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FRC calls for comments on the IAASB proposed changes to audit reports

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01 Aug 2013

The Financial Reporting Council (FRC) has requested comments from interested parties on the International Auditing and Assurance Standards Board’s (IAASB’s) recently issued Exposure Draft which proposes changes to audit reports including the provision of more information on how audits are performed. The FRC intends to use comments received to assist it in developing its response to the IAASB’s proposals. Comments are invited by the FRC until 1 November 2013.

The IAASB released their Exposure Draft (ED) ‘Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs) in July 2013.  The ED revises a number of existing ISAs (700, 260, 570, 705 and 706) but also introduces a new ISA, ISA 701 ‘Communicating Key audit matters in the Independent Auditor’s Report’.  Under ISA 701, the IAASB proposes that within the audit report there should be a “key audit matters” section which would outline audit matters that were of most significance which arose during the audit.     

The FRC’s equivalent ISAs (UK and Ireland) are largely developed from the ISAs published by the IAASB.  The FRC has made a number of recent revisions to ISAs 260 and 700 (UK and Ireland) as a result of changes that have been made to the UK Corporate Governance Code in October 2012.  The FRC have also recently issued further revisions to ISA 700 ‘The Independent Auditor’s Report on Financial Statements’ (UK and Ireland) in response to calls from investors to make audits more transparent.  These revisions cover broadly the same areas as the proposed ISA 701.   

In the Invitation to comment the FRC note that they believe the recent changes they have made to the UK Corporate Governance Code and subsequent changes to ISAs (UK and Ireland) will achieve many of the aims that the IAASB is seeking to achieve with the current revisions to ISAs.  However they are keen to understand from respondents whether any further changes to ISAs (UK and Ireland) should be made to incorporate the IAASB proposals and also the new ISA 701.  In providing their comments, the FRC would like respondents to have regard to “the inter-relationship of the IAASB’s proposals and the changes already made by the FRC in 2012/13”. 

Respondents are also invited to provide comments on the 14 specific questions raised by the IAASB in their ED. 

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