The International Accounting Standards Board (IAASB) initiated a campaign in 2004 to improve the clarity (readability) of the ISAs.
This Clarity Project’s overarching objective was to make the ISAs more understandable, which would, in turn, make it easier to apply the standards consistently and lead to an improvement in the overall audit quality on a global scale.
After a string of corporate scandals that received widespread media attention and a widespread erosion of trust within the auditing profession, this was a vital task to carry out.
As a result of the Clarity Project, each standard now possesses a transparent structure with clear objectives, definitions, and requirements, in addition to the application and other explanatory material that provides a deeper dive into the requirements of the ISAs.
Because of how the new standards are organised, it is much simpler to comprehend what is needed and what is considered recommendations.
In addition, ISQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements has been rewritten, and the revised guidance on quality control procedures went into effect at the same time as the clarified ISAs did.
These updates were made in conjunction with the International Standards on Auditing. The following constitutes the structure of each standard:
Introduction
Objective
Definitions
Requirements
Application and Other Explanatory Material
Introduction
This paragraph contains information concerning the standard, including the ISA’s purpose, scope and subject matter. It also contains information regarding the responsibilities of the auditor and others in the context in which the ISA is set.
Objective
Each ISA contains a statement of the auditor’s objective in the audit area in which the ISA is set.
Definitions
The Clarity Project included adding an element for a greater understanding of the ISAs, and as such applicable terms contained within the ISAs have now been defined.
Requirements
Clearly stated requirements support each ISA.
Phrases such as ‘the auditor should …’ have now been replaced by ‘the auditor shall …’.
The profession welcomed this improvement because it cleared any ambiguity.
The word ‘shall’ indicates that the standard expects the auditor to do something rather than ‘should’, which implies that the standard ‘may’ expect something of the auditor in certain circumstances.
Application and other explanatory material
Each ISA clearly explains more precisely what the auditor is required to do to achieve the objective of the ISA in question.
Where applicable, the ISA may also contain illustrative examples of procedures that may apply in certain circumstances.
Other explanatory material may be contained within an ISA to help the auditor understand the ISA’s overall objective and application.
The impact of the Clarity Project contributed significantly to the enhancement and uniformity of audit quality worldwide.
The IAASB set out to undertake the project to encourage international convergence and assist audit firms that operate internationally by harmonising auditing standards.
In summary, the Clarity Project had the following effect on the ISAs and ISQC:
19 ISAs and ISQC 1 were redrafted.
16 ISAs were revised and redrafted to reflect the new clarity convention.
One new standard was issued:
relating to communication, ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management
ISA 540 Audit of Accounting Estimatesand ISA 545 Auditing Fair Value Measurements and Disclosureswere combined in ISA 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures
The Clarity Project brought about some significant changes in the work that auditors are required to undertake, which can be seen in the following summaries.
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ISA 260 Communication with Those Charged with Governance
This clarified ISA emphasises the importance of effective two-way communication between the auditor and those charged with governance of the entity.
Where the auditor encounters significant difficulty during the course of an audit, the auditor is required to notify such significant difficulties to the appropriate level of management or those charged with governance.
Where auditors feel that the two-way communication has not been effective, they should consider their ability to accept re-appointment as auditors if the conclusion is that the level of two-way communication has been inadequate for their purposes.
与治理层的沟通
ISA 260（修订版）要求审计师就计划的审计范围和时间安排的总体情况，包括识别出的特别风险与治理层进行清晰的沟通。
ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management
This new ISA was born out of the Clarity Project and is designed to address how auditors report control deficiencies to those charged with governance.
The main objective is to increase the communication quality to management and to focus on the definition of a significant deficiency in internal control and/or a missing control that requires formal reporting.
Auditors’ risk assessments must consider the types of control they would expect to find at an audit client, considering its size, complexity and nature.
If relevant controls are missing, their absence should be reported to the appropriate level of management or those charged with governance, even if they do not directly impact on the planned audit procedures.
ISA 265 准则出台的背景
IAASB 在2005年10月开始 ISA 265的制定，以应对世界范围内对内部控制的管制措施和准则制定方面的发展，尤其包括：欧盟法定审计指令要求审计师向审计委员会报告已识别出的内部控制重大漏洞 (Material Weakness)，美国 PCAOB 发布了规范财务报告内部控制审计的准则。
ISA 450 Evaluation of Misstatements Identified During the Audit
This new ISA, born out of the Clarity Project, requires (among other things) the accumulation of misstatements, reassessment of materiality and specific documentation.
This ISA sets a foundation for risk-based auditing, which means that the auditors will plan their procedures using a risk assessment which is, in turn, built on an understanding of the entity and the environment in which it operates.
The clarified ISA emphasises the point that it would be extremely rare for any deviation or misstatement identified in a sample to be considered an anomalous error (a one-off error) and not representative of the whole population.
Where auditors wish to decide whether a deviation or misstatement is anomalous, they should obtain sufficient appropriate audit evidence to support this position.
ISA 530 准则出台的背景
现代审计的重要特征之一就在于审计抽样的广泛运用。
可以说，审计抽样工作的质量高低，直接关系到整个审计工作的质量。
为了规范审计师使用审计抽样和其他选取测试项目的方法，IAASB 制定了 ISA 530“审计抽样和其他选取测试项目的方法”，该准则于2004年12月15日生效。
This revised ISA includes several specific requirements to ensure that auditors place a greater emphasis on a risk-based approach in the area of related parties and improve the identification of related party relationships and transactions which have not already been disclosed by management.
The clarified ISA recognises that the risks of material misstatement are higher when related parties are involved and require related party relationships and transactions to be considered explicitly in the engagement team’s fraud discussion.
This is required to understand the controls relevant to related parties.
The ISA also requires that where controls are not present in this area, the auditor may be required to report such facts to those charged with governance.
In addition, the clarified ISA requires the auditor to challenge any management assertion that transactions with related parties are on an arm’s length basis.
因此，2005年12月，IAASB 发布了修订并格式重排的 ISA 550“关联方”的征求意见稿，这也是根据 IAASB的明晰化起草体例编写的。
该征求意见稿发布后收到很多评论，使提议的 ISA 550得到重大的、实际的变化，因此，IAASB 认为有必要对修订的意见稿再次征求意见。
于是，IAASB 于2007年2月发布了第二次征求意见稿，并于2008年7月正式发布本准则。
ISA 570 Going Concern
ISA 570 did not see much revision during the Clarity Project.
However, it was redrafted to see much elevation in several areas.
In particular, where events or conditions cast significant doubt on the entity’s ability to continue as a going concern.
In this respect, auditors should obtain evidence concerning management’s assertion where they conclude that the going concern basis is appropriate in their particular circumstances by evaluating management’s plans for future actions and considering whether those plans are, in fact, feasible.
为规范审计师在会计报表审计中对持续经营假设合理性的考虑，提高审计师的风险意识，增强风险防御能力，IAASB 于2008年7月发布了按明晰化项目 (Clarity Project) 起草体例重新编写的 ISA 570“持续经营”。
ISA 600 Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors)
This revised ISA became far more wide-ranging than the previous standard and set new requirements regarding the relationship between the group engagement team and the component auditors.
This revised ISA has the most impact on group audits where the component auditor is not the auditor for the whole group hence requiring additional thought and documentation, such as:
Consideration of whether the engagement is a group audit within the scope of ISA 600;
Scoping the group audit, including determining significant components within the group;
Gaining an understanding of the group-wide internal control environment and the consolidation process;
Determining materiality and performance materiality for the group and its components; and
Obtaining an understanding of the component auditors involved in the work.
2007年10月，IAASB 发布了正式的 ISA 600(修订和格式重排)“对集团财务报表审计的特殊考虑，包括组成部分审计师的工作”。
Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.
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