The auditor's report on financial statements
Revisions to ISA 700 Proposed International Auditing Standard
Comments from the Association of Chartered
Certified Accountants
May 2001
Executive Summary
The Association of Chartered Certified Accountants (ACCA) is pleased to have the opportunity to comment on the Exposure Draft The Auditor's Report on Financial Statements, Revisions to ISA 700 (the proposed Standard) issued for comment by the International Auditing Practices Committee (IAPC) of the International Federation of Accountants (IFAC).ACCA welcomes the proposed Standard which will improve the understanding of auditors' reports. However, we regret that the opportunity has not been taken to incorporate further wording changes which would facilitate the use of reports on the Internet.
We believe that the logical place for disclosure of the accounting convention is the financial statements. However, pragmatically, we accept the need for the approach in the proposed Standard.
We do not support the use of the opinion section to communicate the new information as it potentially impairs the clarity of the report.
1 General Comments
The Scope of Revision1.1 ACCA welcomes the proposed Standard which will improve the consistency of auditors' reports by making mandatory disclosures already required by several national standard setters. While this consistency will lead to improved understanding of auditors' reports, we regret that the opportunity was not taken to incorporate further wording changes which would facilitate the use of reports on the Internet.
1.2 The United Kingdom Auditing Practice Board (APB) issued Bulletin 2001/1 The Electronic Publication of Auditors' Reports in January 2001. That document deals with the issues relevant to the electronic distribution of auditors' reports. While identification of the accounting and auditing standards applied is addressed, so too is the need to identify the financial statements which have been audited. The Bulletin suggests that the traditional method of referring to page numbers is no longer appropriate for electronic distribution as the physical separation into pages may be lost when financial statements are accessed on a website. The APB recommends that the auditors' report describes, by name, the primary statements which comprise the financial statements. ACCA supports this approach and would like to see IAPC incorporate this in its own pronouncements.
Disclosure of Financial Reporting Framework
1.3 We believe that the logical place for disclosure of the accounting convention is in the financial statements. However, pragmatically, we accept the need for disclosure in the auditors' report as the importance of the disclosure outweighs any objections on purely logical grounds.
1.4 We do not agree with the proposal that the financial reporting framework must be disclosed in the opinion section of the auditors' report. The opinion section should be kept as concise as possible. This not only promotes understanding of an unqualified opinion but also facilitates writing of opinions where a qualification or other modification is necessary. There is also a possibility of duplication between the requirements of the proposed Standard and the legal requirements in some jurisdictions which require the opinion section to refer to specific laws.
1.5 We suggest that the disclosure of the financial reporting framework is most appropriate in the section of the auditors' report which identifies the financial statements and deals with the responsibilities of those charged with governance.
2 Specific Issues
Paragraph 5 of the Preface to the Exposure Draft sets out two issues on which comment is particularly sought:(a) Will the proposed date on which the new standard becomes effective cause implementation problems? Would an earlier or later date be preferable?
2.1 For those auditors already making the disclosures as 'best practice' an early implementation date will give no difficulty. However, there will be no advantages to an early implementation date for such auditors, as the reports issued will not be affected. Those auditors not currently making the disclosures should be given sufficient time to incorporate the changes in their reports. We would not like to see an implementation date before that suggested in the proposed Standard (periods ending 30 September 2002).
(b) Are there are any terms, phrases, or concepts in the amended paragraphs that would be particularly difficult to translate into other languages or that might be ambiguous when translated?
2.2 We do not
foresee any difficulties in translating the amended text.