Auditing updates

On 12 February 2021, the International Accounting Standards Board (IASB) issued narrow scope amendments to International Accounting Standard (IAS) 1, Presentation of Financial Statements. Basis the amendments introduced, companies are required to disclose their material accounting policy information, instead of significant accounting policies. The amendments are effective for annual reporting periods beginning on or after 1 January 2023, with early application permitted.

In this regard, on 16 November 2022, the International Auditing and Assurance Standards Board (IAASB) issued a guidance to enable users of financial information understand the impact of amendments to IAS 1 on the International Standards on Auditing (ISAs) (the guidance).

As per the guidance, few key aspects of the audit engagement that could be impacted as a result of amendment to IAS 1 are as follows:

• Financial reporting process: When management prepares financial statements as per IFRS, the auditor will need to evaluate the appropriateness of management’s disclosures, including understanding the effect of amendments to IAS 1 on the entity’s financial reporting process. Auditors will also need to assess the related impact on the auditor’s report
• ISAs relevant to auditors’ work on disclosures: Various ISAs contain requirements that are relevant to the auditor’s work on disclosures in the financial statements, which include³⁴ an entity’s disclosure of material accounting policy information as required in accordance with the amendments to IAS 1. Auditors will need to apply these ISAs while reviewing the management’s compliances with amendments to IAS 1³⁵.
• Other aspects of the audit: Other aspects of the audit that may be impacted include the audit engagement letter, communicating deficiencies in internal control to and requesting written representations from management and, where appropriate, those charged with governance.

The guidance clarifies that the amendments to IAS 1 do not impact the principles-based requirements of the ISAs. However, the same would impact the illustrative auditor reports throughout the ISAs – where the terminology of the illustrative auditor reports will have to be aligned with the amendments to IAS 1.

To access the text of the guidance, please click here

To access the text of the announcement of IASB with regard to amendments made to IAS 1, please click here

34. if the applicable financial reporting framework is IFRSs.
35. These ISAs are relevant to the auditors’ identification and assessment of risks of material misstatement related to disclosures in the financial statements, the auditor’s responses to assessed risks, evaluating information in disclosures, communicating significant findings from the audit, and reporting