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Clarity query

1 Dec 08

The APB wants views on UK and Ireland adoption of Clarity Project international accounting standards

The Auditing Practices Board (APB) is consulting on whether UK and Irish auditing standards should be updated for new international auditing standards (ISAs) to be issued in early 2009.

The International Auditing and Assurance Standards Board (IAASB) will soon complete its project to update and reformat ISAs. This job, the Clarity Project, was undertaken with international regulatory support to improve understanding of ISAs and make them more compatible with regulatory frameworks, including the EC’s Statutory Audit Directive.

In parallel with the Clarity Project, ISAs on important topics such as auditing groups, estimates (including fair values) and related party transactions are being improved to reflect the latest developments and thinking. The IAASB intends that all ISAs redrafted in the Clarity format should take effect internationally for audits of financial statements for periods beginning on or after 15 December 2009.

The EU decision on, and timetable for, an endorsement of “Clarity ISAs” have not been established. The APB believes, that if it happens, it will be after the IAASB implementation date.

In 2004, the APB decided to base UK and Irish auditing standards on ISAs, partly as an efficient way to benefit from future improvements to them.

The consultation paper asks whether the APB’s current ISAs (UK and Ireland) should be updated to reflect improvements in the underlying international standards and, if so, whether this should be done by adopting the Clarity ISAs as soon as practicable or by waiting for an outcome from the EU.

The paper includes the results of a regulatory impact assessment by the APB to evaluate the possible impact on audit costs of Clarity ISAs.

The APB wants to hear the views of investors (who have a particular interest in obtaining high quality audits), companies (who pay audit fees), accountancy bodies (who will provide training and implementation support) and audit firms (who will have to apply the new standards).

Richard Fleck, APB chairman, said: “The APB believes that the new standards should be adopted domestically as soon as practicable so that UK and Irish auditing standards will continue to be seen as amongst the strongest internationally. We look forward to views on this approach and, in particular, on the optimal timing for the adoption of the new standards.

“The basis of the consultation is that the new ISAs should apply to all audits. For this approach to work it is essential that the accountancy bodies and external providers provide training and implementation support, especially to the auditors of smaller entities. We have been liaising with the accountancy bodies and are committed to work with them throughout this process.”

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