The UK Financial Reporting Council (FRC) has
issued revised International Standards on Auditing (ISAs) primarily
to support changes to the UK Corporate Governance Code for Audit
Committees and the Stewardship Code.
FRC Board member and chairman of the Audit and
Assurance Council Nick Land said the aim of the revisions is to
“continue the FRC’s work on enhancing effective company stewardship
and stimulate greater transparency about the judgments made by
boards and auditors”.
The changes take two main directions. The
first is to require the auditor to communicate information to the
audit committee that they believe may be needed to understand the
judgements made in the audit, and thus to enhance auditor
communications.
The second is to require the auditor to
report, by exception, “if the board’s statement that the annual
report is fair, balanced and understandable is inconsistent with
the knowledge required by the auditor in the course of performing
the audit,” or if matters communicated by the auditor are not
appropriately addressed by the audit committee’s report.
Revisions have also been made to allow the use
of those standards in the Republic of Ireland, and to more fully
align the requirements of ISAs (UK and Ireland) 705 and 706 with
ISA (UK and Ireland) 700, which Land said would “enable Irish
auditors’ reports to be more concise and more relevant.”
The revised standards will give effect to
proposals published in September 2011 in the FRC’s Effective
Company Stewardship: Next Steps, and will come into effect for
audits of financial statements for periods commencing on or after 1
October.
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