ISA 720 (Revised) DEALS with the auditor’s responsibilities relating to other information, Whether financial or non-financial information (other than ‘Financial Statements‘ and the ‘Auditor’s Report‘ thereon) INCLUDED in an entity’s Annual Report.
Table of Contents
- ISA 720 (Revised) – Introduction
- ISA 720 – Objectives
- ISA 720 – Definition
- ISA 720 – Requirements
- 1. Obtaining the Other Information
- 2. Reading and Considering the Other Information
- 3. Responding When a Material Inconsistency Appears to Exist or Other Information Appears to be Materially Misstated
- 4. Responding When the Auditor Concludes That a Material Misstatement of the Other Information Exists
- 5. Responding When a Material Misstatement in the Financial Statements Exists or the Auditor’s Understanding of the Entity and Its Environment Needs to be Updated
- 6. Reporting
- 7. Documentation
- Synopsis
ISA 720 (Revised) – Introduction
1. Scope of this ISA
It deals with the auditor’s responsibilities relating to other information.
2. Effective Date
This ISA is EFFECTIVE for audits of financial statements for periods ending on or after December 15, 2016.
ISA 720 – Objectives
The Objectives of the ‘Auditor’ having Read the ‘Other Information‘ are:
- To CONSIDER whether there is a Material Inconsistency between the other information and the financial statements;
- To CONSIDER whether there is a Material Inconsistency between the other information and the auditor’s knowledge obtained in the audit;
- To RESPOND appropriately when the auditor identifies that such Material Inconsistencies appear to exist; AND
- To REPORT in accordance with this ISA.
ISA 720 – Definition
1. Other Information
Financial or Non-Financial Information (other than ‘Financial Statements’ and the ‘Auditor’s Report’ thereon) INCLUDED in an entity’s Annual Report.
ISA 720 – Requirements
1. Obtaining the Other Information
| The Auditor Shall: |
|---|
| (a) DETERMINE through discussion with Management, which document(s) comprises the annual report; |
| (b) MAKE appropriate Arrangements with Management to OBTAIN in a timely Manner and if possible prior to the date of the auditor’s report, the final version; AND |
| (c) When Some or all of the document(s) will NOT be available until after the date of the auditor’s report, REQUEST Management to provide a ‘Written Representation‘. |
2. Reading and Considering the Other Information
The ‘Auditor’ shall READ the ‘Other Information‘ and in doing so shall:
- CONSIDER whether there is a Material Inconsistency between the other information and the financial statements; AND
- CONSIDER whether there is a Material Inconsistency between the other information and the auditor’s knowledge obtained in the audit.
3. Responding When a Material Inconsistency Appears to Exist or Other Information Appears to be Materially Misstated
The ‘Auditor’ shall DISCUSS the Matter with Management and if necessary, PERFORM other procedures.
4. Responding When the Auditor Concludes That a Material Misstatement of the Other Information Exists
| The Auditor Shall REQUEST Management to Correct the Other Information. If Management: |
|---|
| (a) AGREES to Make the correction, the auditor shall DETERMINE that the correction has been Made; OR |
| (b) REFUSES, the auditor shall COMMUNICATE the Matter with those charged with governance and REQUEST that the correction be Made. |
5. Responding When a Material Misstatement in the Financial Statements Exists or the Auditor’s Understanding of the Entity and Its Environment Needs to be Updated
The ‘Auditor’ shall RESPOND appropriately in accordance with the other ISAs.
6. Reporting
The auditor’s report shall INCLUDE a Separate Section with a heading ‘Other Information’ or other appropriate heading, when at the date of the auditor’s report;
- For an audit of Financial Statements of a ‘Listed Entity’, the auditor has obtained or expects to obtain the other information; OR
- For an audit of Financial Statements of an entity ‘Other than a Listed Entity’, the auditor has obtained some or all of the other information.
When the ‘auditor’ Expresses a QUALIFIED or ADVERSE opinion in accordance with ISA 705 (Revised), the auditor shall CONSIDER the Implications of the Matter giving rise to the Modification of the opinion.
7. Documentation
| As Per ISA 230, the Auditor Shall INCLUDE in the Audit Documentation: |
|---|
| (a) Documentation of the procedures performed under this ISA; AND |
| (b) The Final Version of the ‘Other Information’ on which the auditor has performed the work required under this ISA. |
Synopsis
ISA 720 ‘The Auditor’s Responsibilities Relating to Other Information‘ DEALS with the auditor’s responsibilities relating to other information, whether financial or non-financial information INCLUDED in an entity’s Annual Report.
[700-799] Audit Conclusions and Reporting
Chartered Accountant (Institute of Chartered Accountants of Pakistan)
Bachelor of Accounting Honours (Asia e University, Malaysia)