TECHNICAL RELEASE Interim Guidance

TECHNICAL RELEASE
Interim Guidance
GUIDANCE FOR AUDITING FINANCIAL
STATEMENT DISCLOSURES MADE
UNDER IFRS 7 (FRS 29), FINANCIAL
INSTRUMENTS: DISCLOSURES
FSF 03/07
GUIDANCE FOR AUDITING FINANCIAL
STATEMENT DISCLOSURES MADE
UNDER IFRS 7 (FRS 29), FINANCIAL
INSTRUMENTS: DISCLOSURES
Status of Guidance
FSF 3/07 is issued as interim guidance to assist auditors of entities applying
IFRS 7 for the first time. The Institute of Chartered Accountants in England
and Wales (ICAEW) is not responsible for setting Financial Reporting Standards,
which are set in the UK by the Accounting Standards Board (ASB), or for the
International Financial Reporting Standards set by the International Accounting
Standards Board (IASB). Nor is it responsible for International Standards on
Auditing (ISAs) which are set by the International Auditing and Assurance
Standards Board (IAASB) or for ISAs (UK and Ireland), which are set by the
Auditing Practices Board (APB). Our role includes providing guidance to our
members where we consider such guidance is necessary and is not provided
elsewhere, in order to enhance the consistency and quality of auditing.
The content of this Technical Release has no formal or mandatory status
beyond that of guidance to our members.
Final guidance will only be issued if further issues arise or significant comments
are received in respect of this interim guidance.
Invitation to comment
Comments on the interim guidance are welcome and should be provided
to Iain Coke at the address below by 1 February 2008.
[email protected]
Iain Coke, Head of the Financial Services Faculty
Chartered Accountants’ Hall
PO Box 433
Moorgate Place
London EC2P 2BJ
No responsibility for loss occasioned to any person acting or refraining from action
as a result of any material in this Technical Release can be accepted by the ICAEW.
© The Institute of Chartered Accountants in England and Wales, 2007
TECHNICAL RELEASE FSF 03/07: Guidance for Auditing Financial Statement Disclosures made under IFRS 7 (FRS 29), Financial Instruments: Disclosures Page 1
Contents
Paragraph Numbers
Introduction
1
Background
2–4
Summary of the changes introduced by IFRS 7
5–6
Auditing issues
Assessing the risk of material misstatement
The auditor’s procedures in response to assessed risks
7
8–12
13–15
The relationship between information reported internally and externally
16
Matters specific to group audits
17
Qualitative disclosures relating to the risk management process
18–20
Assessing the quality of disclosures overall
21–23
Appendix
Page 2 TECHNICAL RELEASE FSF 03/07: Guidance for Auditing Financial Statement Disclosures made under IFRS 7 (FRS 29), Financial Instruments: Disclosures
INTRODUCTION
1
The purpose of this Technical Release is to provide guidance to auditors on the audit
of disclosures made in financial statements under International Financial Reporting
Standard (IFRS) 7, Financial Instruments: Disclosures.
BACKGROUND
2
The IASB issued IFRS 7 in 2005, to promote the quality and consistency of disclosures
in financial statements relating to financial instruments. IFRS 7 supersedes International
Accounting Standard (IAS) 30, Disclosures in the Financial Statements of Banks and
Similar Financial Institutions and the disclosure requirements in IAS 32, Financial
Instruments: Presentation and Disclosure.
3
IFRS 7 (‘the Standard’) is effective for periods commencing on or after 1 January 2007,
with earlier application encouraged. The Standard subsequently adopted by the
European Union is identical to that issued by the IASB and has the same effective date.
4
The Standard is also being implemented by the ASB for UK GAAP preparers as
Financial Reporting Standard (FRS) 29, which has the same effective date as its
international equivalent. FRS 29 differs in a few significant particulars from IFRS 7 but
the following guidance for auditing IFRS 7 applies to FRS 29 except where indicated.
Paragraph references are to IFRS 7.
SUMMARY OF THE CHANGES INTRODUCED
BY IFRS 7
5
IFRS 7 requires more extensive disclosures about an entity’s exposure to risk and
how those risks are managed than IAS 32, and specifies that both qualitative and
quantitative disclosures should be given. Qualitative disclosures include an explanation,
for each type of risk arising from financial instruments, of an entity’s ‘objectives,
policies and processes for managing the risk and the methods used to measure the
risk’ (paragraph 33). The quantitative disclosures are to be based on the information
provided internally to key management personnel (paragraph 34). The Standard
includes a requirement for a sensitivity analysis either for each type of market risk
(paragraph 40), or one that reflects interdependencies between risk variables,
such as value at risk (VAR) (paragraph 41).
6
Unlike the superseded IAS 30, IFRS 7 applies to financial instruments held by all types
of entity and not specifically to those held by financial institutions.
AUDITING ISSUES
7
This Technical Release considers the following auditing issues:
• assessing the risk of material misstatement;
• the auditor’s procedures in response to assessed risks;
• the relationship between information reported internally and externally;
• matters specific to group audits;
• qualitative disclosures relating to the risk management process; and
• assessing the quality of the disclosures overall.
TECHNICAL RELEASE FSF 03/07: Guidance for Auditing Financial Statement Disclosures made under IFRS 7 (FRS 29), Financial Instruments: Disclosures Page 3
ASSESSING THE RISK OF MATERIAL
MISSTATEMENT
8
Significant risks are likely to arise in those areas that are subject to significant
judgement by management or are complex and properly understood by comparatively
few people within the audited entity. The application of IFRS 7 is one such area and
may give rise to significant audit risk in respect of the adequacy of financial statement
disclosures. ISA (UK and Ireland) 315, Understanding the Entity and its Environment and
Assessing the Risks of Material Misstatement, requires that ‘The auditor should obtain
an understanding of the entity and its environment, including its internal control,
sufficient to identify and assess the risks of material misstatement of the financial
statements whether due to fraud or error, and sufficient to design and perform
further auditor procedures.’ (ISA (UK and Ireland) 315, paragraph 2)
9
In assessing the risk of material misstatement associated with an entity’s IFRS 7
disclosures, specific considerations for the auditor may include the following:
• The entity’s use of financial instruments and its exposure to risk (IN4)
• The significance of financial instruments for an entity’s financial position and
performance (IN5(a))
• If an entity is close to full utilisation of its internal risk limits, or a Financial Services
Authority-regulated entity has little headroom between its actual capital and that
required by the regulator, the auditor considers the extent to which the IFRS 7
disclosures may affect economic decisions more than would otherwise be the case,
and the adequacy of disclosures explaining the entity’s circumstances. IAS 1,
Presentation of Financial Statements, has been amended for periods commencing on
or after 1 January 2007 to require additional disclosures in relation to capital (IAS 1,
paragraphs 124A-124C).
10 One source of risk under IFRS 7 is the disclosure of the quantification of exposure to
risks arising from financial instruments. Guidance in PN 19, developed for auditors
considering the valuation techniques used by banks and building societies, provides
suggestions for reviewing controls and substantive testing. Whilst this was not written
to support the audit of the IFRS 7 disclosures or the audit of entities other than banks
and building societies, it may nevertheless be useful to auditors planning their
approach to IFRS 7 quantitative disclosures and has been reproduced in the Appendix
to this Technical Release.
11 The introduction of the new external disclosures required under IFRS 7 may prompt
some preparers to review and supplement their internal processes and controls for
managing and reporting risk, in order to conform with emerging industry standards.
The auditor considers the implications, if any, of such changes in processes and
controls to their assessment of the risk of material misstatement and understanding
of the entity’s internal controls (see ISA (UK and Ireland) 315).
12 Subject to the complexity and specialist nature of the risks generated by the financial
instruments held by the entity, the extent of the risks and indeed the inherent difficulty
in assessing the risks associated with complex financial instruments, auditors should
consider whether they need to consult with experts or use work performed by an
expert to support their audit. Auditors who are not experienced in auditing financial
instruments disclosures may have a particular requirement for expert input. ISA (UK
and Ireland) 620, Using the Work of an Expert, provides further guidance.
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THE AUDITOR’S PROCEDURES IN RESPONSE
TO ASSESSED RISKS
13 ISA (UK and Ireland) 330, The Auditor’s Procedures in Response to Assessed Risks,
provides guidance on audit procedures which test controls and substantive testing
and obtaining audit evidence. Suggestions for procedures when auditing market risk
information supplied under IFRS 7 by banks and building societies is provided by the
APB in PN 19. This is reproduced in the Appendix, but will need to be adapted for
entities which are not deposit takers.
14 Preparers which are not financial services institutions may be unfamiliar with disclosing
the market risk sensitivity analyses or VAR amounts required by IFRS 7. Entities making
these disclosures for the first time may not have established appropriate controls and
audit risk in this area for such entities may be higher than for those experienced in
providing such disclosures. ISA (UK and Ireland) 545, Auditing Fair Value Measurements
and Disclosures, provides guidance on assessing controls over fair value measurements
and disclosures. Where the control framework is underdeveloped, the auditor considers
the impact of this on their audit approach to IFRS 7 disclosures as well as any wider
implications for their audit.
15 Auditors consider whether, in the preparation of sensitivity analysis, all reasonably
possible changes have been included. For example, these may be changes in interest
rates, foreign exchange rates or price movements, depending on the financial
instruments in question. Application guidance to IFRS 7 explains that changes which
are remote or ‘worst case’ scenarios should not be considered reasonably possible
changes (B19), and gives further direction on how entities might approach sensitivity
analyses (B17-21). Auditors also assess whether the market risk disclosures describe the
impact of changes in interest rates on both fixed and floating rate assets and liabilities.
THE RELATIONSHIP BETWEEN INFORMATION
REPORTED INTERNALLY AND EXTERNALLY
16 IFRS 7 requires summary quantitative data about exposure to risk to be ‘based on’ the
information reported internally (paragraph 34). Accordingly, auditors consider whether
the information disclosed in the financial statements for the purposes of the Standard
is based on that used internally, rather than whether it is identical. Differences between
the information used internally and reported externally may arise where a simplified
version of a measure is used for external purposes, for example, banks may report a
simplified VAR. Where such differences exist it will be useful if the client has prepared
a reconciliation which the auditor can review. Differences between information used
internally and reported externally may also arise where the risks associated with
financial instruments are not managed on a similar basis across a company or group,
but to avoid generating an unhelpful level of detail in the financial statements,
the information is summarised for external reporting.
MATTERS SPECIFIC TO GROUP AUDITS
17 IFRS 7 disclosures are required in the financial statements prepared by the parent
company for the group, its entity-only statements and in each subsidiary’s individual
financial statements, as there is no specific exemption for subsidiaries in IFRS 7. Note
that FRS 29 differs from IFRS 7 in this respect as it gives exemptions to subsidiaries
where 90% of voting rights are held within the group and the entity-only accounts
of parents. Where disclosures are being made by different entities within the group,
the auditor considers whether the IFRS 7 disclosures are being made to the appropriate
level of materiality and are clearly described. Where internal management reporting
lines do not coincide with the legal entities preparing financial statements, for example
TECHNICAL RELEASE FSF 03/07: Guidance for Auditing Financial Statement Disclosures made under IFRS 7 (FRS 29), Financial Instruments: Disclosures Page 5
because the group’s activities and risks are managed by type of operation, the auditor
considers whether the risk disclosures in the entity-only financial statements are
appropriate and complete.
QUALITATIVE DISCLOSURES RELATING
TO THE RISK MANAGEMENT PROCESS
18 IFRS 7 specifies that for each type of risk arising from financial instruments, an entity
shall disclose ‘its objectives, policies and processes for managing the risk and the
methods used to measure the risk’ (paragraph 33). Auditors review the disclosures
included in the financial statements to ensure they are factual descriptions of the
objectives, policies and processes used. More subjective commentary on risks should
form part of other narrative documents within the annual report, rather than being
part of the audited financial statements. In connection with the financial statement
disclosures, the auditor seeks evidence of approval of the disclosures by the directors
and those charged with governance. If sufficient evidence is not available the auditor
considers whether written representations in respect of disclosures are required.
19 IFRS 7 application guidance specifies that information about the nature and extent
of risks arising from financial instruments can be included in the financial statements
by way of cross-reference to other documents within the annual report, such as a
management commentary or risk report (paragraph B6). To avoid extending the
scope of the audit unintentionally, auditors consider whether any such cross-reference
is sufficiently specific and does not extend to other information in the management
review.
20 A particular instance where additional information could inappropriately be scoped
into, or IFRS 7 information left out of, the financial statements arises in relation to
directors’ reports. The Companies Act 1985 specifies that a company’s directors’ report
should indicate the financial risk management objectives and policies of the company
in relation to financial instruments, along with an indication of exposure to price risk,
credit risk, liquidity risk and cash flow risks (Companies Act 1985, Schedule 7, 5A).1
Some companies may seek to combine the disclosures required by IFRS 7 with those
required by law to be included in the directors’ report, in which case the preceding
guidance on a specific cross-reference will be relevant.
ASSESSING THE QUALITY OF DISCLOSURES
OVERALL
21 The auditor considers whether the IFRS 7 disclosures, taken together, report the
entity’s management of risks arising from financial instruments clearly and
comprehensively. This is more likely to be the case where the disclosures explain
how risks arising from financial instruments relate to other aspects of the business,
for example where an instrument is used to hedge the price of raw materials.
22 Risk systems will vary as to whether they report gross risk positions or the net position
after offsetting equal and opposite positions. IFRS 7 does not specify whether the gross
or net amount should be shown for many of the quantitative disclosures it requires.
Subject to the specific risks associated with an entity’s financial instruments, the
presentation of either net or gross information may be more relevant. In some cases,
it may be useful to disclose both. For example, where there is a significant risk which
has been fully hedged, gross disclosures showing both the position giving rise to the
risk and the hedge being used to manage this risk are likely to better reflect the scale
of activity in financial instruments than would a net disclosure. Accordingly, auditors
1
The draft regulations which set out the detailed accounting rules under the Companies Act 2006 retain this requirement; Draft Statutory Instrument,
‘The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations’ 2008.
Page 6 TECHNICAL RELEASE FSF 03/07: Guidance for Auditing Financial Statement Disclosures made under IFRS 7 (FRS 29), Financial Instruments: Disclosures
may wish to consider whether the provision of net or gross information significantly
affects the usefulness of the disclosures.
23 The auditor assesses whether the classification of financial instruments for financial
reporting purposes is appropriate to the nature of the information disclosed and takes
into account the characteristics of those financial instruments. The auditor also
considers whether sufficient information has been provided to permit reconciliation
from the IFRS 7 disclosures to the line items in the balance sheet, where this is relevant
(IFRS 7, paragraph 6).
TECHNICAL RELEASE FSF 03/07: Guidance for Auditing Financial Statement Disclosures made under IFRS 7 (FRS 29), Financial Instruments: Disclosures Page 7
APPENDIX
Extracts from Practice Note 19, The Audit of Banks and Building Societies in the United
Kingdom, are reproduced below. The PN was written specifically for the audit of banks
and building societies (‘deposit takers’). However, the extracts below are also relevant to
the audit of businesses which are not deposit takers, but which have significant financial
instrument activity. Clearly, the application of the guidance will need to be assessed in
the context of the specific audit. References in the PN to the ‘deposit taker’ should be
interpreted as referring to the audited entity.
In addition, existing guidance in PN 23, Auditing Derivative Financial Instruments, may be
useful to the audit of IFRS 7 information, including its suggestions for audit procedures in
relation to valuation and measurement (paragraphs 82-87). Those using this PN should,
however, be aware that parts of it are now out of date.
EXTRACTS FROM PRACTICE NOTE 19
ISA (UK and Ireland) 330, The Auditor’s Procedures
in Response to Assessed Risks
Disclosure of market risk information under IFRS 7
and FRS 29
113 IFRS 7/FRS 29 Financial instruments: Disclosures may give rise to particular issues
for the auditor, particularly in relation to market risk sensitivity analysis.
Understanding the risk measurement method adopted
by the management
114 A deposit taker applying IFRS 7/FRS 29, where appropriate, discloses a sensitivity
analysis for each type of market risk to which the entity is exposed. Where a
deposit taker uses sensitivity analysis, such as value at risk (‘VAR’) that reflects
interdependencies between risk variables and this is the method used to manage
the financial risks of the business, disclosures based on these measures may be
used instead of the standard method prescribed by IFRS 7/FRS 29 paragraph 40.
115 The auditor obtains an understanding of the method adopted by the management
to develop the market price risk information to be disclosed. This may be done in
conjunction with obtaining an understanding of the deposit taker’s accounting and
internal control systems. For example, the auditor considers the independence of the
deposit taker’s risk management function from the front office in the context of their
understanding of the control environment.
Considering the skills needed by the audit team
116 The audit team is assembled on the basis of the skills needed. The auditor’s approach
to the market price risk disclosures is normally based on reviewing and testing the
process used by the management to develop the information to be disclosed, rather
than on re-performing the calculations (or making or obtaining an independent
assessment). However, obtaining an understanding of that process and assumptions
used may require technical knowledge of risk measurement methodologies; these
can be complex, especially where a VAR model is adopted. Accordingly, when
planning the audit, the auditor considers the skills needed in order to obtain and
evaluate audit evidence in this part of the engagement.
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117 The nature and extent of any technical knowledge of risk measurement
methodologies that are required depends on the circumstances. The auditor takes
into account such factors as the complexity of the model used and whether the
model has received regulatory recognition. Where appropriate, the auditor may
involve an expert in elements of this work (see ISA (UK and Ireland) 620 section).
Considering the application of the risk measurement method
118 The auditor considers whether the risk measurement method adopted has been
applied reasonably by, for example:
• reviewing, and where necessary testing, the internal controls relating to the
operation of the deposit taker’s risk management system, in order to obtain
evidence that the data used in developing the market price risk information
are reliable. This may be done in conjunction with the auditor obtaining an
understanding of control procedures including those over the data fed into the
risk management system, pricing, and independent review of the algorithms.
If the deposit taker has applied for regulatory recognition of the method used,
the auditor reviews correspondence with the regulator regarding such matters;
• reviewing, and where necessary testing, the internal controls relating to changes
in the deposit taker’s risk management system (for example, controls over changes
to algorithms and assumptions);
• if a VAR model is used, performing analytical review of the model’s predictions
during the year against actual outcomes (a process commonly referred to as
‘backtesting’). The auditor normally reviews any comparisons made by the deposit
taker as part of its own backtesting procedures (for a deposit taker to receive
regulatory recognition of the model used it is required to undertake backtesting
procedures);
• agreeing the amount disclosed to the output of the risk management system.
119 If an approach based upon internal controls and backtesting proves to be
unsatisfactory, the auditor may wish to consider testing the accuracy of the
calculations used to develop the required information. However, this situation may
indicate that it would be more appropriate for the deposit taker to make disclosures
on the simpler basis described in IFRS 7/FRS 29 paragraph 40.
Considering the adequacy of disclosures
120 Market price risk information is subject to a number of significant limitations which
are inherent in the risk measurement methods used. For example:
• there are different VAR models and methods of presenting sensitivity analyses.
It is to be expected that, in any particular case, the management of a deposit taker
will make an informed choice of the method that it considers to be most suitable.
Normally, for the purpose of developing the market price risk information to be
disclosed, the management will use the risk measurement method that is used in
the deposit taker’s risk management system. It would, for example, be reasonable
to expect the appropriateness of this method in the past to be supported by the
deposit taker’s own backtesting procedures, where such procedures are performed.
However, in the absence of recognised industry standards on VAR, there is no
objective benchmark against which to assess the future appropriateness of
management’s choice;
• both VAR models and sensitivity analyses involve the management making a
number of important assumptions in order to develop the disclosures. These are,
by their nature, hypothetical and based on management’s judgment (for example,
TECHNICAL RELEASE FSF 03/07: Guidance for Auditing Financial Statement Disclosures made under IFRS 7 (FRS 29), Financial Instruments: Disclosures Page 9
when using a VAR model, assumptions are made concerning the appropriate
holding period, confidence level and data set);
• both VAR models and, to a limited extent, sensitivity analyses are based on
historical data and cannot take account of the fact that future market price
movements, correlations between markets and levels of market liquidity in
conditions of market stress may bear no relation to historical patterns; and
• Each of the methods permitted for developing market price risk information may
lead to a deposit taker reporting significantly different information, depending on
the choice made by the management. IFRS 7/FRS 29 paragraph 41 requires the
market price risk information disclosed to be supplemented by other disclosures,
including explanations of:
– the method used in preparing such sensitivity analysis and of the main
parameters and assumptions underlying the data provided in the disclosures;
and
– the objective of the method used and the limitations that may result in the
information not fully reflecting the fair values of assets and liabilities involved.
121 The auditor considers the overall adequacy of the disclosures made by the deposit
taker in response to the requirements of IFRS 7/FRS 29 and whether the market risk
information is presented fairly so that its limitations can be understood. In particular,
the auditor considers whether it is sufficiently clear that:
• the market price risk information is a relative estimate of risk rather than a precise
and accurate number;
• the market price risk information represents a hypothetical outcome and is not
intended to be predictive (in the case of probability-based methods, such as VAR,
profits and losses are almost certain to exceed the reported amount with a
frequency depending on the confidence interval chosen); and
• future market conditions could vary significantly from those experienced in
the past.
122 In many deposit takers and related groups, market price risk is primarily managed
at the level of individual business units rather than on a legal entity or group-wide
basis. Therefore, the auditor considers the appropriateness of the basis on which the
market risk information to be disclosed in the financial statements is to be compiled.
It may well be inappropriate simply to aggregate the operating unit information to
arrive at the information to be disclosed for the deposit taker or group as a whole.
Considering the consistency of the risk measurement method
adopted
123 The main purpose of the disclosure of market price risk information is to provide
users of a deposit taker’s financial statements with a better understanding of the
relationship between the deposit taker’s profitability and its exposure to risk. For
example, an increase in profitability may be achieved by taking on increased risk.
IFRS 7/FRS 29 paragraph 40(c) requires disclosure of any changes in the methods
and assumptions used and the reasons for the changes. Therefore, the auditor
considers the consistency of the method, the main assumptions and parameters
with those used in previous years.
124 If the method used for developing the market risk information is also used in the
deposit taker’s risk management system, modifications will be made to the method
as the need arises. If the deposit taker performs its own backtesting procedures, this
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may lead to modification of, for example, the algorithm used, the assumptions and
parameters specified or the parts of the trading book covered. Where modifications
have been made, the auditor considers their effect on the market risk measures and
whether appropriate disclosures about the changes have been made.
125 In some cases, re-statement may not be possible if the relevant data for the previous
year cannot be constructed and in this case the auditor considers whether the
disclosures provide sufficient information about the nature and extent of any change
in the entity’s risk profile. For example, as well as providing the current year figure
on the ‘new’ basis, it may be relevant to show both the current year and the
previous year figure on the ‘old’ basis. In all such cases, the auditor considers
whether the disclosures contain sufficient narrative explanation of the change.
ISA (UK and Ireland) 545, Auditing Fair Value Measurements
and Disclosures
143 The valuation of derivative and other financial instruments which are not traded in
an active market and so for which valuation techniques are required is an activity
that can give rise to significant audit risk. Such financial instruments are priced using
valuation techniques such as discounted cashflow models, options pricing models
or by reference to another instrument that is substantially the same as the financial
instrument subject to valuation. The auditor reviews the controls, procedures and
testing of the valuation techniques used by the deposit taker. Controls and
substantive testing could include focussing on:
• Valuation technique and approval and testing procedures used by the deposit
taker;
• The independence of review, sourcing and reasonableness of observable market
data and other parameters used in the valuation techniques;
• Calibration techniques used by the deposit taker to test the validity of valuation
techniques applied by comparing outputs to observable market transactions;
• Completeness and appropriate inclusion of all relevant observable market data;
• The observability in practice of data classified by the deposit taker as observable
market data;
• The appropriateness and validity of classification of instrument designated as being
traded in a non active and in an active market;
• The appropriateness and validity of the validity of the particular valuation
technique applied to particular financial instruments;
• The appropriateness and validity of the parameters used by the deposit taker
to designate an instrument as substantially the same as the financial instrument
being valued;
• Mathematical integrity of the valuation models; and
• Access controls over valuation models.
© Auditing Practices Board Ltd (APB). Adapted and reproduced with the kind permission
of the Financial Reporting Council. All rights reserved.
TECHNICAL RELEASE FSF 03/07: Guidance for Auditing Financial Statement Disclosures made under IFRS 7 (FRS 29), Financial Instruments: Disclosures Page 11
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GUIDANCE FOR AUDITING FINANCIAL
STATEMENT DISCLOSURES MADE
UNDER IFRS 7 (FRS 29), FINANCIAL
INSTRUMENTS: DISCLOSURES
Status of Guidance
FSF 3/07 is issued as interim guidance to assist auditors of entities applying
IFRS 7 for the first time. The Institute of Chartered Accountants in England
and Wales (ICAEW) is not responsible for setting Financial Reporting Standards,
which are set in the UK by the Accounting Standards Board (ASB), or for the
International Financial Reporting Standards set by the International Accounting
Standards Board (IASB). Nor is it responsible for International Standards on
Auditing (ISAs) which are set by the International Auditing and Assurance
Standards Board (IAASB) or for ISAs (UK and Ireland), which are set by the
Auditing Practices Board (APB). Our role includes providing guidance to our
members where we consider such guidance is necessary and is not provided
elsewhere, in order to enhance the consistency and quality of auditing.
The content of this Technical Release has no formal or mandatory status
beyond that of guidance to our members.
Final guidance will only be issued if further issues arise or significant comments
are received in respect of this interim guidance.
Financial Services Faculty
The Institute of Chartered Accountants
in England and Wales
Chartered Accountants’ Hall
PO Box 433
Moorgate Place
London EC2P 2BJ
T: +44 (0)20 7920 8417
F: +44 (0)20 7638 6009
E: [email protected]
DX 877 London/City
www.icaew.com/fsf
TECPLM6667 10/07