New auditing regime: checklist

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The tax and audit season is now upon us with many preparing for the January madness for self-assessment tax returns and gearing up for the December year ends, says Steve Collings.

We’ve now (more or less) gone first cycle with the clarified International Standards on Auditing (ISAs) and feedback from practitioners is that they are generally coping well with the new regime. With the planning about to start for December year ends, it seems sensible to offer some quick recaps relating to the new auditing regime to ensure that practitioners are complying with the new requirements. This article will not go into every single ‘new’ aspect of the clarified ISAs but aims to offer some guidance to practitioners on the more critical parts which might affect an SME audit particularly as some practitioners dealing with SME clients may only have one or two audit clients.

Engagement letters

All engagement letters should have been re-issued to clients to comply with the provisions in ISA 210 Agreeing the Terms of Audit Engagement. The engagement letters need to be re-issued following the requirement in the clarified ISA 210 for the preconditions of an audit to be present prior to accepting appointment as auditor. The auditor must also assess whether the financial reporting framework to be applied is acceptable, and in the UK the framework will either be UK GAAP or EU-adopted IFRS. 

The preconditions of an audit (all of which must be present) are as follows:

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Steven Collings
Audit and Technical Partner
Leavitt Walmsley Associates Ltd
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08th Nov 2011 18:05

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Thanks Steve. I wasn't aware of the need to discuss related party issues. Oops.

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By ctkuan
11th Nov 2011 13:44

going concern

Hi Steve

Thanks for the great article.. I wish to clarify with you regarding this statement you made above 'management have to assess going concern for a period of one year from the (expected) date of approval of the financial statements'.  I thought ISA570 requires as a minimum that assessment period to be 12 months from the balance sheet date (instead of the date of approval of the financial statements)

Hope to hear from you.  Many thanks.

 

 

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11th Nov 2011 14:34

Going Concern

Hi ctkuan

ISA 570 does say that management's assessment of going concern should be for a period of 12 months from the balance sheet date (see para 18) - this is based on the full ISA issued by IAASB but the UK's APB have 'tweaked' these standards to be UK & Ireland specific (hence why they are referred to as ISA 'pluses').  ISA+ 570 (UK & Ireland) says at paragraph 18-1 that in the UK and Ireland if the period assessed by those charged with governance is less than 12 months from the date of approval of the accounts and TCWG have not disclosed the fact that their assessment is less than 12 months from the date of approval of the accounts, the auditor does so in their report.

Hope that helps.

Best wishes

Steve

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By ctkuan
dialm4accounts
11th Nov 2011 15:34

going concern

Hi Steve

Many thanks for your kind explanations!

Cheers/CT

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11th Nov 2011 19:51

Excellent Article Steve

Many thanks for the recap of pertinent points.

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