PracticeAuditContentious audit sign-off rules go ahead

Contentious audit sign-off rules go ahead

The new rules compel management to provide auditors with a clear written statement that they have provided auditors with all the information they need

The international audit standards board has revised rules which will compel
management to provide auditors with a clear written statement that they have
provided auditors with all the information they need.

ISA 580, which caused an uproar among UK companies last year when it was
proposed, has now been revised by the US-based International Auditing and
Assurance Standards Board.

The rules – requiring the auditor to request that management provide written
representations detailing that it had fulfilled its duties relating to the
preparation and presentation of the company’s financial statements and that it
has provided the auditor with all relevant information – have not been changed
from their initial proposal last year.

According to the IAASB, managers mus also confirm in their statements whether
all transactions have been recorded and reflected in the statements,
WebCPA.com
reported.

The standard also provides recourse for an auditor, in cases in which written
statements are either not provided or unreliable.

However it the rules are also clear that while such written representations
are necessary, they do not provide sufficient audit evidence on their own and do
not affect the nature or extent of other audit evidence that the auditor obtains
about the fulfillment of management’s responsibilities, or about specific
assertions.

‘The aim of the new requirements is to enhance the quality and
appropriateness of written representations sought by the auditor by a focus on
what is really necessary and, in particular, to deal with concerns that auditors
may over-rely on representations at the expense of other evidence,’ said IAASB
Chairman John Kellas.

The standard will be effective for audits of financial statements for periods
beginning on or after 15 December, 2009.

Further reading:

UK
body rejects contentious letters standard

‘Sign off’ standard sparks fears

Standard threat to audit sign-offs

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