Auditing Practices Board Work Programme for 2006/7
Comments from ACCA
March 2006
General Comments
The Consultative Committee of Accountancy Bodies (CCAB), of which the Association of Chartered Certified Accountants (ACCA) is a member, was pleased to comment on the Regulatory Strategy and the Plan and Budget of the Financial Reporting Council for 2006/7. In addition to those comments, ACCA welcomes the opportunity to provide views on the proposed Auditing Practices Board Work Programme for 2006/7.
As noted in the CCAB comments, there is a continuing dialogue between the APB and the CCAB Ethics Group concerning the APB having a remit for setting standards for assurance services (including ethical standards). In this response we do not comment further on that matter.
In general we find the APB proposals to be an appropriate response to the current international convergence in auditing standards. In the next section of our response we provide answers to the specific questions raised in the consultation document.
Answers to Specific Questions
1. Do you consider APB’s list of publications to be comprehensive and current?
• specify any other topics which should be covered, and
• specify any guidance that should be updated as a priority.
Except as referred to below in our answers to subsequent questions, we consider that the APB’s publications sufficiently address the main aspects of audit and assurance within its remit and are reasonably current.
2. Do you agree with APB’s plans in relation to auditing standards? Do you agree that the focus of APB’s work in 2006/7 should be on:
• being actively involved in the auditing standards adoption process within the EU,
• responding to IAASB exposure drafts arising from the Clarity Project, and
• contributing to the work of IAASB to update the remaining ISAs.
We agree that the APB should focus on the development of International Standards on Auditing (ISAs) and contribute actively to the auditing standards adoption process within the EU.
In November 2005, we commented on the APB’s Consultation Paper concerning its proposed approach to responding to exposure drafts issued by IAASB in connection with its ‘Clarity Project’. We have since facilitated meetings with ACCA members and look forward to continuing to support the APB’s actions to engage stakeholders with the IAASB’s processes. We consider that the APB should continue to promote a principles-based approach to standard setting and strongly challenge any 'regulatory creep' whereby existing guidance is changed to a requirement without sufficient justification.
We welcome the active involvement of the Financial Reporting Council and the APB in the European Group of Auditors’ Oversight Bodies and its ISA sub-group. This will contribute to the ISA adoption process and compliment activity at Government level to successfully implement the revised 8th Company Law Directive. We also believe that the APB should continue its close involvement in the development of EU proposals affecting auditors so as to present a rigorous challenge to any that appear to be unjustified in a UK and Ireland context.
3. Do you agree with APB’s plans in relation to auditing guidance?
• do you agree that updating the industry specific Practice Notes a priority?
• is new guidance needed on changes arising from the Company Law Reform Bill?
We agree with the plans for updating Practice Notes and Bulletins which provide useful guidance in specific subject areas and have to be updated for the introduction of ISA (UK and Ireland). In particular, because of their wide application, we regard as high priority those dealing with pension schemes and investment businesses.
We are aware of and support the continuation of the efforts made by the APB to encourage regulatory bodies to update the wording required of auditors in regulatory reports (for example to refer to ISAs (UK and Ireland) rather than ‘Auditing Standards’).
The Company Law Reform Bill is introducing many changes that affect companies and their auditors and the APB is right to consider the need for guidance. Because the changes are wide-ranging it may well be that they are better addressed through updating of existing publications rather than a single publication. Any need for the latter would we suggest be met by commercial or professional publications as guidance on change need not be authoritative.
4. Do you agree with APBs plans in relation to assurance services?
The plans deal with three separate matters:
• adoption of IAASB assurance pronouncements
• investment circulars
• adoption of IAASB’s interim review standard.
We note that the investment circulars were developed having regard to International Standard on Assurance Engagements 3000 and the IAASB’s International Framework for Assurance Engagements. Given that they are being used in practice, we suggest that the APB promulgates these assurance pronouncements so that they may be used in the UK and Ireland with appropriate authority. As they are generic, this could be done simply, with the very minimum of change for national purposes.
In our general comments we noted that there is a continuing dialogue between the APB and the CCAB Ethics Group concerning the APB having a remit for setting standards for assurance services (including ethical standards). In this response we do not comment further on that matter. In relation to investment circulars, we support the stated intention to consult on whether additional standards and guidance are needed.
We agree that views should be sought on whether International Standard on Review Engagements 2410 Review of interim financial information performed by the independent auditor of the entity should be adopted.
5. Do you support the APB plan not to make piecemeal changes to the Ethical Standards for Auditors in 2006/7?
This matter has been the subject of dialogue between the APB and the CCAB Ethics Group and we understand that the APB is reluctant to made changes to the Ethical Standards for Auditors but believes that implementation may be aided by ‘FAQs’ developed to assist practitioners. ACCA is pleased to continue that work and looks forward to a systematic review of the standards in the summer of 2007.
6. Do you have any other comments on APB’s proposed work plan for 2006/7?
We strongly support the APB’s decision to form an SME audit sub-committee to assist the Board in its work.
We applaud the APB for producing staff analysis papers in relation to IAASB exposure drafts. We have recommended their use more widely than in the UK and Ireland and look forward to their further production. We are very disappointed however that the APB has chosen to publish the documents in a form similar to that of APB exposure drafts such that users can only read or print the material. This contrasts with the form adopted for the APB Proposed Work Plan which may be used electronically, saving re-typing. We strongly suggest that the APB adopts a more usable format for all publication on which it seeks comments.
We suggest that the APB carries out a benchmarking of its policies and procedures against those of the IAASB. Increased transparency, though simple measures, such as publishing responses to exposure drafts on its website or holding meetings that are open to the public, would improve accountability and ultimately increase the authority of the work of the APB and its pronouncements.