New international auditing standard revisions are designed to increase auditors' involvement with information outside audited financial statements that is included in entities' annual reports, also known as "other information."
The revisions are contained in International Standard on Auditing 720 (Revised), The Auditor's Responsibilities Relating to Other Information, issued by the International Auditing and Assurance Standards Board (IAASB).
The standard requires that an auditor undertake an "intelligent read" of the annual report in the context of the knowledge obtained in the audit, according to IAASB Chairman Arnold Schilder. The auditor will be required to perform procedures to ensure that the annual report is not materially inconsistent with the audited financial statements, Schilder said in a news release.
In addition, the standard includes new requirements related to auditing "other information" that complement changes arising from the IAASB's new auditor reporting standards, which were issued earlier this year. The auditor reporting standards and the revised "other information" standard will take effect for audits of financial statements for periods ending on or after Dec. 15, 2016.
IAASB Technical Director Kathleen Healy, CPA, said in a news release that under the revised "other information" standard, users of auditors' reports should understand which documents the auditor has considered, as well as the auditor's work on those documents.
"Specifically articulating the auditor's responsibilities for other information, including the fact that the auditor's opinion does not cover this information, will also give users the appropriate context in which to consider an entity's annual report," she said.
The standard also addresses the challenges auditors may face when some or all of the "other information" is not available as of the date of the auditor's report. For these circumstances, additional communications are prescribed for auditor's reports for listed entities.