While the revised standard mandates application of the revised guidelines for the financial statement audits commencing on or after 15th December 2022, it has also allowed voluntary early application to ensure the quality of the audit is maintained throughout the audit engagement. Here’s a comparison of the old standard vs. revised standard on quality of audit for financial statements.
Old Vs. Revised ISA (UK) 230 - Key Differences
Particulars | Old Standard | Revised Standard |
Focus | More focus on exercising control over the Quality of the audit engagement. | Focusing the overall Quality of the audit is Managed responsibly. |
Audit Concern | The firm’s policy decides the process, objectives and controls of the audit engagement. | Considering each firm’s risks, the audit quality management, process, objectives, procedures, and control should be decided. |
Emphasis | The audit engagement should be accurately and effectively adhere to the audit quality controls. | More accurate and complete information and communications to maintain the quality of the audit. |
Specific Requirements | Overall leadership responsibilities. | Active participation from the key auditor as well as the team members emphasizing on the accountability as well. |
Documentation of Processes | Documenting and testing of the processes is not specified. | Specifically requires processes to be documented and tested. |
Reference to ‘Resources’ | The resources refer to the Human only | Wider reference so as to include Humans, intellectual, technological components |
Challenges on the Practical Implication
The main challenge will be of an overall application as there are a lot of requirements and making all of those work together would be a bit of a hardship.
The revised standard requires documentation and testing of the processes, which is quite challenging as the methods might be in place but documenting them could be cumbersome.
The requirement of the risk-based approach makes it complicated to set the objectives, procedures based on the individual firm’s risks and threats. Such an approach will then become too subjective.
The best strategy to manage the transition period would be to match your firm’s objectives with the revised standard and create policies and procedures that meet the standard’s requirements.
References:
ISA (UK) 220_Revised July 2021_final
https://www.frc.org.uk/getattachment/615b6684-314e-44ae-a47f-1fc8ffa92bac/ISA-(UK)-220_Revised-November-2019-With-Covers.pdf
New standards continue drive toward better audits
