UK & Ireland proposed approach to responding to exposure drafts issued by IAASB in connection with it's Clarity Project
International Standards on Auditing (UK and Ireland) Consultation Paper issued for comment by the Auditing Practices Board
Comments from ACCA
November 2005
ACCA welcomes the opportunity to comment on the International Standards on Auditing (UK and Ireland) Consultation Paper Proposed Approach to Responding to Exposure Drafts Issued by IAASB in Connection With its ‘Clarity Project’ (the proposed approach).
Our comments are given as responses to the two questions posed in the Consultation Paper.
DO YOU AGREE WITH THE APB’S PROPOSALS FOR OBTAINING VIEWS ON THE ‘CLARIFIED’ ISAS IN ADVANCE OF SUBMITTING COMMENTS TO IAASB?
As a public interest body, we believe that the APB is right to obtain the views of interested parties, as well as utilising its technical expertise to respond to IAASB exposure drafts.
In this regard, we regret that the Consultation Paper did not provide further details of the APB International Committee and other mechanisms currently employed by the APB to inform its international work, which is influential throughout all stage of development of a pronouncement. We would encourage the APB to bring greater transparency to its stakeholder engagement by giving such mechanisms at least equivalent publicity to that given to the APB Technical Advisory Group.
In respect of the specific actions that the APB proposes, we comment as follows:
- Arranging meetings before 28 February 2006 at which the clarity project can be discussed - we give our wholehearted support to this approach. We have separately approached APB staff offering co-operation in facilitating meetings, both in London and regionally for ACCA members and other stakeholders.
- Alerting interested parties by issuing press releases - we support this action, which would supplement the publicity given by IAASB to its own exposure drafts. We note and support the inclusion of a click-through facility on APB press releases published on the Internet to give readers rapid access to IAASB publications.
- Distributing hard copies of ‘clarified’ exposure drafts to key stakeholders - we are not convinced that this is a cost-effective approach. ACCA, in common with many entities, distributes and deals with documents mainly on an electronic basis. We suggest below, therefore, an alternative mechanism.
- Encouraging interested parties to send comments on exposure drafts of clarified ISAs to APB as well as IAASB - we would support this action in theory. However, ACCA, in common with other entities that have regard to their own internal due process, find it difficult to meet the necessarily earlier deadlines set by APB. There is a danger, therefore, that APB will not receive a balanced view from this mechanism.
- Requesting views from the APB International Committee - ACCA is pleased to participate in this committee and believes that it is a very useful forum for the discussion of the work of IAASB. As set out above, the APB has provided readers of the Consultation Paper with very little information about the committee. This should be taken into account when considering respondents’ views on the matter.
In addition to the above specific actions, we suggest that the APB may wish to consider the following additional mechanisms:
- Setting up a web-based response system (such as employed on the ACCA website) which stakeholders may use to provide views to the APB in relation to international matters.
- The expansion of mechanisms, such as the APB International Committee, for direct stakeholder dialogue with a wider range of representatives including business and the investor community.
- Expanding the system of newsletters published in conjunction with the Financial Reporting Council, so as to directly engage stakeholders with the IAASB processes. Sending an electronic newsletter with a click-through facility to an IAASB exposure draft is more cost effective than any system of supplying hard copy publications.
DO YOU AGREE THAT APB SHOULD PLAN TO EXPOSE A SET OF STANDARDS TO APPLY IN THE UK AND IRELAND BASED ON THE ‘CLARIFIED’ ISAS AFTER FURTHER PROGRESS HAS BEEN MADE WITH BOTH THE CLARITY PROJECT ITSELF AND IN ESTABLISHING THE PROCESS BY WHICH ISAS WILL BE ADOPTED WITHIN THE EC?
The above question does not give any alternatives. However, there must be some exposure of new or revised ISAs with proposed UK and Ireland ‘plusses’ in order to follow ‘due process’, so the implied alternative is to continue to issue exposure drafts at times that match the issue of IAASB exposure drafts.
The IAASB project currently contemplates a semi-big bang implementation whereby the most important ISAs will be ‘clarified’ so as to be implemented for audits of financial statements for periods beginning on or after 15 December 2007. Some 14 remaining ISAs are to be updated and ‘clarified’ over the period 2008 to 2011. IAASB exposure drafts are planned to be issued as follows:
- The current exposure draft seeking views on the new drafting conventions, the intended implementation approach, and the necessary changes to the Preface. This includes four proposed redrafted ISAs
- Some 14 further exposure drafts during the period ending Summer 2007 (relating to projects currently in progress, recently revised and updated ISAs and ISAs that are existing exposure drafts)
- Following the ‘semi-big bang’ commencement of the above, some 14 further ISAS over the period 2008 to 2011
The APB proposal is, in essence, to expose UK and Ireland ‘plusses’ after the release of the final pronouncements arising from the first two bullet points above.
On the assumption that the APB will enhance its gathering of views from interested parties (the subject matter of the other question posed by the Consultation Paper), there is a much-reduced need to issue exposure drafts at times that match the issue of IAASB exposure drafts. The APB could still choose to do this, however, running the risk that uncertainty over ‘plusses’ could necessitate a revised approach and re-exposure after the release of the final pronouncements arising from the first two bullet points above.
We believe that this risk is high because of the extensive plusses in ISA (UK and Ireland) and the expectation that many will no longer be appropriate, either because of adoption in ISAs or elimination to meet EU restrictions.
On the assumption that there will be sufficient time for due process (which itself should take into account the burden on commentators of considering plusses to nearly 20 ISAs) we support the plan set out in the question.