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Comments Sought on Proposed Changes to the SSAs in Addressing Disclosures in the Audit of Financial Statements

Disclosures are a fundamental part of financial statements and seen as an increasingly important way for preparers to communicate deeper insights about the entity’s financial position and performance. Addressing financial reporting disclosures has always been an integral part of the audit of financial statements, and it is broadly recognised that the International Standards on Auditing (ISAs) appropriately reflect the necessary risk-based approach to disclosures in the audit and that the ISA requirements are generally sufficient to meet the objectives stated in the standards. The proposals by the International Auditing and Assurance Standards Board (IAASB) include new guidance (mainly in the application material) on considerations relevant to disclosures—from when the auditor plans the audit and assesses the risks of material misstatement, to when the auditor evaluates misstatements and forms an opinion on the financial statements—in order to clarify the expectations of auditors when auditing financial statement disclosures, as well as provide additional guidance to assist auditors in addressing practical challenges arising from the evolving nature of disclosures.

Some of the key proposed changes include:

  • Revision of definition of “financial statements” to clarify the intention to include all disclosures
  • Emphasize importance of giving appropriate attention to disclosures (address them in the same way as classes of transactions, events and balances)
  • Encourage early auditor attention to disclosures
  • Add emphasis to consider disclosures when obtaining understanding of entity and its environment, and internal control; and when assessing risks of material misstatement
  • Integrate relevant assertions relating to disclosures with assertions relating to classes of transactions, events and balances
  • Clarify that non-quantitative disclosures is also relevant to the design of audit procedures to address risks of material misstatement
  • Clarify that misstatements in disclosures, irrespective whether they are quantitative or non-quantitative, need to be accumulated and evaluated
  • Guidance on the audit procedures to establish whether information presented in financial statements is relevant, reliable, comparable and understandable, and whether the financial statements achieve fair presentation.

This Exposure Draft (ED) comprises of the Explanatory Memorandum issued by the IAASB as well as the proposed amendments to the Singapore Standards on Auditing (SSAs), which are based on the proposed amendments to the ISAs. ISCA welcomes comments on the ED, specifically the questions listed on page 10. ISCA requires all comments to be submitted to technical@isca.org.sg by Monday, 14 July 2014. 


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