The International Auditing and Assurance Standards Board (IAASB) has released for public comment a discussion paper exploring key issues relating to disclosures in financial statements. Titled The Evolving Nature of Financial Reporting: Disclosure and Its Audit Implications, the paper highlights recent trends in the range, volume, and complexity of financial statement disclosures, and explores issues and practical challenges in preparing, auditing, and using them. In addition, in order to stimulate further debate on audit quality, and in its continuing efforts to facilitate robust audits in the public interest, the IAASB also released a publication titled Audit Quality: An IAASB Perspective.
Financial Statement Disclosures
“Over the past several years, we have witnessed a transformation in the nature and extent of disclosures; for example, it is now common to see disclosures that are more forward-looking or qualitative,” notes Prof. Arnold Schilder, IAASB chairman. He adds, “Such disclosures are critical—as one investor said to me, ‘We care more about the “soft stuff.”’ This development, however, raises important issues and challenges for preparers and auditors alike. Through this discussion paper, the IAASB seeks to better understand different viewpoints on a range of issues about financial statement disclosure practices, as well as the implications from an auditing perspective.”
The discussion paper addresses critical issues such as challenges in preparing disclosures, the nature and extent of evidence for different types of disclosures, and the application of the concept of materiality to disclosures. Views from all stakeholders are sought, and the discussion paper asks specific questions of preparers; investors, lenders, and other creditors; regulators; and auditors. A consultation period of over four months has been provided to enable stakeholders to consider the complex issues addressed in the discussion paper.
“Audit quality is at the heart of the IAASB’s mandate to set high-quality auditing standards,” notes Prof. Schilder. “However, while our clarified International Standards on Auditing (ISAs) make an important contribution to audit quality worldwide, they are not the only element of audit quality. Also, it has been clear from our various stakeholder outreach efforts that there are many different perspectives on audit quality. This publication aims to help raise stakeholders’ awareness of the many different views and influences on audit quality, as well as of the complexity and multifaceted nature of audit quality.”
IAASB Technical Director James Gunn explains that the publication is intended to stimulate further thought and discussion on audit quality among stakeholders, while recognizing the importance of international consensus on audit quality matters “At the same time, the IAASB recognizes that more can be done to maintain and enhance audit quality. The IAASB will continue to explore how it may do so throughout 2011 and beyond,” adds Gunn.
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