The Association of Chartered Certified Accountants (ACCA) has said that proposals to revise International Standard on Auditing (ISA) 720 could make audit more beneficial and had the potential to better meet investor demands.
ACCA welcomed the proposals in its response to proposed ISA 720 (Revised), The Auditor’s Responsibilities Relating to Other Information in Documents Containing or Accompanying Audited Financial Statements and the Auditor’s Report Thereon.
"The audit promotes high quality financial reporting and proposed ISA 720 has the potential to increase the audit's beneficial impact on corporate reporting more generally," says David York, ACCA head of auditing practice. "It widens the scope of the material that auditors read and consider to bring in all the other information released with or in connection with the financial statements."
York explains that the real benefit to corporate reporting arrives not just because auditors make additional statements in their report but because the company gets a strong signal from the process that as much care has to go into the accompanying information as into the financial statements.
The ACCA Global Forum for Audit and Assurance debated the proposals and the views of its members, who are based in major capital markets around the world, were encapsulated in the ACCA consultation response.
"ACCA's response naturally delves into the nuts and bolts of the proposed revision and the practicalities of the procedures. We suggest, for example, changes to certain terminology, including the reference to 'documents' itself and question a proposed new treatment of the concept of materiality," notes York.
ACCA's response also calls for greater clarity on the status of the additional work that auditors will do.
"Certainly, increasing the emphasis on other information will add to the time pressure all parties are under when finalising audited financial statements. But if investors are to get more value out of the audit, such pressures and extra costs have to be accepted," says York.
ACCA notes that the purpose of the statement is to increase transparency and so it should be easy to understand. There are limits to what a report can do, however, and it will be important for the IAASB to help in meeting the needs of intended users to increase their understanding, adds the ACCA.