Presentation by Prof. Arnold Schilder, IAASB Chairman, at the HLBI International Audit Conference Amsterdam, in the Netherlands, July 9, 2015

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IAASB Update
Prof. Arnold Schilder, IAASB Chairman
HLBI International Audit Conference
Amsterdam, the Netherlands
July 9, 2015

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• Key Projects Finalized: Clarified ISAs, Auditor Reporting,
Revisions of Other Assurance and Related Services
standards
• Special Support Efforts for Implementation of new and
revised Auditor Reporting standards
• New Strategy and Work Plan with a number of new and
challenging projects
• Looking for feedback on key questions
– What is it that we have to address?
– What kind of development process?
– What forms of interactions with stakeholder groups?
– What kind of outputs?
Times Are Changing for the IAASB

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New and Revised Auditor Reporting Standards
Key Features
AuditorReport
Audit Opinion – Required to be presented first
Key Audit Matters – Required for listed entities
Going Concern – Additional focus
Other Information – New section
Responsibilities – In the audit; Independence and ethical
obligations; Engagement partner (listed entities)

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• No significant changes made to ISA 570/700/701 since July
2014 HLBI audit conference (approved Sept. 2014)
– New Key Audit Matters section (listed entities)
– More focus on Going Concern
– Auditor’s opinion presented first
– Statement about independence and other ethical responsibilities
– Naming of the engagement partner (listed entities)
– Improved description of responsibilities and key features of the audit
• New section to address “Other Information” (ISA 720)
• Extra Auditor Reporting Implementation support activities
The New Auditor Reporting: What’s Different?

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The Decision-Making Framework for KAM
Matters that were
communicated with those
charged with governance
Matters that
required significant
auditor attention
Matters of most
significance
in the
audit
Key Audit
Matters

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Auditor Reporting: More Focus on Going
Concern (ISA 570)
• Explicit mention in both sections on responsibilities, i.e., the
auditor, and management and TCWG
• New requirement to consider the adequacy of disclosures in
view of the applicable financial reporting framework when
events or conditions are identified that may cast significant
doubt on an entity’s ability to continue as a GC (“close calls”)
• IFRIC final Agenda Decision (July 2014):
“The Interpretations Committee observed that … in the circumstance
discussed, the disclosure requirements of paragraph 122 of IAS 1
would apply to the judgements made in concluding that there remain
no material uncertainties related to events or conditions that may cast
significant doubt upon the entity’s ability to continue as a going
concern.”

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Other Information – ISA 720 (Revised)
• Major areas strengthened and clarified in light of critical
importance of annual reports to investors and need for
transparency about the auditor’s work effort
– Scope: Annual reports or combination of documents that serve the
same purpose
– Work Effort: read and consider the Other Information (OI) for material
inconsistencies with financial statements or the auditor’s knowledge
obtained in the audit (“intelligent read”), and remain alert for other
material misstatements
– In Auditor’s Report: clear link to work effort, listed entities required to
identify any OI expected to be obtained after the auditor’s report
– OI obtained after AR date: same work effort, reporting not required
but if misstated auditor must “take appropriate action”
• Released April 2015, effective date same as AR standards

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• IAASB-supported “roll-out plan” with objectives of
– Promoting awareness
– Informing and educating users
– Learning about experiences of those responsible for adopting and
implementing the standards
– Preparing for post-implementation review
• Planned activities
– Outreach and other communications
– Auditor Reporting Toolkit (IRBA, South-Africa: “extremely useful”)
Auditor Reporting Implementation Support
New and revised Auditor Reporting standards are effective for periods ending on or
after December 15, 2016

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• New auditor reporting webpage:
www.iaasb.org/auditor-reporting
• Available now
– Auditor Reporting Fact Sheet
– Basis for Conclusions
– “At a Glance” publication
– Publications on GC and KAM
– Slide Presentation
– Illustrative KAM examples
• Coming
− Listings and extracts of illustrative auditor’s reports
− Webcast and podcasts
Resources – Auditor Reporting Toolkit

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• Changes to ISAs approved in March 2015 to appropriately
address the evolving nature of financial reporting, in particular
re (qualitative) disclosures, in all phases of the audit
• Board sought to balance important public interest perspectives
• Strengthened Requirements (and more Application Material):
– Understanding relevant aspects of information system relating to
information disclosed in the f/s (ISA 315(Revised)) and reconciling
information in disclosures with the underlying accounting records (ISA
330 (Revised))
– Identifying and assessing risk of misstatements in both quantitative and
qualitative disclosures (ISA 315 (Revised))
– Enhanced focus on evaluation of accounting policies and relevance /
understandability of f/s (ISA 700 (Revised))
Disclosures – Key Issues

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• Information gathering activities underway on three priority
topics
– Quality control (ISA 220 and ISQC 1)
– Group audits (ISA 600)
– Special audit considerations relevant to financial institutions
(including ISA 540 in particular)
• Professional skepticism
• March 2015 IAASB discussions highlighted interactions
between the four projects above
– Common themes (e.g., sufficient appropriate audit evidence;
professional skepticism)
– Crossover issues (e.g., direction, supervision and review of audits;
audit delivery models)
– Which resulted in June in…
Work Plan for 2015–2016 – Enhancing Audit
Quality

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Work Plan for 2015–2016 – Priority Projects
2015: Intense exploration,
research and outreach 
One discussion paper
2016: Analysis of comments
and dialogue  Proposals
for standard setting and
other guidance
Enhancing Audit Quality
with a Clear Public Interest Perspective
Quality
Control
Group
Audits
Professional
Skepticism
Financial
Institutions

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• Roles and responsibilities of the engagement partner, as the
person taking responsibility for the overall quality of the audit
– The knowledge, skills, experience and time of the engagement
partner
– Direction, supervision and performance of the audit engagement,
including when others are involved in the audit
• Engagement quality control reviews (EQCRs) / engagement
quality control reviewers and their role in audit quality
– What steps may be necessary to enhance selection of reviewers, and
the nature, timing, and extent of EQCRs?
– When should EQCRs be required?
Possible Areas to Be Explored

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• The role of the firm in audit quality, both at the engagement
and firm levels
– “Tone at the top”
– Monitoring of the firm’s quality control policies and procedures
 What could be done to improve how firms remediate inspection findings?
 Are there other types of monitoring activities that should be required in
particular audits (e.g., financial institutions, listed entities, etc.)?
– Firm governance, including perceived threats to audit quality
 Are there opportunities to strengthen the standards to address values,
ethics and attitudes at the firm level?
Possible Areas to Be Explored (cont.)

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• Involvement of others in performing or supporting the audit
engagement, including the effects on audit quality
– What enhancements may be needed to strengthen or supplement the
existing ISAs, including ISA 220, ISA 600, ISA 620 and ISA 540?
– Do the ISAs sufficiently address the way in which audits may be
conducted in a global business environment, including the various
audit delivery models used or the need for specialists or experts in
particular areas?
• Obtaining sufficient appropriate audit evidence and
documenting conclusions to support the opinion on the
financial statements
– Improvements needed related to auditing fair values, expected
losses, other estimates? Relevant to financial institutions and others
Possible Areas to Be Explored (cont.)

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• Group Audits: range of questions
– Initial focus on “letterbox” audits
– Practical implications of applying ISA 600, e.g. equity investments,
non-controlled group entities, risk aggregation, component materiality,
differing levels of interactions with and review of component auditors
• Quality Control: from ‘Quality control approach’ to a ‘Quality
management approach’? More pro-active, risk based, in line
with e.g. COSO?
• Professional Skepticism
– Training in ‘Making the opposing case’? Apply a ‘skepticism
continuum’? Mindset, behavior, framing?
– Joint effort of Audit, Ethics and Education Standards Boards
Possible Areas to Be Explored (cont.)

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• Other new initiatives include:
– Agreed-upon procedures and ‘hybrid’ engagements – ISRS 4400
– Further understanding of findings related to ISA 315 (Revised);
project will commence in second half of 2015
• Innovation Working Group
– Monitor identified and emerging developments in audit, assurance and
related services and provide recommendations to the IAASB
• Important to strategy development and consideration of new topics for the
2017–2018 Work Plan
– Information gathering activities by separate working groups for
• Integrated reporting, including the demand for assurance on integrated
reports
• Data analytics and the effect on the audit
Other Initiatives

18. www.iaasb.org
Thank you - Q&A?