IFAC Public Discussion

The IAASB has now completed its project to redraft all of the ISAs and International Standard on Quality Control (ISQC) 1 in the new clarity style. The standards will be effective for audits of financial statements for periods beginning on or after December 15, 2009.

The Clarity project was undertaken to make ISAs and ISQC 1 more readily understood, applied and enforced. Key elements of the clarity drafting conventions include: establishing an objective for the auditor with respect to the subject matter of each standard; clearly distinguishing requirements from guidance on their application; avoiding ambiguity through eliminating the present tense to describe actions by the auditor and using more imperative language where a requirement was intended; and other structural and drafting improvements to enhance the overall readability and understandability of the standards.

The IAASB plans to publish the complete set of clarified ISAs together with the redrafted ISQC 1, a Glossary of Terms, and an amended Preface, in its 2009 handbook. This handbook will be available for download free-of-charge in PDF format from the IFAC online bookstore (http://www.ifac.org/store) in April 2009.

While welcoming many aspects of this project the IFAC SMP Committee is concerned about the increased number of requirements and its impact on the cost of performing an SME audit. We welcome your views, in particular:

1. Do you believe the redrafted ISAs & ISQC 1 will increase the cost to complete an SME audit? If yes, by approximately what percentage?
2. Do you believe the redrafted ISAs & ISQC 1 will improve the quality of SME audits?
3. Do you believe any benefits from the redrafted ISAs & ISQC 1 (in terms of improved quality audits) will outweigh any additional costs of completing an SME audit?

The Auditing Practices Board (APB), the UK standard setter, has issued a consultation paper seeking comment on whether the UK and Ireland should adopt the clarified ISAs - and when. The APB is also proposing that the same standards should apply to all entities regardless of size. The paper includes an impact assessment performed by the APB which supports the case for the immediate adoption of ISAs with a few pluses to address issues required by national legislation. See Press Release at http://www.frc.org.uk/apb/press/pub1742.html