APB publishes Exposure Draft of a revision of ISA (UK and Ireland) 700 'The Auditor's Report on Financial Statements'
News types: Consultation Announcement
Published: 23 September 2010
APB PN 132
The Auditing Practices Board (APB) today issued a consultation paper on a proposed revision of ISA (UK and Ireland) 700 “The Auditor’s Report on Financial Statements”. The consultation period ends on 26 November 2010.
A revision to ISA (UK and Ireland) 700 was issued in March 2009 with an effective date, for its application to UK companies, of periods ending on or after 5 April 2009. In meeting the requirements of ISA (UK and Ireland) 700, an auditor can choose to refer to the APB web site description of an audit in its auditor’s report or incorporate verbatim the short form description, specified by ISA (UK and Ireland) 700, in its report. APB has maintained on its web site two descriptions of the scope of an audit applicable to publicly traded and non-publicly traded UK companies respectively.
Arising from the need to extend the application of ISA (UK and Ireland) 700 to all entities, the APB has decided to replace the extant company specific descriptions with a generic description that can be applied to all entities. The APB considers that publishing a separate description for each type of entity would lead to unnecessary complexity. The generic description restricts itself to addressing the auditor’s responsibilities arising from the requirements of auditing standards as these are applicable to all audits. It is considered unnecessary to describe the auditor’s reporting responsibilities arising from requirements other than auditing standards as they are required to be set out in either the opinion section of the auditor’s report or in the section in which the auditor describes matters on which it is required to report by exception.
However, the majority of auditor’s reports do not cross refer to the description on APB’s web site but include the short form description specified by ISA (UK and Ireland) 700. In light of the growing importance of narrative information in annual reports the APB proposes to amend the short form description to refer to the auditor’s responsibility to read such narrative information. This does not involve any change in the auditor’s responsibilities or procedures.
Richard Fleck, Chairman of the APB and a director of the FRC commented:
The Auditing Practices Board (APB) today issued a consultation paper on a proposed revision of ISA (UK and Ireland) 700 “The Auditor’s Report on Financial Statements”. The consultation period ends on 26 November 2010.
A revision to ISA (UK and Ireland) 700 was issued in March 2009 with an effective date, for its application to UK companies, of periods ending on or after 5 April 2009. In meeting the requirements of ISA (UK and Ireland) 700, an auditor can choose to refer to the APB web site description of an audit in its auditor’s report or incorporate verbatim the short form description, specified by ISA (UK and Ireland) 700, in its report. APB has maintained on its web site two descriptions of the scope of an audit applicable to publicly traded and non-publicly traded UK companies respectively.
Arising from the need to extend the application of ISA (UK and Ireland) 700 to all entities, the APB has decided to replace the extant company specific descriptions with a generic description that can be applied to all entities. The APB considers that publishing a separate description for each type of entity would lead to unnecessary complexity. The generic description restricts itself to addressing the auditor’s responsibilities arising from the requirements of auditing standards as these are applicable to all audits. It is considered unnecessary to describe the auditor’s reporting responsibilities arising from requirements other than auditing standards as they are required to be set out in either the opinion section of the auditor’s report or in the section in which the auditor describes matters on which it is required to report by exception.
However, the majority of auditor’s reports do not cross refer to the description on APB’s web site but include the short form description specified by ISA (UK and Ireland) 700. In light of the growing importance of narrative information in annual reports the APB proposes to amend the short form description to refer to the auditor’s responsibility to read such narrative information. This does not involve any change in the auditor’s responsibilities or procedures.
Richard Fleck, Chairman of the APB and a director of the FRC commented:
“APB proposes amending the optional short form description of an audit to refer to the important requirement of ISAs (UK and Ireland) that an auditor is required to read all of the narrative information included in the annual report in which financial statements are published, with a view to ensuring that there are no material misstatements or inconsistencies with the financial statements.”
This proposed revision to ISA (UK and Ireland) 700 would apply to auditor’s reports of all UK entities (including companies) for periods ending on or after 23 March 2011. Earlier adoption is encouraged.
Notes to Editors
- The FRC is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
- The APB is committed to leading the development of auditing practices in the United Kingdom and the Republic of Ireland so as to:
- establish high standards of auditing;
- meet the developing needs of users of financial information; and
- ensure public confidence in auditing.
- Proposed changes to ISA (UK and Ireland) 700 other than those described in the Press Notice are a consequence of those changes. As the proposed changes to ISA (UK and Ireland) 700 are not substantive APB is proposing an exposure period of 2 months.
- The APB intends to publish a compendium of illustrative auditor’s reports, on UK private sector financial statements, for periods ended on or after 15 December 2010. This compendium will become the principal source of APB’s illustrative auditor’s reports on such financial statements. APB’s Practice Notes will cease to include illustrative examples of auditor’s report on financial statements although they will continue to include illustrative examples of other auditor’s reports such as those addressed to regulators.
Document created under a former FRC operating body.