In 2004 the Auditing Practices Board (APB) decided to base UK and Irish auditing standards on International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board (IAASB). These were supplemented with additional standards and guidance where necessary to maintain the requirements and clarity of the previous UK and Irish auditing standards.
One of the reasons given for adopting ISAs was so that the UK and Ireland could benefit efficiently from future improvements in them.
The IAASB Clarity Project
In 2004, the IAASB launched a project to improve the clarity of its standards. This 'Clarity Project' was undertaken with support from regulators in order to improve the overall readability and understandability of the ISAs and make them more compatible with regulatory frameworks, including the EC's Statutory Audit Directive.
Alongside the Clarity Project, ISAs on important topics such as auditing groups, estimates (including fair values) and related party transactions were being revised and improved to reflect the latest developments and thinking.
The IAASB completed its clarity project in March 2009 and as a result there are now 36 newly updated and clarified ISAs and a clarified International Standard on Quality Control (ISQC).
Impact in the UK
The APB has now updated its auditing standards for the new, clarified ISAs and the new UK and Irish auditing standards will be effective for audits of financial statements for periods ending on or after 15 December 2010.
Clarified International Standard on Quality Control (UK and Ireland) 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements (ISQC (UK and Ireland) 1) has also been published.
The improvements that have been made are designed to improve audit quality.
The new clarified ISAs (UK and Ireland) introduce significant changes to audits and will therefore require considerable effort for their successful implementation. There is a lot of preparatory work needed by audit firms, software providers and training organisations to get ready for implementation, including:
- Updating audit manuals and audit methodologies
- Developing new or updated software
- Developing new or updated training material for audit firms.
ICAEW input
Several initiatives are underway to ensure a smooth transition to the new standards, including:
-
Clarified ISA Coaching: a practice support service
- A new advisory group on audit software, methodologies and training has been established under the ICAEW's existing ISA Implementation sub-group
- 2010 roadshows will have a heavy emphasis on implementation of clarified ISAs
- A series of articles have been placed in various newsletters/magazines
- The Audit and Assurance Faculty has and continues to respond to various consultations on clarified ISAs
Further information