Assurance

IAASB Announces Revision of ISA 240: Strengthening Auditor Duties Regarding Fraud in Financial Statement Audits

Feb 06, 2024

On February 6, 2024, the International Auditing and Assurance Standards Board (IAASB) announced the revision of the International Standard on Auditing (ISA) 240, the Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements.

This move comes in response to the critical role high-quality audits play in ensuring the smooth functioning of capital markets. Recent international corporate failures and significant accounting restatements have heightened scrutiny on all participants in the financial reporting system, emphasizing the importance of confidence in audits. As fraud remains a focal point, the IAASB seeks to strengthen auditor duties concerning fraud detection and prevention to better serve the public interest and bolster trust in financial reporting.

The changes will:

  • clarify the auditor’s responsibilities about fraud in financial statement audits;
  • strengthen the auditor’s procedures; and 
  • include more detail about fraud in the auditor’s report. 

The proposed revisions are expected to significantly strengthen the IAASB’s standard on auditors’ responsibilities related to fraud by defining the expectations in relation to fraud, delineating more robust procedures, and increasing transparency about the auditors’ responsibilities and fraud-related procedures in the auditor’s report.

Access the explanatory memo on the IASSB’s website.

IAASB proposes strengthening of audit standard related to fraud

Feb 06, 2024

On February 6, 2024, the International Auditing and Assurance Standards Board (IAASB) proposed a significant strengthening of its standard on auditors’ responsibilities relating to fraud.

The proposed revisions define the expectations in relation to fraud, delineate more robust procedures, and increase transparency about the auditors’ responsibilities and fraud-related procedures in the auditor’s report.

Key Changes in the Proposed Revisions include:

  • Clarified auditor responsibilities relating to fraud in an audit.
  • Emphasized professional skepticism to ensure auditors remain alert to possible fraud and exercise professional skepticism throughout an audit.
  • Strengthened identification and assessment of risks of material misstatement due to fraud.
  • Clarified response to fraud or suspected fraud identified during the audit.
  • Increased ongoing communication with management and those charged with governance about fraud.
  • Increased transparency about auditors’ responsibilities and fraud-related procedures in the auditor’s report.
  • Enhanced audit documentation requirements about fraud-related procedures.

Respondents are encouraged to share their insights using the response template by June 5, 2024.

Access the exposure draft and response template on IAASB’s website.

IAASB proposes strengthening of audit standard related to fraud

Feb 06, 2024

On February 6, 2024, the International Auditing and Assurance Standards Board (IAASB) proposed a significant strengthening of its standard on auditors’ responsibilities relating to fraud.

The proposed revisions define the expectations in relation to fraud, delineate more robust procedures, and increase transparency about the auditors’ responsibilities and fraud-related procedures in the auditor’s report.

Key Changes in the Proposed Revisions include:

  • Clarified auditor responsibilities relating to fraud in an audit.
  • Emphasized professional skepticism to ensure auditors remain alert to possible fraud and exercise professional skepticism throughout an audit.
  • Strengthened identification and assessment of risks of material misstatement due to fraud.
  • Clarified response to fraud or suspected fraud identified during the audit.
  • Increased ongoing communication with management and those charged with governance about fraud.
  • Increased transparency about auditors’ responsibilities and fraud-related procedures in the auditor’s report.
  • Enhanced audit documentation requirements about fraud-related procedures.

Respondents are encouraged to share their insights using the response template by June 5, 2024.

Access the exposure draft and response template on IAASB’s website.

SEC Chief Accountant releases statement on Audit Quality

Feb 05, 2024

On February 05, 2024, the Securities and Exchange Commission’s (SEC) Chief Accountant Paul Munter released a statement on how auditors and audit committees must focus on audit quality to protect investors.

Mr. Munter expressed concerns over the Public Company Accounting Oversight Board's (PCAOB) recent inspection findings. He highlighted a troubling increase in deficiencies, particularly regarding insufficient audit evidence, rising from 29% in 2020 to 40% in 2021 inspections. This trend, Mr. Munter emphasized, necessitates renewed commitment from the entire auditing profession to ensure investor protection.

He reminded auditors of their fundamental responsibility to investors, requiring objective judgment, rigorous skepticism, and prioritizing investor interests throughout the audit process. While acknowledging the dedication of most auditors, Mr. Munter stressed the need for renewed focus on delivering high-quality audits in line with the profession's mission.

Access the statement on the SEC’s website

Navigating feedback and future steps for CSSA 5000 Sustainability Assurance Standard

Jan 26, 2024

On January 26, 2024, the Auditing and Assurance Standards Board (AASB) announced that it has reviewed the feedback received and is considering necessary adjustments for Canada's adaptation of the international sustainability assurance standard, CSSA 5000.

After reviewing the feedback gathered, AASB found it to be generally consistent with the main themes identified during the international standard's consultation. These include requests for enhanced guidance on relevant ethical requirements and quality management, clarification on the relationship between CSSA 5000 and ISAE 3410, further consideration and guidance on the entity's materiality process, greater detail on materiality, particularly for qualitative disclosures, more guidance on obtaining evidence for estimates and forward-looking information, additional requirements and guidance for group sustainability assurance engagements, and the need for first-time implementation guidance.

Over the next few months, the AASB will be working to ensure Canadian feedback is considered by the International Auditing & Assurance Standards Board (IAASB) as the final standard is developed. The anticipated approval date for the final CSSA 5000 is December 2024.

Access the press release on the AASB’s website.

IIA releases Global Internal Audit Standards

Jan 09, 2024

On January 9, 2024, the Institute of Internal Auditors (IIA) released a new set of global internal audit standards. They were designed to help internal auditors and their organizations respond better to today’s complex and rapidly changing business environment.

Among the notable changes introduced by the International Professional Practices Framework (IPPF) Evolution project are:

  • Strengthening governance frameworks to improve organizations’ responsiveness to rapidly changing business environments.
  • Specific guidance to assist internal auditors in the public sector and for small internal audit functions.
  • A more flexible framework that can adapt to the unique challenges faced by auditors in different parts of the world.
  • Specific guidance and standards on critical areas like cybersecurity.

The Standards provide internal audit principles, requirements, and considerations for implementation in a streamlined format. They help elevate the quality of internal auditing and enhance the internal audit function’s role as an essential business partner to boards and senior management.

Access the press release on the IIA’s website.

IAASB opens public consultation on amendments to meet expectations for public interest audits

Jan 08, 2024

On January 8, 2023, the International Auditing and Assurance Standards Board (IAASB) launched a consultation process on proposed narrow scope amendments to achieve greater convergence with the International Ethics Standards Board for Accountants’ (IESBA) International Code of Ethics for Professional Accountants (Including Independence Standards).

These proposed revisions have two key objectives. First, they would align definitions and requirements in IAASB standards with new definitions for publicly traded and public interest entities in the IESBA Code. Second, the amendments would extend the applicability of existing differential requirements for listed entities to meet heightened stakeholder expectations regarding audits of public interest entities (PIE).

Key proposed revisions include extending the scope of the entities included under the International Standards on Quality Management and the International Standards on Auditing such that they will be subject to:

  • Engagement quality reviews;
  • Providing transparency in the auditor’s report on specific aspects of the audit, including auditor independence, communicating key audit matters, and the engagement partner’s name; and
  • Communicating with those charged with governance to help them fulfill their responsibility overseeing the financial reporting process, (e.g., communicating about quality management and auditor independence).

The IAASB invites all stakeholders to provide feedback on the Exposure Draft using the digital Response Template, which is available on the IAASB website. Feedback is requested by April 8, 2024.

Access the exposure draft on the IAASB website.

IAASB issued new standard for Audits of Less Complex Entities

Dec 06, 2023

On December 6, 2023, the International Auditing and Assurance Standards Board (IAASB) published the International Standard on Auditing for Audits of Financial Statements of Less Complex Entities, known as the ISA for LCE.

The ISA for LCE is a standalone global auditing standard designed specifically for smaller and less complex businesses and organizations. Built on the foundation of the International Standards on Auditing (ISAs), audits performed using this standard provide the same level of assurance for eligible audits: reasonable assurance. The standard is effective for audits beginning on or after December 15, 2025, for jurisdictions that adopt or permit its use.

Released alongside the ISA for LCE are a Basis for Conclusions, which details feedback from the public consultation period, a high-level fact sheet, and a frequently asked questions document. Additional materials to help jurisdictions navigate adoption will be issued in 2024, including supplementary guidance, a fact sheet on adoption, and a first-time implementation guide.

In May 2023, in its comment letter to the IAASB, the Auditing and Assurance Standards Board (AASB) indicated that it will continue to monitor and provide input to the IAASB as it works towards providing solutions in this area.

Review the materials  and the comment letter on the IAASB website.

PCAOB Chair delivers keynote urging firms to increase audit quality and ensure investors are protected

Dec 04, 2023

On December 4, 2023, Public Company Accounting Oversight Board (PCAOB) Chair, Erica Y. Williams delivered remarks reminding auditors that investors depend on high-quality audits to secure and maintain trust and confidence in the capital markets

Williams discussed the need for updating standards, citing proposals and changes made by the PCAOB. She outlined efforts to address issues such as noncompliance and emphasized the importance of public comments in shaping standards. She also discussed PCAOB's enforcement actions, including sanctions and penalties, to ensure accountability and protect investors.

Williams encouraged firms to focus on quality control and remediation for improved audit quality and concluded by emphasizing the crucial role auditors play in fostering confidence in the financial system and protecting investors.

Access the speech on the PCAOB website

SEC Approves PCAOB Standard on Auditor’s Use of Confirmation

Dec 04, 2023

On December 4, 2023, the Securities and Exchange Commission (SEC) released an order approving the PCAOB’s amendments related to the auditor’s use of confirmation, which were published in the Federal Register on October 17, 2023.

These amendments are intended to strengthen and modernize the requirements for the confirmation process by describing principles-based requirements for all methods of confirmation, including paper-based and electronic means of communications.

According to PCAOB’s Chair Erica Williams’s, “the new standard, which replaces a standard that had not been significantly updated in twenty years, is also a big step forward as the Board continues to execute its strategic goal of modernizing PCAOB standards.”

Access the order on SEC’s website.

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