Proposed SAS 160 - Other Information Containing Audited Financial Statements
Proposed revisions to Statement of Auditing Standards 160 issued by the Auditing Practices Board
Comments from the Association of Chartered Certified Accountants
General
1. The Association of Chartered Certified Accountants (ACCA) is pleased to have the opportunity to comment on the Exposure Draft of revised Statement of Auditing Standards 160, Other information in documents containing audited financial statements.
2. The guidance appears to relate to limited companies rather than entities in general. Although the uncertainties referred to in the Preface may arise mainly in the course of listed company audits, other entities can give rise to similar difficulties. Bodies such as charities and universities may publish other information with their audited financial statements and this should be taken into account in drafting the changes to SAS 160.
3. The Auditing Practices Board asked for comments on paragraphs 7 and 15 in particular, as these contain the most substantial changes to SAS 160. These and other comments are set out below.
Paragraph 7
4. The purpose of paragraph 7 is to help auditors identify who should read the other information included with audited financial statements. The third sentence states that the audit engagement partner is required to read and consider all that other information. This may not always be possible, however. It may be more practical for the audit firm to install quality control procedures to ensure that the other information is read by the person or people who have the necessary understanding of the entity's business, financial position and transactions to identify significant misstatements or inconsistencies with the audited financial statements. The engagement partner must always have the final responsibility for this process, but detailed reading may be delegated to senior staff if there are adequate procedures to ensure that significant matters will be drawn to the partner's attention.
5. We therefore recommend that the paragraph be revised to allow for quality control procedures in firms rather than personal reading of all material, in all circumstances, by the audit engagement partner. Such control procedures would have to be strong enough to ensure that all relevant information was read by an appropriate person or people and significant issues drawn to the partner's attention.
Paragraph 15
6. We consider the new guidance in paragraph 15 to be helpful.
Other issues
7. Paragraphs 16 and 17 refer to auditors' rights under sections 390 and 394, Companies Act 1985 (and equivalent legislation in Northern Ireland the Republic of Ireland). As we point out in our paragraph 2 above, the guidance is focused rather narrowly on limited companies. We recommend that consideration be given to remedies at the auditors' disposal where there appear to be significant misstatements or inconsistencies in other information published with the financial statements of bodies not covered by companies legislation.