During its December 2020 meeting, the IAASB held its first public discussions on the draft of a separate standard being developed for an audit of less complex entities and the official project proposal to complete and publish the draft standard for public consultation in 2021. The IAASB approved the project proposal and early draft.
Following these decisions, the IAASB today published a new communique detailing plans for the new standard, including current thinking on what the standard will look like, what entities it will apply to, and the development timeline.
For additional information on the IAASB’s efforts to balance the needs of all its stakeholders by addressing complexity, understandability, scalability and proportionality in the International Standards on Auditing, please see its November 2020 communique.
The International Auditing and Assurance Standards Board (IAASB) today released its three quality management standards. The standards promote a robust, proactive, scalable and effective approach to quality management and mark a significant evolution of the existing quality control standards.
“These standards will drive the audit profession to an enhanced approach to quality ‘management’ rather than ‘control’, which better enables the consistent performance of quality engagements, including audits,” according to IAASB Chair Tom Seidenstein. “The standards place greater responsibility on firm leadership for continuously improving the quality of their engagements and remediating when deficiencies are found. When effectively implemented, the standards should help ensure that a commitment to quality is at the heart of firm strategy and operations.”
The suite of standards includes:
International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements;
ISQM 2, Engagement Quality Reviews; and
International Standard on Auditing 220 (Revised), Quality Management for an Audit of Financial Statements.
The standards become effective on December 15, 2022.
The IAASB has also developed Bases for Conclusions and factsheets to support the implementation of the new standards, which are available on the IAASB’s website. Additional support materials will be published in 2021.
About the IAASB The International Auditing and Assurance Standards Board develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.
New, Revised Standards Strengthen, Modernize Approach to Quality Management
ISA 220 (Revised) deals with the engagement partner and engagement team’s responsibilities for quality management for an audit of financial statements. The revised standard modernizes the approach to quality management and requires the engagement partner and engagement team to be proactive in managing and achieving quality.
ISA 220 (Revised) is effective for audits of financial statements for periods beginning on or after December 15, 2022.
ISQM 1 strengthens firms’ systems of quality management through a robust, proactive and effective approach to quality management. The standard encourages firms to design a system of quality management that is tailored to the nature and circumstances of the firm and engagements it performs. ISQM 1 applies to all firms that perform engagements under the IAASB’s international standards. ISQM 1 replaces ISQC 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements and Other Assurance and Related Services Engagements.
ISQM 2 deals with the appointment and eligibility of the engagement quality reviewer, and the engagement quality reviewer’s responsibilities relating to the performance and documentation of an engagement quality review. ISQM 2 applies to all engagements for which an engagement quality review is required to be performed in accordance with ISQM 1.
The IAASB recently approved the suite of new and revised quality management standards, which will be released following approval from the Public Interest Oversight Board of the due process later this year. The new and revised quality management standards will become effective on December 15, 2022.
The International Auditing and Assurance Standards Board (IAASB) Technology Working Group today released a new non-authoritative frequently asked questions publication on using automated tools and techniques in identifying and assessing risks of material misstatements in accordance with International Standard on Auditing 315 (Revised 2019), Identifying and Assessing Risks of Material Misstatement.
The publication assists auditors to understand the types of automated tools and techniques that can be used, and how they can be used, in performing risk assessment procedures. It also addresses considerations regarding the entity’s use of machine learning or artificial intelligence when performing risk assessment procedures.
This publication does not amend or override the International Standards on Auditing (ISAs), the texts of which alone are authoritative. Reading the publication is not a substitute for reading the ISAs.
The impact of technology advancements on fraud perpetration and detection;
The “expectation gap”, or differences between public perceptions and the auditor’s responsibilities for fraud and going concern; and
Fraud and going concern in audits of less complex entities.
Today’s publication details the roundtables and what we heard. The input from these roundtables comprise one aspect of the IAASB’s broader information-gathering activities related to fraud and going concern that will be considered in determining possible future actions.
The full roundtable recordings, including individual breakout sessions, are available on the IAASB’s YouTube channel:
The IAASB recently hosted three virtual roundtables with experts and leaders exploring issues and challenges related to fraud and going concern. These roundtables focused on:
