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FRC comment letter on the IAASB’s Exposure Draft on an auditor's responsibilities relating to 'other information'

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29 Jul 2014

The Financial Reporting Council (FRC) has published its comment letter on the International Audit and Assurance Standards Board’s (IAASB’s) revised Exposure Draft of International Standard on Auditing (ISA) 720 'The auditor’s responsibilities relating to other information in documents containing or accompanying audited financial statements and the auditor’s report thereon'.

The IAASB issued an Exposure Draft for a revised International Standard on Auditing (ISA) 720 in November 2012.  The revised Exposure Draft responds to significant concerns raised in response to the IAASB's original proposals.

The FRC’s comment letter has been informed by comments received from respondents to its call for comments on the IAASB proposals in May 2014

Overall, conditional on a number of recommendations, the FRC are “very supportive” of the changes proposed in the IAASB’s revised Exposure Draft.

The key comments of the FRC are:

  • That it supports “in principle” the introduction of the new requirements in paragraphs 14 and 15 and the related enhanced application material that clarify the auditor’s responsibilities with respect to other information.  However the FRC suggest a number of improvements to make it clearer as to the extent and nature of the work effort required.
  • That the proposals do not communicate clearly that the auditor’s obligation does not extend to knowledge of matters identified in all other engagements performed by the firm.  In this respect the FRC recommend that the IAASB change the requirement in paragraph 14(b).
  • That the FRC does not agree with the IAASB’s conclusion to require the auditor to read and consider other information only obtained after the date of the auditor’s report, but not to require identification of such other information in the auditor’s report or subsequent reporting on such other information.  The FRC comments that “we believe that considerable benefit would accrue to stakeholders from the identification of such other information” and that it “strongly” suggests that the IAASB enhance the requirements in paragraph 21 “Reporting” in respect of these areas.

Further comments and a full response to all questions raised in the invitation to comment are contained within the full comment letter on the FRC website.

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