This blog is written by Mr. Ahmad Afzaal Baig, Associate Internal Audit. Please read this blog and provide your valued comments.

ISA 720

OBJECTIVE

The objective of the IAASB’s revision of ISA 720 was to ensure that the ISA continues to be capable of enhancing the credibility of financial statements through specifying appropriate responsibilities of the auditor relating to the range of other information in documents containing audited financial information, taking account of how such information is disseminated.

Other information is financial or non – financial information (other than financial statements and the auditor’s report thereon) included in an entity’s annual report. The auditor’s work effort with respect to other information; the auditor is required to read the other information and:

 

  1. Consider whether there is a material inconsistency between the other information and the financial statements ; and
  2. Consider whether there is a material inconsistency between the other information and the auditor’s knowledge obtained in the audit, in the context of audit evidence obtained and conclusions reached in the audit;
  • As the basis the consideration of whether there is a material inconsistency between the other information and the financial statements, the auditor is required to compare selected amounts or other items in the other information with such amounts or other items in the financial statements.
  • The auditor is also required, while reading the other information, to remain alert for indications that the other information not related to the financial statements or the auditor’s knowledge obtained in the audit appears to be materially misstated. Consistent with extant ISA 720, the auditor’s work effort on other information applies regardless of whether the other information is obtained prior to or after the date of the auditor’s report. Using the heading “Other Information” or other appropriate heading, the auditor’s report will include:

A statement that management is responsible for the other information.

Identification of the other information obtained prior to the date of the auditor’s report. In the case of a listed entity, the auditor is also required to identify any other information expected to be obtained after the date of the auditor’s report.

A statement that the auditor’s opinion does not cover the other information and, accordingly, that the auditor does not express (or will not express) an audit opinion or any form of assurance conclusion thereon.

A description of the auditor’s responsibilities relating to reading, considering and reporting on other information as required by ISA 720 (Revised).

When other information has been obtained prior to the date of the auditor’s report, either: A statement that the auditor has nothing to report; or If the auditor has concluded that there is an uncorrected material misstatement of the other information, a statement that describes the uncorrected material misstatement of the other information.

Ahmed Afzaal Baig