The International Audit and Assurance Standards Board (IAASB) has recently issued exposure drafts of three important auditing standards:
• ISA 400 Understanding the entity and its environment and assessing the risk of material misstatement,
• ISA 401 The auditors procedures in response to assessed risks, and
• ISA 500 Audit evidence.
The exposure drafts can be downloaded free of charge from the IAASB's website www.ifac.org.
As it is likely that the European Commission will require member states to apply international auditing standards from 2005 these standards, when finalised, are likely to directly apply to UK and Irish audits in the foreseeable future.
The Auditing Practices Board is inviting, by 28 February 2003, comments on the drafts, views on how the new standards will impact audit quality and audit costs, and views on when firms are likely to be in a position to implement them.
A paper setting out the differences between the current and proposed standards together with specific questions has been posted to the APB's website at www.accountancyfoundation.com (Publications and Reports/Exposure Drafts)
The draft IAASB standards are the result of a considerable period of research and development which commenced, at the APB's instigation, with a review of how the audit methodologies of the largest audit firms have responded to changes in the business environments of their clients.
The APB recognises that the IAASB proposals would represent a significant change to international auditing standards and, in due course, to auditing standards in the UK and the Republic of Ireland (APB standards in relation to this aspect of the audit are similar to the existing international standards). Changes to auditing standards will, however, not necessarily cause the same degree of change to audit practice as firms' methodologies may already have anticipated some of these developments.
The APB is especially interested is obtaining information to assist it evaluate the extent to which the new standards would result in changes to the way audits are conduced in practice and the costs and benefits associated with such changes and to explore whether the costs, and indeed the benefits, vary depending on the size of the entity being audited.
Jon Grant, APB executive director