International standards on auditing (ISAs) are to replace the current statements of auditing standards on 15 December 2004. The impact of the new standards may seem a long way off, but there is no room for any complacency. Changing to the new standards is not something that firms will be able to do overnight.
The major changes are in two main areas, audit risk and fraud, involving just three new standards. But these standards are pervasive. The assessment of, and response to, audit risk forms the backbone of every audit approach and those three standards will potentially affect every stage of the audit process.
Before firms are able to undertake audits they will need to address the contents of their audit, audit documentation, use of audit software and partner and staff training.
This will take time for firms that produce their own manuals and documentation.
Even those that use commercially available manuals and documentation will have to address the training issue.
The extent of the changes required will vary. Firms are likely to have to make alterations to their procedures. But many of the specific audit procedures undertaken as part of the fieldwork are likely to remain the same. Where changes are required, they should add to the overall coherence of the audit. The new standards may be longer, but as a package they make sense, with a logical core running through them.
The institute has been working with the APB and other CCAB bodies involved in auditing on the introduction of ISAs in the UK. A website dedicated to ISA-related issues (www.audit2005.com) has been set up and the audit and assurance faculty’s autumn roadshows will concentrate on ISAs.
Ultimately, it all comes down to members and firms. A few ISAs in the briefcase for the next long train journey would be a start.
- Katherine Bagshaw is a member of the ICAEW’s audit and assurance faculty.
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