CAQ Issues Discussion Document on Monitoring Inflation

Jun 20, 2022

The Center for Audit Quality (CAQ) International Practices Task Force (IPTF) issued a discussion document, Monitoring Inflation in Certain Countries. The discussion document addresses the IPTF’s “framework for compiling inflation data to assist registrants in monitoring inflation statistics in connection with their determination of the inflationary status of countries in which they have operations.”

The document notes that Ethiopia, Suriname, Turkey, and Yemen have been added to the list of countries with three-year cumulative inflation rates exceeding 100 percent.

Review the document on the CAQ's website.

PCAOB updates standard-setting and research agendas

Jun 20, 2022

The PCAOB seeks to establish and maintain high-quality auditing and related professional practice standards for audits of public companies, as well as of registered broker-dealers, in support of the PCAOB’s mission to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports.

The new board announced its priorities via its updated standard-setting and research agendas. What’s not new? “Other Auditors” and “Quality Control” are still at the top of the list. Both projects have been active for some time. In addition, Data and Technology and Audit Evidence remain on the research agenda.
What’s new? The standard-setting agenda now has projects designated as “short-term” and “mid-term.” In addition to Other Auditors and Quality Control as noted above on the short-term list, the board has added:

  • NOCLAR – This refers to Noncompliance with Laws and Regulations
  • Attestations Standards
  • Going Concern
  • Confirmations

On the Mid-term list is:

  • Substantive Analytical Procedures
  • Fraud
  • Interim Ethics and Independence Standards
  • Interim Standards

What are interim standards? Upon inception of the PCAOB, all AICPA auditing standards were adopted on an “interim” basis. Many standards have since been updated by the PCAOB. There remains 28 interim auditing standards, 6 interim ethics and independence standards, and 6 attestation interim standards. Are they broken? Not necessarily. But standards should be continuously evaluated and modernized. Therefore, it seems a good effort to take stock of these interim standards.

Review the press release on the PCAOB's website.

Balancing urgency and effectiveness in international sustainability assurance standards

Jun 08, 2022

On June 8, 2022, the International Audit Assurance and Standards Board (IAASB) released a statement by Tom Seidenstein, IAASB Chair, on how the IAASB is taking the next steps for new standards for ESG assurance.

With global assets in sustainability and ESG-related investment vehicles due to surpass $53 trillion by 2025, the need for reliable, neutral, and comprehensive frameworks for reporting sustainability information is evident. And policymakers and regulatory bodies have taken note. The European Union (EU) continues to negotiate terms for its Corporate Sustainability Reporting Directive. This past March, the U.S. Securities and Exchange Commission proposed new rules regarding disclosure of climate-related risks. The newly formed International Sustainability Standards Board (ISSB), which has support of the G20 and others, issued their exposure drafts for sustainability reporting for public comment. The International Organization of Securities Commissions and Financial Stability Board weighed in on climate-related disclosures as well.

Review the press release on the IAASB's website.

IAASB less complex entities conference yields key takeaways and strong support for an LCE standard

May 24, 2022

On May 24, 2022, the International Auditing and Assurance Standards Board (IAASB) published key takeaways from its recent Paris conference on the audits of financial statements of less complex entities (LCEs). Drawn from two days of discussions with more than 130 participants from 33 jurisdictions, the takeaways indicate a strong steer for the IAASB to finalize the develop of a separate standard for audits of financial statements of LCEs in the public interest.

Key takeaways focus on themes around the continuing need for a timely global solution comprising a separate, standalone standard; working towards a common understanding of what an ‘LCE’ is and that this should also appropriately include audits of group financial statements; ways to support adoption and implementation of the standard; and the importance of communication about how the standard helps serve the public interest.

Review the press release and key takeaways on the IAASB's website.

IAASB Issues New Non-Authoritative Guidance on Fraud in an Audit of Financial Statements

May 05, 2022

On May 5, 2022, the International Auditing and Assurance Standards Board (IAASB) released non-authoritative guidance, "The Fraud Lens – Interactions Between ISA 240 and Other ISAs". The guidance illustrates the relationship and linkages between International Standard on Auditing (ISA) 240, "The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements", and other ISAs when planning and performing an audit engagement and reporting thereon.

Review the press release and guidance on the IAASB's website.

IAASB Fact Sheet Addresses Engagement Team Definition

May 02, 2022

On May 2, 2022, the International Auditing and Assurance Standards Board (IAASB) released a new fact sheet to help users of its standards adapt to the clarified and updated definition of “engagement team”.

The new fact sheet addresses the clarified definition and its possible impacts, including recognition that engagement teams may be organized in a variety of ways, including across different locations or by the activity they are performing. The fact sheet also includes a diagram that walks users through who specifically is included and excluded.

Review the press release and fact sheet on the IAASB's website.

PCAOB requests comment on impact of auditing requirements related to estimates and specialists

Apr 11, 2022

On April 12, 2022, the Public Company Accounting Oversight Board (PCAOB) issued a Request for Comment on the initial impact of new requirements for auditing accounting estimates and using the work of specialists.

The PCAOB will evaluate comments received, along with other evidence obtained from the analysis, and consider whether additional guidance or other steps may be appropriate.

Review the following additional information on the PCAOB's website:

IFIAR releases 2021 Report on Annual Survey of Audit Inspection Findings

Apr 08, 2022

The International Forum of Independent Audit Regulators (IFIAR) released its tenth annual survey of inspection findings arising from its member regulators’ individual inspections of audit firms affiliated with the six largest global audit firm networks.

Review the press release and survey on the IFIAR's website.

IAASB Modernizes Its Standard for Group Audits in Support of Audit Quality

Apr 07, 2022

On April 7, 2022, the International Auditing and Assurance Standards Board (IAASB) released International Standard on Auditing (ISA) 600 (Revised). The revised standard addresses special considerations that apply to audits of group financial statements (group audits). Group audits are often more complex and challenging than single-entity audits because a group may have many entities or business units across multiple jurisdictions, and component auditors may be involved. The revised standard becomes effective for audits of group financial statements for periods beginning on or after December 15, 2023.

ISA 600 (Revised) includes a robust risk-based approach to planning and performing a group audit. The approach focuses the group auditor’s attention and work effort on identifying and assessing the risks of material misstatement of the group financial statements and designing and performing further audit procedures to respond to those assessed risks. It also recognizes that component auditors can be, and often are, involved in all phases of the group audit. The standard furthermore promotes a clear, proactive and scalable approach for group audits that can be applied to today’s evolving group audit structures.

The IAASB also developed a Basis for Conclusions and factsheet to support the implementation.

Review the press release on the IAASB's website.

CPAB Regulatory Oversight Report: 2021 Annual Inspections Results

Apr 05, 2022

The Canadian Public Accountability Board’s (CPAB) Regulatory Oversight Report on its 2021 annual inspections features common findings and highlights several audit quality matters that impact audit committees, regulators and investors.

CPAB's 2021 findings show mixed inspection results with inconsistent audit performance among the 11 annually inspected audit firms. Key findings at the annually inspected firms include:

  • Two of the four largest firms met the target of no more than 10 per cent of files inspected with significant findings.
  • The findings rate at the other annually inspected firms in 2021 is substantially above CPAB’s target.
  • Four firms had significant findings in more than 50 per cent of files inspected and three firms had significant findings in more than 25 per cent of files inspected.
  • Investigations at two annually inspected audit firms resulted in the imposition of requirements and/or sanctions including public censure.

Overall, their reviews point to disappointing deficiencies in the areas of professional skepticism, sufficient audit evidence and forward-looking estimates. They expect a continued high level of enforcement and other regulatory intervention in 2022.

Review the report on the CPAB's website.

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