The Government Accountability Office has expressed its support for giving auditors more responsibility for the information in documents accompanying audited financial statements.
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In a comment letter last week to the International Auditing and Assurance Standards Board on a proposed revision in international auditing standards, the GAO said it generally supported the changes, but nevertheless had some concerns, including the fact that the information reviewed by the auditor could be changed later.
“We support the IAASB’s efforts to improve the auditing standards and believe it is important to clearly state the auditor’s responsibility related to other information,” wrote GAO director of financial management and assurance James R. Dalkin. “We do, however, have a number of specific comments on the proposed revisions to the standard, including our concerns related to the auditor’s ability to identify all the different information that may be associated with the auditor’s report, the information reviewed by the auditor that could be subject to change or revision, and the level of work expected of the auditor to meet the requirements.”
He noted that the expanding the auditor’s responsibilities has merit, but added that the GAO is concerned about several issues that should be clarified. For example, the revised standard would require an auditor to “discuss with management the nature and timing of the documents that are expected to be issued in connection with the initial release and determine which of them are within the scope of this [International Standard on Auditing],” but the standard does not clarify that the auditor’s responsibility to read and consider other information is limited to information identified through this discussion with management.
“We believe the proposed ISA would be improved if it clearly stated that the auditor’s responsibility extends only to other information identified through this discussion with management and of which the auditor is otherwise aware,” Dalkin wrote. “Further, we believe the proposed ISA would be improved if it provided a more definitive description of the types of documents that may be considered to constitute ‘other accompanying information’ to ensure consistency of practice.”
He suggested improving the standard by stating that other information may be issued in different formats or different media (i.e., print or electronic) or be described by different names.
The GAO is also concerned about later revisions in the documents that are made without consulting the auditor.
“Further, we are concerned that certain types of other information could be subsequently changed without the knowledge of the auditor, particularly those that are not incorporated into the same document as the financial statements,” Dalkin wrote. “We are also concerned about the challenge of notifying users of the auditor’s report that some of the accompanying information reviewed by the auditor could be subject to change or revision. However, we believe that auditors may be able to report that they read and considered other information as of a certain date, and that they would have no control over any subsequent changes to accompanying information. For example, auditors could state that they reviewed the accompanying information on a certain date, at a certain time, and from a certain location (i.e., website address). We encourage the IAASB to consider expanding the guidance included in the ISA to address the possibility of subsequent changes to other information and any impact this may have on the auditor’s responsibilities.”
The GAO would also like the IAASB, which operates under the auspices of the International Federation of Accountants, to coordinate with other standard-setters in the U.S.
“As stated in our previous comment letters, we strongly encourage the recognized accounting and auditing standard setters, including the IAASB, the Public Company Accounting Oversight Board, and the Auditing Standards Board, to coordinate the development of any new requirements regarding the auditor’s responsibilities relating to other information with a goal of harmonizing the auditor’s responsibilities to the maximum extent possible,” said Dalkin.