NZAuASB Meeting 24 October 2018
Date And Time
- Level 7
50 Manners Street
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Here is a summary of matters considered at the meeting:
ISA (NZ) 540 (Revised) Auditing Accounting Estimates and Related Disclosures, and conforming and consequential amendments
The Board approved ISA (NZ) 540 (Revised), as well as conforming and consequential amendments to other ISAs (NZ) resulting from the revision to ISA (NZ) 540.
The revision conforms with the revised international standard, which enables the process of assurance over estimates to keep pace with the changing market, and to foster a more independent and challenging sceptical mindset in auditors.
ISA (NZ) 540 (Revised) becomes effective for financial statement audits for periods beginning on or after December 15, 2019.
The International Auditing and Assurance Standards Board (IAASB) staff have prepared a Basis for Conclusions document that provides helpful background in understanding the conclusions the IAASB reached in finalising the international standard.
Audit of Service Performance Information
The Board discussed the submissions received on the fatal flaw review of the draft auditing standard on service performance information,which was exposed for final comment earlier in the year.
In addition to some suggested editorial changes, the Board agreed to revert to the terminology of ‘service performance criteria’ as originally exposed, but to change the definition to better reflect its meaning.
The Board will consider the final revisions to the draft standard at its December meeting.
Submission to the IAASB’s ED ISA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement
The Board considered and approved its submission on the IAASB’s ED on ISA 315 (Revised).
The Board is generally supportive of the direction of the standard. The main concern the Board raised, as heard from its constituents during outreach conducted, is the overall length and complexity of the standard. This makes it hard to read and understand and may hinder its effective implementation.
Overall, the Board believes that scalability of the ISAs is becoming more difficult and needs to be considered holistically across the suite of auditing standards. The Board therefore noted its support for the IAASB’s new project to consider the applicability of the ISAs to the audits of less complex entities.
Proposed revision of the standard on Review of Financial Statements by the Independent Auditor
The Board considered a New Zealand exposure draft to update NZ SRE 2410, Review of Financial Statements Performed by the Independent Auditor of the Entity.
The proposed revision will update the review standard to:
- Reflect the auditor reporting changes, excluding the requirements to report on key audit matters;
- Include requirements for dealing with non-compliance with laws and regulations;
- Require practitioners to refer to New Zealand ethical requirements in the report; and
- Include the description of the responsibility related to going concern in the report, with reference to “enquiry” to describe the auditors’ responsibility.
The Board further agreed not to mandate the inclusion of the Other Information section in the Review report, given the level of confusion that the requirements appears to have created for annual reporting. This may be reconsidered after the planned post-implementation review of the auditor reporting requirements.
The Board is working closely with the Australian Auditing and Assurance Standards Board, which is concurrently revising the equivalent Australian standard, to ensure the Trans-Tasman standards are harmonised.