International Standard on Auditing (UK and Ireland) 300 Planning an Audit of Financial Statements
An Exposure Draft of the Auditing Practices Board
Comments from ACCA
October 2004
General Comments
The Association of Chartered Certified Accountants (ACCA) welcomes the opportunity to comment on the proposed International Standard on Auditing ( UK and Ireland ) 300 Planning an Audit of Financial Statements (proposed ISA ( UK &I) 300) issued for comment by the Auditing Standards Board (APB).
As explained in the �Invitation to Comment', proposed ISA ( UK &I) 300 forms part of the proposed ISAs ( UK and Ireland ) to replace existing Statements of Auditing Standards. We have commented separately on the 28 other ISA ( UK &I) already exposed for comment. We welcome APB's decision to issue ISA 300 ( UK &I) with the same effective date as the other ISA ( UK &I) as this is consistent with the decision to avoid a piecemeal transition to international standards.
We have already offered comments on certain matters that apply equally to the proposed ISA ( UK &I) 300:
- Given the limited anticipated life of national supplementary material, it should only be included where it significantly strengthens auditing in the UK and Ireland .
- The extensive material on �management' and �those charged with governance' is unnecessary, as the terms are already well known to auditors in the UK and Ireland , in particular through using SAS 610 Communication of Audit Matters to Those Charged with Governance.
- We see no need to disapply Public Sector Perspectives in ISA, which could operate in parallel with national guidance.
- We support the way in which the extra material has been incorporated, through shading and appropriate numbering of text.
We make specific comments on the UK and Ireland supplementary material in the next section of this response.
The benefits of international harmonisation of auditing standards are widely recognised by securities regulators and governments, but the nature of our specific comments leads us to believe that APB is in danger of not consistently applying its declared policy of supporting international harmonisation through the adoption of ISA.
Specific Comments
We do not comment on the material reproduced from ISA 300 itself. Supplementary material between paragraphs 1 and 2 of the proposed ISA ( UK &I) 300 and in relation to the Public Sector Perspective is dealt with in our general comments above.
Inappropriate �plus' introduced by footnote to paragraph 7
The second bullet point of paragraph 7 has a UK and Ireland footnote that extends considerations over �management integrity' to the integrity of those charged with governance.
This appears to us to be a misinterpretation of the purpose of adding guidance generally on �management' and �those charged with governance' between paragraphs 1 and 2. That material seeks to map the international concepts to the terms historically more familiar to users of auditing standards in the UK and Ireland (for example, �directors', �audit-committee', �executive' and �non-executive'). As we have pointed out in our general comments, and at length in our response to the 28 other proposed ISA ( UK &I), we do not believe that such guidance is now necessary. Auditors in the UK and Ireland are familiar with these concepts and have used SAS 610 Communication of Audit Matters to Those Charged with Governance successfully for several years.
The footnote is not, however, clarification in the spirit of the guidance between paragraphs 1 and 2. It is a clear extension of a responsibility.
ISA 300 has been issued very recently and we are extremely concerned that APB is attempting to impose a national �plus' in circumstances where it is, therefore, least appropriate. We suggest in the strongest possible terms that this proposed addition be deleted.
Unwarranted cross-reference at paragraph 27
Paragraph 27 has a footnoted cross-reference to ISA ( UK &I) 260. The purpose of the cross-reference is to highlight an additional requirement in the other document.
While we would historically have had no problem with the inclusion of a helpful cross-reference in an APB pronouncement, we do not think that helpfulness is sufficient justification for adding material to a recently-issued ISA.
APB has announced that it hopes to be able to withdraw such �pluses' as relevant ISA are revised. It is inconsistent with this thinking to introduction �pluses' � even helpful cross-references � to a recently issued ISA. Instead, APB should be engaging with the International Auditing and Assurance Standards Board (IAASB) to promote its views. Only if accepted internationally, should the cross-reference be made.
APB has an immediate opportunity to argue internationally for this cross-reference. APB will be aware of the fact that, at its September 2004 meeting, IAASB deliberated on a draft revised standard and issues highlighted by the Task Force addressing the revision of ISA 260 Communication of Audit Matters with those Charged with Governance . There exists the prospect, therefore, that in the relatively short term, ISA 260 will be revised and consequential changes to ISA may be made, to remove the need for national clarifying materials and to insert appropriate cross-references. At that stage, and only then if properly decided on an international basis, should the cross-reference in paragraph 27 appear.