ISSAI 1710 The International Standards of Supreme Audit Institutions, ISSAI, are issued by the International Organization of Supreme Audit Institutions, INTOSAI. For more information visit www.issai.org. I N T O S A I Financial Audit Guideline – Comparative Information – Corresponding Figures and Comparative Financial Statements This Financial Audit Guideline draws on a not final redrafted version of International Standard on Auditing (ISA) 710, ”Comparative Information – Corresponding Figures and Comparative Financial Statements” developed by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC). The proposed ISA is included in this Guideline with the permission of IFAC. Exposure Draft of INTOSAI Practice Note, pages 3-4 (ISA 710 enclosed for reference) For Comments 2 February-1 May 2009 This is trial version www.adultpdf.com 2 This is trial version www.adultpdf.com 1(4) Date: January 29, 2009 Ref no: 14-2008-0111 Request for comments: Draft Practice Notes for International Standards on Auditing (ISA) 600, 610, 700, 705, 706,710 and 720. The enclosed Practice Notes have been developed by the Special Expert Teams no 4 and 5 and approved for exposure by the Financial Audit Guidelines Subcommittee at their meeting in January, 2009. With this letter the Practice Notes are exposed for comments from the entire INTOSAI community. The exposure period expires on May 01, 2009. Format of Comments Commenting on exposure drafts is open to all members of INTOSAI and other interested stakeholders. All comments will be considered by the experts and back-office experts involved in development of the guidance before issuing the final guidance for approval by Financial Audit Guidelines Subcommittee and thereafter the Governing Board. Request for general comments Comments may be issued as desired, however it is preferable if the comments are structured to give an answer on the following basic questions: Do you agree with the stated applicability for the ISAs in the public sector environment? Do you agree with the stated additional guidance given in the Practice Notes? If not what additional areas/guidance do you think should be added? In your opinion, will the drafted guidance together with the respective ISA provide relevant guidance for the public sector auditor? This is trial version www.adultpdf.com 2(4) All comments provided will be exposed on the FAS website as well as on www.issai.org after the commenting period is closed. FAS especially encourage and highly appreciate comments from Courts of Accounts. Request for specific comments Practice Note for ISA 600 Paragraphs P3 and P4 is drafted to clarify that if the group auditor refers to a component auditor in the group auditor’s report and therefore not take the sole responsibility, the audit is not in compliance with the ISAs. This is no difference related to the public sector, and is already contained in the ISA. Do you consider it relevant to have the responsibility clarified as drafted? The practice Note has some appendices (Appendix 2-4) providing additional public sector related examples or matters related to the appendices of the ISA. Do you have additional suggestions to be included in the appendices? PN 600 does not provide additional guidance directed to the Court of Accounts environment. Representatives from Court of Accounts system are highly welcome to suggest any such guidance relevant for the PN 600. Practice Note for ISA 610 The FAS has considered that the issue of determining the independence for internal auditors needs to be explained as included in paragraph P4. Do you agree on the issues to consider in order to determining the independence and objectivity in the public sector in addition to those FAS out in ISA 610? The FAS did not identify a need for any specific Court of Accounts guidance. Representatives from Court of Accounts system are especially requested to suggest guidance if needed. Practice Note for ISA 700 The experts considered ISA 700 applicable for audits of financial statements in the public sector. The experts considered the illustrative example reports in the ISA to be relevant to the public sector as well and decided not to include any additional examples. Do you agree? The Practice Note to ISA 700 provides guidance on how to make reference to auditing standards that are applied in the public sector (paragraph P12). Do you consider the reference relevant? This is trial version www.adultpdf.com 3(4) The Practice Note addresses the issue on references to compliance with ethical requirements in the auditor’s report in P9. Do you agree with the guidance provided? INTOSAI Fundamental Principles (paragraph 4.0.20.) deals with inclusion of recommendations and responses from the audited entity within the auditor’s report. FAS considered such inclusion not to be acceptable in the Auditor’s report. Therefore the guidance in P5 has been drafted. Do you agree with the guidance provided? The Practice Note for ISA 700 does not provide additional guidance directed to the Court of Accounts environment. Experts representing the Court of Accounts system are highly welcome to suggest any such guidance relevant for the Practice Note for ISA 700. Practice Note for ISA 705 The FAS has considered ISA 705 applicable for audits of financial statements in the public sector as explained in paragraph P2. The FAS did not consider it necessary to include any additional examples of modified opinions in addition to the illustrative examples included in the ISA. The differences in the public sector would mainly relate to the addressee and the subject for modification. Do you agree, or would you prefer that examples were included in the Practice Note? The FAS did not identify a need for any specific Court of Accounts guidance. Experts representing the Court of Accounts system are especially requested to suggest guidance if needed. Practice Note for ISA 706 The FAS considered ISA 706 applicable for audits of financial statements in the public sector, and have concentrated on providing additional guidance relevant to the public sector. P3 provides examples relevant to the public sector on circumstances when an Emphasis of Matter(s) paragraph may be issued, in addition to the examples of circumstances in paragraph A1 of the ISA. If you have examples of other relevant circumstances that can render an Emphasis of Matter(s) paragraph, please provide such examples. The FAS did not identify a need for any specific Court of Accounts guidance. Experts representing the Court of Accounts system are especially requested to suggest guidance if needed. Practice Note for ISA 710 The FAS considered ISA 710 applicable for audits of financial statements in the public sector both related to comparative financial statements and corresponding figures. However, the experts were a bit concerned with not being aware of the extent This is trial version www.adultpdf.com 4(4) of the existence of comparative financial statements in the public sector. It would therefore be helpful if you could include in your response information regarding whether you are auditing comparative financial statements and if so, if the guidance provide is relevant. The FAS did not identify a need for any specific Court of Accounts guidance. Experts representing the Court of Accounts system are especially requested to provide and suggest specific guidance if needed Practice Note for ISA 720 Paragraph A1 of the ISA addresses other reporting responsibilities. The FAS considered that there was no additional need for guidance in this respect. Do you agree? The FAS did not identify a need for any specific Court of Accounts guidance. Experts representing the Court of Accounts system are especially requested to provide and suggest specific guidance if needed Thank you very much for taking the time to consider these Practice Notes. Jonas Hällström FAS Director Please send your comments by January, 31 2009 to: projectsecretariat@riksrevisionen.se or by mail to: Riksrevisionen The FAS Project Secretariat 114 90 Stockholm Sweden or by fax to: +46-8-5171 4111 This is trial version www.adultpdf.com Table of Contents BACKGROUND 3 SCOPE OF THE ISA 3 CONTENT OF THE PRACTICE NOTE 3 APPLICABILITY OF THE ISA IN PUBLIC SECTOR AUDITING 4 ADDITIONAL GUIDANCE ON PUBLIC SECTOR ISSUES 4 SCOPE OF THIS ISA 4 AUDIT REPORTING 4 This is trial version www.adultpdf.com 3 ISSAI 1710 Practice Note 1 to [Redrafted] International Standard on Auditing 710 – Comparative Information – Corresponding Figures and Comparative Financial Statements Background This Practice Note provides supplementary guidance on [Redrafted] International Standard on Auditing (ISA) 710 – Comparative Information – Corresponding Figures and Comparative Financial Statements. It is read together with the ISA. The Practice Note is effective the same date as the ISA. Scope of the ISA ISA 710 deals with the auditor’s responsibilities regarding comparative information in an audit of financial statements. When the financial statements of the prior period have been audited by a predecessor auditor or were not audited, the requirements and guidance in ISA 510 (Redrafted) 2 regarding opening balances also apply. The Nature of Comparative Information The nature of the comparative information that is presented in an entity’s financial statements depends on the requirements of the applicable financial reporting framework. There are two different broad approaches to the auditor’s reporting responsibilities in respect of such comparative information: corresponding figures and comparative financial statements. The approach to be adopted is often specified by law or regulation but may also be specified in the terms of engagement. The essential audit reporting differences between the approaches are: (a) For corresponding figures, the auditor’s opinion on the financial statements refers to the current period only; whereas (b) For comparative financial statements, the auditor’s opinion refers to each period for which financial statements are presented. ISA 710 addresses separately the auditor’s reporting requirements for each approach. ISA 710 is effective for audits of financial statements for periods beginning on or after December 15, 2009. Content of the Practice Note P1. The Practice Note provides additional guidance for public sector auditors related to: 1 All Practice Notes are considered together with General Considerations in the Financial Audit Guidelines. 2 ISA 510 (Redrafted), “Initial Audit Engagements – Opening Balances.” This is trial version www.adultpdf.com 4 a. Scope of this ISA b. Audit Reporting Applicability of the ISA in Public Sector Auditing P2. ISA 710 (Redrafted) is applicable to auditors of public sector entities in their role as auditors of the financial statements. Additional Guidance on Public Sector Issues Scope of this ISA P3. As noted in paragraph 2 of ISA 710 (Redrafted) the approach to be adopted in regard to reporting responsibilities in respect of comparative information is often specified by law or regulation. Public sector auditors therefore need to consider the audit mandate in addition to any terms of the engagement. Audit Reporting P4. Normally the situations described in paragraphs 13 and 17 of ISA 710 (Redrafted) are less likely to occur in the public sector as the responsibility to audit the financial statements may reside with the Supreme Audit Institution (SAI) as defined in its mandate. Situations where the concept of predecessor auditor may be relevant are nationalization and privatization. When public sector auditors’ contract out the audit of the financial statements and the responsibility of the audit remains within the SAI, the concept of predecessor auditor will not be relevant. P5. If the prior period financial statements are amended as stated in paragraph 18 of ISA 710 (Redrafted) it may be common practice in some public sector environments to include an Emphasis of Matter, if the matter is presented or disclosed in the financial statements, or Other Matter Paragraph. Such practice would not contradict compliance with the ISAs. This is trial version www.adultpdf.com 1 AGENDA ITEM 6-C (UPDATED) 1 INTERNATIONAL STANDARD ON AUDITING 710 (REDRAFTED) COMPARATIVE INFORMATION— CORRESPONDING FIGURES AND COMPARATIVE FINANCIAL STATEMENTS (Effective for audits of financial statements for periods beginning on or after December 15, 2009) CONTENTS Paragraphs Introduction Scope of this ISA 1-3 Effective Date 4 Objectives 5 Definitions 6 Requirements Audit Procedures 7-9 Audit Reporting 10-19 Application and Other Explanatory Material Audit Procedures A1 Audit Reporting A2-A118 Appendix 1: Example Auditor’s Reports Appendix 2: Reporting Decision Trees 1 [Agenda Item 6-C was updated during the September 15-19, 2008 IAASB meeting to reflect in marked text changes based on decisions taken at the meeting. The updated agenda item is included here for information purposes only and is not the final pronouncement. Interested parties are discouraged from distributing, translating or using the updated agenda item for any purpose. They should await the release of the final pronouncement, which may contain minor modifications when compared to the updated agenda item. The final pronouncement is that approved by the IAASB and published by IFAC after the Public Interest Oversight Board (PIOB) has confirmed that due process was followed in its development. It will be available at http://www.ifac.org/IAASB/Resources.php. References in this ISA to other ISAs that have not yet been finalized reflect the working titles of those ISAs. The references are indicated in brackets and will be updated when those ISAs are finalized.] This is trial version www.adultpdf.com [...].. .INTERNATIONAL STANDARD ON AUDITING 710 (REDRAFTED) International Standard on Auditing (ISA) 710 (Redrafted), ―Comparative Information— Corresponding Figures and Comparative Financial Statements‖ should be read in conjunction with ISA 200 (Revised and Redrafted), ―Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing.‖... with ISA 200 (Revised and Redrafted), ―Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing.‖ 2 This is trial version www.adultpdf.com . ISSAI 1710 The International Standards of Supreme Audit Institutions, ISSAI, are issued by the International Organization of Supreme Audit Institutions, INTOSAI. For. Situations where the concept of predecessor auditor may be relevant are nationalization and privatization. When public sector auditors’ contract out the audit of the financial statements and the responsibility. responsibility of the audit remains within the SAI, the concept of predecessor auditor will not be relevant. P5. If the prior period financial statements are amended as stated in paragraph 18 of ISA