporting Standards. He holds a Master in Public Policy from the Harvard Kennedy School and is an undergraduate of the Woodrow Wilson School of Public and International Affairs, Princeton University.

Mr. Seidenstein’s appointment was recommended by the Interim Nominating Committee after an extensive international search. His appointment was endorsed by the IFAC Board and approved by the Public Interest Oversight Board, which oversees the IAASB.

For fur­ther de­tails, please re­fer to the press re­lease on the IAASB”s web­site.

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