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Enhanced focus on
other information in
auditor reporting
This article aims to:
–– Provide an overview of the reporting
requirements under SA 720 (Revised).
Introduction
In April 2015, the International on Auditing (SAs) 720 – SA
Auditing and Assurance 720 (Revised), The auditor’s
Standards Board (IAASB) issued responsibilities relating to other
revised International Auditing information. This SA deals with
Standard (ISA) 720, The Auditor’s the auditor’s responsibilities
Responsibilities Relating to Other relating to other information,
Information, in order to ensure whether financial or non-financial
that it continues to be capable information (other than financial
of enhancing the credibility of statements and the auditor’s
financial statements. The revised report thereon), included in an
standard became effective for entity’s annual report.
audits of financial statements
The following section aims
for periods ending on or after 15
to provide an overview of the
December 2016.
auditors’ responsibilities under
In line with international SA 720 (Revised) to report on
requirements, the Institute of other information included in an
Chartered Accountants of India entity’s annual report.
(ICAI) revised its Standards
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Depending on the applicable law, regulation or custom, • There is a material inconsistency between the other
one or more of the following documents may form part information and the financial statements
of the annual report: • There is a material inconsistency between the other
• Management report, management commentary, information and the auditor’s knowledge obtained in
or operating and financial review or similar reports the audit.
by those charged with governance (for example, a The material inconsistency identified by the auditor
directors’ report) may indicate that there is a material misstatement of
• Chairman’s statement the financial statements or of the other information,
either of which may undermine the credibility of the
• Corporate governance statement/reports. financial statements and the auditor’s report thereon.
Following are not other information within the scope of Such material misstatements may also inappropriately
this SA: influence the economic decisions of the users for
whom the auditor’s report is prepared.
• Separate industry or regulatory reports (for example,
capital adequacy reports), may be prepared in the The SA 720 (Revised) would also assist the auditor
banking, insurance, and pension industries in complying with relevant ethical requirements and
to avoid association with information that the auditor
• Corporate social responsibility reports believes contains a materially false or misleading
• Sustainability reports statement.
• Diversity and equal opportunity reports In some cases, the applicable financial reporting
framework may require specific disclosures but permit
• Product responsibility reports
them to be located outside of the financial statements.
• Labour practices and working conditions reports As such disclosures are required by the applicable
financial reporting framework, they form part of the
• Human rights reports
financial statements. Accordingly, they do not constitute
• Other regulatory filings with the government other information for the purpose of this SA. For
agencies such as the Registrar of Companies. example, certain disclosures required by Ind AS 107,
Financial Instruments: Disclosures.
The SA 720 (Revised) also does not apply to preliminary
Objective of SA 720 (Revised) announcements of financial information or securities
offering documents, including prospectuses.
The SA 720 (Revised) increases the
responsibility of the auditor relating
to other information in enhancing the Applicability
reliability of financial statements.
The revised standard on auditing is
The auditor’s responsibilities relating to other effective for audits of financial
information (other than applicable reporting statements for periods beginning
responsibilities) apply regardless of whether the on or after 1 April 2018.
other information is obtained by the auditor prior
to, or after, the date of the auditor’s report.
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Main changes in scope of the When the other information is obtained after the date
auditor’s work of the auditor’s report, the auditor is not required to
update the procedures performed in accordance with
The main changes brought by revised SA requirement of SA 560, Subsequent Event (paragraphs
720 (Revised) are: 6 and 7). However, the auditor would communicate with
• The revised SA 720 (Revised) management or those charged with governance about
broadened the scope of other information by linking it the possible implications when the other information is
to the concept of an annual report1 obtained after the date of the auditor’s report.
1. As per SA 720 (Revised), “an annual report is a document, or combination of documents, prepared typically
on an annual basis by management or those charged with governance in accordance with law, regulation or
custom, the purpose of which is to provide owners (or similar stakeholders) with information on the entity’s
operations and the entity’s financial results and financial position as set out in the financial statements”.
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© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Consider this
• The revision of SA 720 aims to clarify and increase the
auditor’s involvement with other information – whether
financial or non-financial information other than audited
financial statements that is included in the entity’s
annual report.
• The auditors are not required to obtain assurance about
the other information.
• The auditor’s report will include a separate section on other
information when the auditor has obtained some or all of
the other information as of the date of the auditor’s report.
• For audits of financial statements of listed entities, ‘other
information’ section will also be included if the auditor
expects to obtain other information after the date of the
auditor’s report.
Sources:
• SA 720 (Revised), The Auditor’s Responsibilities Relating to Other Information, issued by ICAI.
• IAASB’s publication, At a Glance, The International Standard on Auditing (ISA) 720 (Revised), The Auditor’s
Responsibilities Relating to Other Information, published in April 2015.
© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.