Advice: What’s new and what to expect in 2022

The standards of the International Auditing and Assurance Standards Board (IAASB) continue to evolve.

New and revised IAASB standards, and findings from regulatory inspections, may result in revision of the SAICA frequently asked questions (FAQs) that relate to matters arising from monitoring findings and other in-practice challenges.

NEW AND REVISED IAASB STANDARDS THAT ARE EFFECTIVE IN 2022
The Independent Regulatory Board for Auditors (IRBA) has approved the new and revised standards for adoption, issue and prescription for use by registered auditors in South Africa.

A wealth of information related to these standards can be accessed from the SAICA and IRBA websites. For the sake of brevity, this article only refers to the most pertinent information available from the SAICA website.

International Standard on Auditing (ISA) 315 (Revised 2019), Identifying and Assessing the Risks of Material Misstatement
ISA 315 (Revised 2019) is effective for audits of financial statements for periods beginning on or after 15 December 2021.

Most pertinent information available from the SAICA website

Suite of Quality Management Standards
International Standard on Quality Management (ISQM)
1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements
Systems of quality management in compliance with ISQM 1 are required to be designed and implemented by 15 December 2022, and the evaluation of the system of quality management required by paragraphs 53-54 of ISQM 1 is required to be performed within one year following 15 December 2022.2

ISQM 1 applies to all firms performing audits or reviews of financial statements, or other assurance or related services3 engagements.4

ISQM 2, Engagement Quality Reviews
ISQM 2 is effective for:

• Audits and reviews of financial statements for periods beginning on or after 15 December 2022, and
• Other assurance and related services engagements beginning on or after 15 December 2022 5

ISQM 2 applies to all engagements for which an engagement quality review is required to be performed in accordance with ISQM 1.6

ISA 220 (Revised), Quality Management for an Audit of Financial Statements
ISA 220 (Revised) deals with the specific responsibilities of the auditor regarding quality management at the engagement level for an audit of financial statements, and the related responsibilities of the engagement partner.7

This ISA is effective for audits of financial statements for periods beginning on or after 15 December 2022.8

Most pertinent information available from the SAICA website

View Tables here

The IRBA and SAICA are in process of revising a number of regulatory reports where agreed-upon procedures engagements are performed. The finalised reports will be communicated via the relevant IRBA and SAICA communication channels.

STANDARDS APPROVED BY THE IAASB THAT ARE EFFECTIVE AFTER 2022
ISA 600 (Revised), Special Considerations − Audits of Group Financial Statements (Including the Work of Component Auditors) was approved as a final standard by the IAASB in December 2021. The IAASB will formally release the standard after confirmation is received from the Public Interest Oversight Board (PIOB) that due process was followed. The revised ISA will be effective for audits of group financial statements for periods beginning on or after 15 December 2023.

IAASB WORK PLAN FOR 2022−2023
The information below has been extracted from the IAASB’s Work Plan for 2022-2023, which was approved at its December 2021 meeting. The work plan is pending approval by the PIOB.

New projects
Sustainability and environmental, social, and governance (ESG) assurance is a prominent addition to the new work plan and will see increased time and resourcing for 2022–2023. In addition, the new work plan highlights candidate topics in the audit and review space (eg responding to assessed risks of material misstatement and the impact of technology on various standards) that the IAASB will consider for a further project to commence in 2023.

View Table here – Planned actions for 2022-2023

Other initiatives and ongoing activities
In addition to the IAASB’s standard-setting projects, the following initiatives and activities will continue in the work plan period:

• Technology, including focused efforts on disruptive technologies
• Professional scepticism
• Auditor reporting
  Implementation support activities for recently completed standard-setting projects, including for ISA 600 (Revised)
• Developing or revising non-authoritative support materials as needed
• Coordinating with IESBA and other international global standard-setting boards (including but not limited to the International Accounting Standards Board and the newly formed International Sustainability Standards Board) as necessary, including monitoring the work that they undertake in 2022 and 2023 and how any changes may impact on the IAASB standards.
• Development of the Strategy for 2024–2027 and the Work Plan for 2024–2027.

UPDATES TO THE SAICA FAQS THAT RELATE TO MONITORING FINDINGS AND OTHER IN-PRACTICE CHALLENGES
An updated version of SAICA Frequently Asked Questions: Application of the requirements of the International Standards on Auditing in relation to matters arising from monitoring findings and other in-practice challenges was published in December 2021. This document is non-authoritative.

Access the document on the SAICA website.

Existing FAQs updated

• FAQ 7 When information to be used as audit evidence involves the work of experts now includes references to the work of experts contained in ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures.
• FAQ 10 Testing the completeness assertion from an appropriate source now includes links to two new FAQs, namely FAQ 11 and FAQ 12.

New FAQs published
The new FAQs address recurring regulatory inspections findings relating to the audit of revenue:

• FAQ 11 Obtaining audit evidence about the accuracy and completeness of information produced by the entity.
• FAQ 12 Auditing the completeness of revenue: an illustrative example focusing on the relevance and reliability of the population from which items are selected for testing.

Authors
Annerie Pretorius CA(SA), Project Director: Assurance at SAICA