The International Auditing and Assurance Board (IAASB) released proposed narrow scope amendments to International Standard on Auditing 700 (Revised), Forming an Opinion and Reporting on Financial Statements and ISA 260 (Revised), Communication with Those Charged with Governance.

Proposed amendments will help to put into practice recently approved changes to the International Ethics Standards Board for accountants’ (IESBA) International Code of Ethics for Professional accountants (including International Independence Standards). The changes to the IESBA Code require firms to publicly disclose when the independence requirements for public interest entities have been applied in an audit of financial statements.

The IAASB invites stakeholders to comment on the Exposure Draft via the IAASB website by 4 October, 2022. As part of the public consultation, the IESBA invites stakeholders to comment on aspects for its consideration of the need for any further action.

IAASB chair Tom Seidenstein said: “There are heightened expectations about auditor independence for audits of public interest entities. The recent changes to the IESBA Code, reinforced through the IAASB’s proposed changes to the ISAs, will enhance transparency to the public about application of independence requirements for audits of financial statements of public interest entities.”

This Exposure Draft is part of a broader IAASB project responding to recent revisions to the IESBA Code related to listed and public interest entities. These are undertaken as two tracks, this being Track 1. Other narrow-scope amendments that may be considered in Track 2 on a separate timeline with a later effective date include:

Aligning to the greatest extent possible definitions and key concepts; those that underlie the definitions in the International Standards on Quality Management (ISQMs) and International Standards on Auditing (ISAs) related to listed and public interest entities to IESBA’s definitions and key concepts in the revisions to the IESBA Code
Considering the applicability of existing differential requirements for listed entities in the ISQMs and ISAs – and whether these need to be amended considering IESBA’s revisions that address the definitions of ‘publicly traded entity’ and public interest entities.