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Comments Sought on SSA 720 (Revised) and Addressing Disclosures in the Audit of Financial Statements

SSA 720 (Revised), The Auditor’s Responsibilities Relating to Other Information 

SSA 720, which is based on ISA 720, deals with the auditor’s responsibilities relating to other information (OI). Over recent years, there have been significant developments in corporate reporting, as well as the importance ascribed by users to the information in annual reports beyond the audited financial statements and the auditor’s report thereon. Hence, the International Auditing and Assurance Standards Board (IAASB) sought to undertake this project to revise ISA 720 to ensure that it remains relevant in the context of today’s financial reporting environment.

The key changes from the extant standard are: 

  • Broadening and clarifying the scope of OI by linking it to the concept of an “annual report”;
  • Enhancing the auditor’s work effort with respect to OI; and
  • Instituting transparency by requiring reporting on the auditor’s work relating to OI.

Under the standard, the auditor is required to:

  • Consider whether there is a material inconsistency between the OI and the financial statements;
  • Consider whether there is a material inconsistency between the OI and the auditor’s knowledge obtained in the audit;
  • Respond appropriately when the auditor identifies that such material inconsistencies appear to exist, or when the auditor otherwise becomes aware that OI appears to be materially misstated; and
  • Report as appropriate in the auditor’s report. For a listed entity, the auditor is required to include a separate OI section when, at the date of the auditor’s report, the auditor has obtained, or expects to obtain OI. For a non-listed entity, the auditor is required to include a separate OI section when, at the date of the auditor’s report, the auditor has obtained some or all of the OI. 

The key localisation amendments are made to the illustrative reports to cater for a Singapore incorporated company. Conforming amendments are also made to 16 other SSAs, Audit Guidance Statement (AGS) 5 and AGS 10. They will be effective for audits of financial statements for periods ending on or after 15 December 2016, in line with the effective date for the new and revised auditor reporting standards. 

Addressing Disclosures in the Audit of Financial Statements 

On 15 July 2015, the IAASB released its revised ISAs, Addressing Disclosures in the Audit of Financial Statements. The revisions to the standards aim to focus auditors more explicitly on disclosures throughout the audit process and drive consistency in auditor behavior in applying the requirements of the ISAs. 

As a complement to these revisions, IAASB staff has also developed a publication, Addressing Disclosures in the Audit of Financial Statements, for auditors that describes financial reporting disclosure trends and their possible implications from an audit perspective and highlights how the ISAs as revised guide the auditor in addressing disclosures. This publication is intended to help the consistent, effective, and proper application of the ISAs when addressing disclosures as part of an audit of financial statements, and may be particularly relevant to small and medium practices implementing the changes to the ISAs. 

The revisions to the standards encompass changes to 10 ISAs and conforming amendments to five other ISAs. They will be effective for audits of financial statements for periods ending on or after 15 December 2016, in line with the effective date for the new and revised auditor reporting standards and SSA 720 (Revised). 

At a glance:

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ISCA takes a leading role in advocating the views and proposals of the audit community in Singapore. ISCA would hence like to seek views from key stakeholders in Singapore on the above IAASB's proposal.

ISCA requires all comments to be submitted to technical@isca.org.sg by 24 October 2015.

Please click here for the ED Addressing Disclosures in the Audit of Financial Statements. 


Click here for ED SSA 720