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The International Auditing and Assurance Standards Board (IAASB) has released International Auditing Practice Note (IAPN) 1000, Special Considerations in Auditing Financial Instruments, to provide important practical assistance to auditors when addressing valuation and other considerations pertaining to financial instruments.

Financial instruments is an area of financial reporting involving complex issues and which has come under particular focus due to the recent difficult financial market conditions.

“IAPN 1000 provides important material that will assist auditors in understanding the nature of, and risks associated with, financial instruments, and the different valuation techniques and types of controls that may be used by entities in relation to them," notes Prof. Arnold Schilder, IAASB Chairman. 

Schilder adds that the IAPN 1000 highlights important audit considerations that may be relevant throughout the audit process. 

“The IAPN is relevant to audits of entities of all sizes, as all entities may be subject to risks of material misstatement when using financial instruments,” says Schilder.

IAPNs are non-authoritative documents that do not impose additional requirements on auditors beyond those included in the International Standards on Auditing (ISAs), nor do they change the auditor’s responsibility to comply with all ISAs relevant to the audit.

In finalising IAPN 1000, and in response to stakeholder concerns, the IAASB evaluated the clarity and appropriateness of the authority of the existing International Auditing Practice Statements (IAPSs).

The IAASB decided to withdraw the existing category of pronouncements known as IAPSs and to establish IAPNs, as reflected in the amended Preface to the International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements.

Accordingly, the six existing IAPSs were also withdrawn as the IAASB determined that they were largely outdated and inconsistent with the text of the clarified ISAs.

“The IAASB will be considering in its forward plans matters covered in some of the extant IAPSs, for example the relationship between auditors and banking supervisors, as it develops standards, new IAPNs, or other forms of guidance in the future,” comments Schilder.

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