This update was first published in the April 2011 UK edition of Accounting and Business magazine.
Disclosure notes to financial statements increasingly go beyond an analysis of line items in the primary statements, and include disclosures of a range of information including assumptions, models, alternative measurement bases and sources of estimation uncertainty.
Questions have therefore arisen as to how auditors should apply auditing concepts in obtaining evidence about such disclosures, to support their opinion on the financial statements as a whole. In response to some of these questions, the International Auditing and Assurance Standards Board (IAASB) has issued a discussion paper, The Evolving Nature of Financial Reporting: Disclosure and Its Audit Implications, aimed at exploring audit-related issues in respect of disclosures made in financial statements.
The paper uses IFRS as a frame of reference for considering disclosure requirements although similar principles are considered to apply to any reporting framework. The IAASB explores a number of issues surrounding the audit of disclosures but acknowledges that, in addition to auditors, other parties may be affected. Responses are therefore also being requested from auditors, investors, lenders, preparers and regulators.
The IAASB is also looking to stimulate further debate on audit quality and has issued Audit Quality: An IAASB Perspective. The publication aims to raise awareness of the different views on audit quality, which the IAASB discovered as a result of discussions with a wide range of parties with interests in audited financial statements.
Yvonne Lang, director, and Kern Roberts, associate director, Smith & Williamson