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September 14, 2008

UK standard setter looks to lead international developments

The UK Auditing Practices Board (APB) has grabbed what it perceives to be a “window of opportunity” to influence international decisions on changes that could be made to the auditor’s report.

The board is seeking comments on proposed revisions to International Standard of Auditing (ISA) (UK and Ireland) 700 – The Auditor’s Report on Financial Statements. The new draft is intended to facilitate a more concise report. It follows a 2007 discussion paper that sought views on what updates were needed to reflect changes introduced by the Companies Act 2006 and whether other wider ranging changes should be made to the auditor’s report.

The APB noted that in response to the discussion paper, a number of the accountancy bodies and auditing firms strongly expressed the view that global convergence, through compliance with ISA, should be the APB’s principal objective. Therefore, the proposed revision has been made so it will not preclude auditors from asserting in their audit reports that the ISA have been complied with.

The proposed revision moves UK standards towards global convergence by requiring the auditor’s opinion on the financial statements to be separate from other opinions required by law and regulation. The two-part opinion is a feature of ISA 700 as issued by the International Auditing and Assurance Standards Board (IAASB).

APB chair Richard Fleck commented: “The European Commission has yet to decide on the form of auditor’s report to be used within the EU and the IAASB has agreed to consider developments with regard to the auditor’s report and determine what consequential action it should take in relation to ISA 700.

“Consequently there is a window of opportunity in which the APB believes it can most effectively influence international decisions on the auditor’s report by moving to implement a concise auditor’s report and commencing research to better understand what can realistically be done to make auditor’s reports more informative.”

Comments on the draft are invited by 28 November 2008. Subject to comments received, it is proposed that ISA (UK and Ireland) 700 (Revised) will take effect for accounting periods ending on or after 5 April 2009.

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