The international financial reporting interpretations committee of the International Accounting Standards Board released in March draft interpretation D5, Applying IAS 29, Financial Reporting in Hyperinflationary Economies for the First Time ( www.iasb.org/uploaded_files/documents/8_39_ifric-d05.pdf ). The proposed interpretation contains guidance on how an entity should restate its financial statements in the first year it identifies hyperinflation in the economy of its functional currency. Comments are due May 14.
The international auditing and assurance standards board (IAASB) of the International Federation of Accountants in February issued a revised international standard on auditing (ISA) requiring auditors to be more proactive in considering the risk of fraud in financial statements ( www.ifac.org/store/ ). The Auditor’s Responsibility to Consider Fraud in the Audit of Financial Statements builds on the audit risk standards the board issued in 2003 and requires the auditor to focus on areas where there is a risk of material misstatement due to fraud, including management fraud. The revised standard is effective for audits of financial statements for periods beginning on or after December 15, 2004.
The board also issued two quality control standards directed to both audit firms and engagement teams. The first, International Standard on Quality Control 1 (ISQC1), establishes a firm’s responsibility to set up and maintain a system of quality control for all audit and assurance engagements ( www.ifac.org/store/ ). The second, ISA 220, Quality Control for Audits of Historical Financial Information, establishes standards for the specific responsibilities of firm personnel for an individual audit engagement, based on the quality control requirements in ISQC1 ( www.ifac.org/store/ ). Both quality control standards are effective June 15, 2005.