A new International Auditing and Assurance Standards Board (IAASB) reproposal is intended to clarify and strengthen auditors’ responsibilities related to “other information” that is included in organizations’ annual reports outside the audited financial statements.
The reproposed International Standard on Auditing 720 (Revised), The Auditor’s Responsibilities Relating to Other Information, would require the auditor to perform limited procedures to evaluate the consistency of the other information with the audited financial statements.
The reproposal, released last week, would require the auditor to consider whether there is a material inconsistency between the other information and information the auditor learned while conducting the audit. The auditor also would be required to remain alert for other indications that the other information appears to be materially misstated.
IAASB Chairman Arnold Schilder said in a news release that the importance financial statement users place on this other information has increased in recent years.
“Auditors have certain responsibilities relating to this other information as part of an audit of an entity’s financial statements,” he said. “And the IAASB is intending to appropriately strengthen them—and users need to know what those responsibilities are.”
The PCAOB also is gathering feedback on its own other information proposal, which would require audits to evaluate and report on information that is included in an annual report but is outside the financial statements.
Commenters on a previous IAASB other information proposal in 2012 said the proposal needed to be clarified to prevent divergent practices, according to the IAASB.
The IAASB also seeks comment on the current reproposal, which can be submitted through July 18 at the board’s website.
—Ken Tysiac (firstname.lastname@example.org) is a JofA senior editor.