Amendments to the ISAs/CASs with respect to the IESBA’s revised Definitions of Listed Entities and PIEs [ED]
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The AASB comment period ended on September 16, 2022, and the IAASB comment period ended on October 4, 2022 |
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Next Steps: |
The AASB plans to approve final revisions to the CASs in September 2023. |
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Last updated: |
July 2023 |
Overview
At its meeting on March 14-18 and March 23, 2022, the IAASB discussed and approved a project proposal to undertake a narrow scope maintenance of standards project on listed entities and PIEs. This project sets out the IAASB’s actions to respond to recent revisions to the IESBA Code as a result of their project on the Definitions of Listed Entity and PIE.
The IAASB’s proposed actions include:
- a limited number of targeted changes to the ISQMs and ISAs; and
- developing an objective and guidelines to support the IAASB’s judgments in identifying specific matters for which differential requirements are appropriate in the ISQMs or ISAs.
In addition, the Board discussed initial proposals to amend ISA 700 (Revised) that would provide a mechanism for the firm to disclose whether it has applied the relevant ethical requirements for independence for certain entities, such as PIEs in the IESBA Code. The Board’s views will inform the Exposure Draft, which will be presented for discussion and approval at the June 2022 IAASB meeting.
On July 6, 2022, the IAASB issued an Exposure Draft of proposed narrow scope amendments to ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements and ISA 260 (Revised), Communication with Those Charged with Governance. The proposed amendments will help operationalize recently approved changes to the IESBA International Code of Ethics for Professional Accountants (including International Independence Standards) related to listed and public interest entities. The changes to the IESBA Code require firms to publicly disclose when the independence requirements for public interest entities have been applied in an audit of financial statements. Comments are requested by October 4, 2022.
On August 9, 2022, the AASB issued its Exposure Draft of the same name. Comments are requested by September 16, 2022.
On October 4, 2022, the AASB submitted a comment letter responding to the IAASB’s Exposure Draft, where it provides its support to the proposed amendments to ISA 700 (Revised). The AASB indicates that it agrees that the revisions provide a clear mechanism to operationalize the IESBA’s transparency requirement, while recognizing that some jurisdictions, like Canada, adopt the ISAs but apply ethical requirements different from the IESBA Code.
However, the AASB recommends amending paragraph 17 of ISA 260 (Revised) to include an explicit requirement for the auditor to communicate with those charged with governance for which independence requirements were applied. The AASB is concerned that proposed paragraph A29 of ISA 260 (Revised) may not, in all circumstances, achieve this desired transparency. It also shares its concerns that other projects launched by the IAASB in addition to this one, may result in multiple changes to the auditor’s report. These changes, in relatively quick succession, could create implementation challenges and reduce the understandability of the auditor’s report. In considering any future revisions to the auditor’s report, the AASB strongly urges the IAASB to ensure such revisions are coordinated to mitigate the risk of these potential unintended consequences.
The IAASB completed this project in June 2023. It was progressed on a faster moving timeline to align with the effective date of the revisions to the IESBA Code in relation to listed entity and PIE.
At its June 12-13, 2023, meeting, the AASB discussed whether any Canadian amendments should be made when adopting the revisions in the equivalent Canadian Auditing Standards (CASs). After discussing the feedback received on its Exposure Draft and the final revisions proposed by the IAASB, the AASB intends to adopt the IAASB’s revisions without Canadian amendments. The AASB plans to approve final revisions to the CASs in September 2023.
For more information and updates on the this project, visit the IAASB’s project page.
Other developments
August 2022
On August 9, 2022, the AASB issued its Exposure Draft of proposed narrow scope amendments to CAS 700 (Revised) and CAS 260 (Revised) in respect of the changes to the IESBA Code which require firms to publicly disclose when the independence requirements for public interest enti¬ties have been applied in an audit of financial statements. Comments are requested by September 16, 2022.
July 2022
On July 6, 2022, the IAASB issued an Exposure Draft of proposed narrow scope amendments to ISA 700 (Revised) and ISA 260 (Revised) in respect of the changes to the IESBA Code which require firms to publicly disclose when the independence requirements for public interest entities have been applied in an audit of financial statements. Comments are requested by October 4, 2022.
March 2022
At its meeting on March 14-18 and 23, 2022, the IAASB discussed and approved a project proposal to undertake a narrow scope maintenance of standards project on listed entity and PIE.