IAASB Seeks to Enhance Public Confidence in How Financial Info is Produced

The International Auditing and Assurance Standards Board (IAASB) has released a proposed new assurance standard that addresses the process of compiling pro forma financial information included in prospectuses. Due to the increasingly integrated nature of global capital markets and the importance of pro forma financial information in the public's investment decisions, the newly proposed standard is intended to enhance public confidence in how such financial information is produced.


The proposed standard, Assurance Reports on the Process to Compile Pro Forma Financial Information Included in a Prospectus, deals with information relevant to various forms of domestic and cross-border securities offerings, and which illustrates the impact of an event or transaction on an issuer's financial information.


It also provides comprehensive guidance on the nature and extent of a practitioner's work when reporting on whether the process of compiling pro forma financial information has been properly followed. Also covered are related engagement acceptance and reporting considerations.


"Our research indicates that many jurisdictions around the world need a common, high-quality standard that can be consistently, globally applied," says Arnold Schilder, Chairman of the IAASB. "Our goal, therefore, is to guide and contribute to the quality of practice in an area of great importance to capital markets."


Pro forma financial information is of particular interest and relevance to issuers, investors, analysts, professionals working at securities exchanges, and regulators. Respondents from these constituencies are invited to comment on the proposal, including the content of the illustrative practitioner's report.


"Internationally, investors, regulators, and other stakeholders want and expect consistent, quality work by assurance practitioners, as well as clear and understandable reporting. Over the years, however, different countries have developed different practices in relation to reporting on the process of compiling this type of information, and this is a situation that is not sustainable in the public interest," notes James Gunn, IAASB Technical Director.


"The proposed standard seeks to address this issue by helping to create a level playing field for practitioners for such engagements, thereby enabling them to better meet the expectations of investors, regulators, and others," says Gunn.


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