International Standards on Auditing:
Taking ISAs into the National Context
Prof. Arnold Schilder, IAASB Chairman
World Bank REPARIS Conference
Amsterdam
April 5, 2011
IAASB’s Role, Objectives and Structure
Role and Objectives of the IAASB
• Independent standard-setting board that serves the public
interest by:
– Setting high-quality standards dealing with auditing, review,
other assurance, quality control and related services
– Facilitating the convergence of national and international
standards
• Contributes to enhanced audit quality throughout the world,
and strengthened public confidence in financial reporting
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IAASB’s Role, Objectives and Structure
IAASB Structure and Standard-Setting
Process
• IAASB:
– Meets for a full week, four times per year
– Broad-based membership: 17 members, full-time Chair,
Technical Advisors and three permanent observers with
speaking rights
• Consultative Advisory Group
– Meets twice per year, 30 Member Organizations
• Standard-Setting Process
– Global consultation, transparent due process, open meetings
and oversight via the International Public Interest Oversight
Board (PIOB)
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IAASB’s Role, Objectives and Structure
Developing High-Quality Pronouncements
• Rigorous and transparent due process
– Protects public interest and ensures global acceptance
• Global consultation and responsiveness
– Dialogue with key stakeholders
 National auditing standard-setters
 Basel Committee, EC, Financial Stability Board, IAIS,
IFIAR, IOSCO, World Bank
 Investors and preparers (via IAASB CAG and outreach)
 Other key stakeholders: IASB, FEE, Forum of Firms,
ICGN, IFAC member bodies, PCAOB
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IAASB’s Role, Objectives and Structure
Developing High-Quality Pronouncements
• International Standards on Auditing (ISAs)
• International Standards on Assurance Engagements
(ISAEs)
• International Standards on Review Engagements
(ISREs)
• International Standards on Related Services (ISRSs)
• International Auditing Practice Statements (IAPSs)
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Clarified ISAs
The Clarified ISAs
• A significant development in auditing standards
internationally
• Redrafting of 36 ISAs and ISQC 1
• Greater clarity, understandability and consistency of
application
– New structure, conventions and obligations
• Half of the ISAs fundamentally revised
– Strengthen the ‘thinking audit’
– Enhanced quality of performance in many areas
• Now effective! (from 2010 calendar year audits)
• Minimum 2 year moratorium on new standards
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Clarified ISAs
ISAs
General Principles
and
Responsibilities
Risk Assessment
and Response to
Assessed Risks
ISA 200
ISA 300
ISA 500
ISA 600
ISA 700
ISA 800
ISA 210
ISA 315
ISA 501
ISA 610
ISA 705
ISA 805
ISA 220
ISA 320
ISA 505
ISA 620
ISA 706
ISA 810
ISA 230
ISA 330
ISA 510
ISA 710
ISA 240
ISA 402
ISA 520
ISA 720
ISA 250
ISA 450
ISA 530
Audit
Evidence
ISA 260
ISA 540
ISA 265
ISA 550
ISA 560
Using Work
of Others
Audit
Conclusions and
Reporting
Specialized
Areas
Clarity Project: Legend
New
Revised and Redrafted
ISA 570
Redrafted only
ISA 580
Post Clarity (2009 → )
revision of ISAs 610 and 720
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Clarified ISAs
Key Changes from the Clarity Project
• Principles-based and emphasize the use of professional
judgment and professional skepticism
• More robust featuring strengthened requirements in key
areas:
– Risk assessment (e.g., estimates and related parties)
– Materiality and its use in evaluating misstatements
– Audit evidence (e.g., confirmations and representations)
– Using the work of others (e.g., group audits and experts)
– Auditor reporting and communications (including with
those charged with governance)
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Clarified ISAs
Global Auditing Standards: Where Are We Now?
Expressed support for Clarified ISAs:
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International Organization of Securities Commissions (IOSCO)
Basel Committee on Banking Supervision
Financial Stability Board
International Organization of Supreme Audit Institutions (INTOSAI)
United Nations Conference on Trade and Development (UNCTAD)
World Bank
World Federation of Exchanges
Other uses of Clarified ISAs globally:
• INTOSAI Congress (INCOSAI) through International Standards of
Supreme Audit Institutions (ISSAIs)
• Top 22 global auditing networks’ methodologies align
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Clarified ISAs
Global Auditing Standards: Where Are We Now?
Countries Using Clarified ISAs already, or Committed to
Using them in the near future:
Europe:
Albania, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia,
Finland, Georgia, Greece, Hungary, Iceland, Ireland, Kosovo, Latvia, Lithuania,
Malta, Netherlands, Norway, Serbia, Slovakia, Slovenia, Sweden, Switzerland,
Turkey, United Kingdom
Asia/ Pacific:
Australia, Bangladesh, China, Hong Kong, India, Japan, Kazakhstan, Malaysia,
Mongolia, Nepal, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri
Lanka,
Americas:
Brazil, Canada, Guatemala, Guyana, Mexico, Nicaragua, Panama, Trinidad and
Tobago, USA (private companies)
Africa/ Middle East:
Botswana, Kenya, Lebanon, Lesotho, Malawi, Mauritius, Namibia, South Africa,
Swaziland, Tanzania, Tunisia, Uganda, United Arab Emirates (Abu Dhabi and
Dubai), Zambia, Zimbabwe
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Adoption and Implementation into the National Context
EC Green Paper – ISA Adoption
• Support for ISA Adoption – Support from Professional
Bodies, Firms, Public Authorities, Academics, Investors;
mixed views preparers/companies
• Impact on SMEs/SMPs: “We must first avoid causing SMEs
and small and medium audit firms additional cost …”
– IFAC’s “An Audit is an Audit” well-understood; IAASB
Staff Publication on proportionality often quoted; SMP
Committee Implementation Guides important; EDs for
reviews/compilations: may be used by audit-exempt entities
• Governance: Need to emphasize independence, due process,
transparency of the standard-setting process
– Governance and nominations; public interest; Investor
participation – how can this be strengthened?
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Adoption and Implementation into the National Context
Relationship with Audit Regulators
• Dialogue between IAASB and audit regulators
important:
– Interpretation of standards; importance of professional
judgment
– Proportionate audit documentation
– Learning from inspections findings
• Regular contact between IAASB and IFIAR
– Plenary, working groups, ad hoc meetings
• Europe: from EGAOB to European Audit Inspection
Group
– First meeting IAASB-EAIG June 2011 (and ad hoc)
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Adoption and Implementation into the National Context
Key Success Factors
• Effective implementation key to realizing full benefits
• Need to fully adopt ISAs including relevant
pronouncements; ISQC 1, Code of Ethics for Professional
Accountants
• Understand and communicate how ISAs can be applied
proportionately to the size and complexity of the entity
– Projects to assist SMEs/SMPs; Reviews and Compilations
• Practical implementation challenges not underestimated
– Education/training; audit methodologies; monitoring and
enforcement
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Adoption and Implementation into the National Context
Implementation of Clarified ISAs
• IAASB support
– IAASB Clarity Center (http://web.ifac.org/claritycenter/index)
– ISA modules (11 videos + slide packs re revised ISAs)
– IAASB Staff Alerts, Q&A and FAQs
– Clarity ISA Modules
– Implementation Monitoring Project
• IFAC SMP Committee:
– ISAs and Quality Control Guides
– IFAC Translation support
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“Robust audit is key to re-establishing trust and
market confidence; it contributes to investor
protection and reduces the cost of capital for
companies”
EC Green Paper, October 2010
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http://www.iaasb.org