Changes to international auditing standards proposed last week by the International Auditing and Assurance Standards Board (IAASB) are designed to clarify expectations of auditors when auditing financial statement disclosures.
One of the key areas addressed in the proposals is attention earlier in the audit process to disclosures, including those where the information is not derived from the accounting system.
By focusing on this area, the IAASB aims to address the problem of excessive or immaterial disclosures that may occur when disclosures are prepared and audited relatively late in the audit process, IAASB Technical Director James Gunn said in a news release.
The proposals – including those intended to enhance focus on disclosures in the early stages of the audit – may result in additional focus by companies on their financial statement preparation process and improve the quality of disclosures, the IAASB said in the proposal’s explanatory memorandum.
“Financial reporting disclosure requirements and practices have evolved, and disclosures now provide more decision-useful information that is often more narrative and subjective in nature,” IAASB Chairman Arnold Schilder said in a news release. “This gives rise to challenges from an auditing point of view, and the proposals enhance certain areas in the [international standards] to support the proper application of the standards’ requirements.”
Comments can be made through September 11th at the IAASB’s website.
—Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine senior editor.