ACCA AAA ^INT Syllabus G. Current Issues - Current Developments In Auditing Standards - Part 1 - Notes ^{1 / 4}

The lAASB generally considers all audits the same - but there are special considerations for smaller
entities

The lSAs must be followed, even in the audit of SMEs.

However, the work needed to comply with ISAs will be less - it just needs professional judgement to decide which procedures are needed

Eg. Obtaining an understanding of a smaller entity will be much easier

Individual clarity ISAs include guidance on specific points relating to small entity audits. It doesn't reduce the responsibility of the auditor to apply and comply with the requirements of the lSAs.

Big data is basically the huge amounts of info now available to businesses

Data analytics tries to identity patterns. trends or correlations. Making sense of it.

3 Vs of big data: there are larger Volumes, faster Velocity, more Variety.

Big Data and Audit

Recent advances in lT make it increasingly possible for auditors to examine a 100% of the transactions - and to represent trends graphically.

This may bring about a long-term revolution in audit approach

So not only sampling would not be necessary but neither would internal control testing  

The auditor would still have to understand the system producing the data. The auditor would also need to understand and test how data got into the system in the first place

Eg. Cash received data would still need testing against the actual cash receipts. 

So, data analytics will lead to a reconsideration of how controls at least are tested

They would also lead to better audits by helping auditors:

• Analysis revenue trends into product or region

• Match sales orders to cash

• Match purchase/sales orders. goods received/despatched documentation and invoices

• Test user codes for segregation of duties

IAASB ‘Request for lnput’: Exploring the Growing Use of Technology In the Audit, with a Focus on Data Analytics

The use of DA should help the auditor to obtain an understanding of the entity and its environment, thus improving, professional skepticism

Limitations of DA

• Auditors must understand the data - and its relevance to the audit.

• Even testing 100% of a population still ONLY gives reasonable assurance, as professional judgement is always needed.

• Accounting estimates require professional judgement. DA can be a useful aid here only

• Auditors and stakeholders should not become overconfident in technology.

Current lSAs don't encourage DA, because it never really existed when they were created

Challenges to the increased use of DA

1. Data Acquisition - Acquiring and storing large amounts of data and be technically difficult

2. Conceptual challenges -How to use data in different ways than now

3. Legal and regulatory challenges - eg data security.

4. Resource availability - eg. highly-skilled data scientists

5. Regulators problems - lack of experience so hard to inspect audits

6. Re-training / re-skilling auditors — Significant time and investment

The ED proposed the following changes:

1. Engagement Partner Rotation (Pubic Interest Entity) - an increase from 2 to 5 years

2. EQCR of a listed entity: an increase from 2 to 5 years (3 years for a public interest entity other than listed entity)

3. Agreement of those charged with governance over the application of certain exceptions to the rotation requirements

4. Where jurisdictions have different but robust regulatory safeguards... An alternative approach to the cooling-off requirements for PIE audits

The IESBA is proposing a new structure for the Code of Ethics.

Key features of phase 1 included:

1. Requirements clearly distinguished from application material

2. Increased clarity of responsibility for compliance

3. A reorganisation of the content

4. A new Guide to the Code

Phase 2 moved on to consider the following issues:

. Accountants response to non-compliance with laws and regulations (NOCLAR):

. Long association of firm personnel with an audit or assurance client; and

. Ethical issues that professional accountants in business (PAIBs) often face.