IAASB Feedback statement and way forward on audits of less complex entities (LCEs)
The International Auditing and Assurance Standards Board (IAASB) published its feedback statement which provides an overview of the key messages from the responses to the recent IAASB discussion paper.
The feedback statement summarises that:
- respondents think that revising the ISAs would be the most effective solution in addressing issues and challenges, but recognise that this would not be timely
- developing a separate standard is perceived as a timelier solution by respondents
- guidance is not seen as a standalone solution
- overall, the IAASB is encouraged to consider a combination of approaches to tackle the issues at hand
The IAASB will continue to analyse the feedback from stakeholders to help determine the way forward. Further information gathering activities will continue until June 2020, at which time the IAASB will make a decision about the way forward. Read more
IAASB enhanced and modernised ISA 315, auditing standard on identifying and assessing risks of material misstatement
The IAASB released International Standard on Auditing (ISA) 315 (Revised 2019).
The main objective of the revision was to encourage a more consistent and robust risk assessment. The impact of the evolving environment in which businesses operate, particularly in relation to technology, was also taken into consideration.
The standard will become effective for financial statement audits for periods beginning on or after 15 December 2021.
The revision has also resulted in conforming and consequential amendments to other international standards. Read more
The PCAOB issued a concept release on a potential approach to revising its quality control standards
The Public Company Accounting Oversight Board (PCAOB) is requesting comments on what changes might be proposed in the future to strengthen the requirements for audit firms’ quality control systems.
This potential approach is based on the proposed international standard on quality management, ISQM 1, with certain differences as appropriate for firms that are subject to PCAOB standards and rules.
If a new PCAOB Quality Control standard is proposed in the future, there will be another opportunity to comment on the proposal.
The deadline for the submission of comments on this concept release is 16 March 2020. Read more
SEC proposes to modernise auditor independence rules
SEC proposed amendments designed to modernise certain auditor independence requirements. The proposal is likely to reduce compliance costs for both audit firms and their clients by updating certain aspects of the auditor independence requirements that may be unduly burdensome. The Chairman of SEC, Jay Clayton, states that the proposed amendments would also increase the number of qualified audit firms an issuer could choose from. Read more
European Corporate Governance Institute (ECGI) issued a working paper addressing the auditor independence puzzle
Policymakers and scholars around the world have attempted to solve the auditor independence puzzle through a variety of mechanisms, including prohibitions and rotations. More recent proposals have also included breaking up audit firms and the empowerment of shareholders. This paper argues that none of these solutions is entirely convincing. For this reason, the paper proposes a new model to solve the auditor independence puzzle. Read more