The Hindu Business Line : A rush of new standards

THE International Audit and Assurance Standards Board (IAASB) released six important new standards recently. The Auditing Practices Board (APB) believes that these represent a significant strengthening of auditing standards and has, therefore, decided that these new standards shall apply in the UK and Republic of Ireland to audits of accounting periods commencing on or after December 15, 2004.

The new standards are:

ISA 315 — Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement.

ISA 330 — The Auditor's Procedures in Response to Assessed Risks.

ISA 500 — Audit Evidence.

ISA 240 — The Auditor's Responsibility to Consider Fraud in an Audit of Financial Statements.

ISA 220 — Quality Control for Audits of Historical Financial Information.

ISQC 1 — Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information and Other Assurance and Related Services Engagements.

The APB will formally expose the six new standards in spring to ensure that consideration is properly given to issues specific to the UK and Ireland.

When finalised, the standards will supersede: SAS 110 — Fraud and Error; SAS 210 — Knowledge of the Business; SAS 240 — Quality Control for Audit Work; SAS 300 — Accounting and Internal Control Systems and Audit Risk Assessments; and SAS 400 — Audit Evidence.

The adoption of these new standards will require some audit firms to make significant changes to their audit approach. Recognising the lead time for changing audit methodologies and for staff training, the APB is announcing its intention at this stage although the new standards will not be finalised until later in the year and will not be effective until audits of accounting periods commencing on or after December 15, 2004.

Finalisation of the new UK and Irish standards based on the new international standards will mean that consequential changes will need to be made to existing auditing standards. APB is currently exploring the option of undertaking this work as part of a general move towards the adoption of International Standards on Auditing (ISAs) for audits of accounting periods commencing on or after December 15, 2004.

According to Mr Richard Fleck, Chairman, APB: "International standards are in the process of being significantly strengthened and several key ISAs have recently been revised. APB has contributed substantially to this work and believes that it results in improved standards for all audits which should be applied with the minimum delay.

"Announcing this important strategic decision now allows audit firms sufficient time to plan for their introduction for 2005 in an orderly manner. Although the APB will be formally exposing revised standards later in the year, I would encourage auditors to begin now to familiarise themselves with the latest ISAs."

(Source: AccountingWeb.)