ISA 720 - AUDITOR’S RESPONSIBILITIES RELATING TO OTHER INFORMATION

Question 1

Other Information

Answer 1

Definition of Other Information:
‘OTHER INFORMATION’ is financial or non-financial information other than financial statements & the auditor’s report thereon included in an entity’s annual report.

Examples of OTHER INFORMATION in Annual Reports

• Directors’ report (or Management Commentary)
• Chairman’s Statement.
• Corporate Governance Statement.
• Internal Control & Risk Assessment Reports
• Integrated Reports

Corporate Social Responsibility reports, sustainability reports
are usually issued as standalone documents & NOT part of the Annual Report ( & therefore, outside the scope of this ISA)

Users have been attaching more importance to such information & disclosures, using these to analyse the risks of the business and for decision-making purposes.

A misstatement of the FS or misstatement of the Other Information (since OI is not audited) may:

− Undermine the credibility of the financial statements and the auditor’s report.

− Also inappropriately influence the economic decisions of the users for whom the auditor’s report is prepared.

Question 2

ISA 720

Objectives

Answer 2

The objectives of the auditor, having READ the other information, are:
1/ READ
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.

2/ RESPOND
To respond appropriately when the auditor identifies that such material inconsistencies appear to exist.

3/ REPORT
To report in accordance with this ISA.

Question 3

ISA 720

Auditors RESPONSIBILITIES regarding Other Information

Answer 3

1/ Obtain the OI
2/ READ & CONSIDER the OI
* Material inconsistency between the OI & the F/S
* Material inconsistency between the OI & the auditor’s knowledge of the matter

OI that is materially inconsistent with the financial statements or the auditor’s knowledge obtained in the audit may indicate that there is a material misstatement of the financial statements or that a material misstatement of the other information exists.

3/ RESPOND when OI or F/S item APPEARS to be materially misstated

▪ Discuss with management

▪ Perform procedures to ascertain whether:

• A material misstatement of the Other Information exists; Misstatement of the OI exists when the OI is incorrectly stated or [is] otherwise misleading (including [when] it omits or obscures information [that is] necessary for a proper understanding of a matter disclosed in the other information)
• A material misstatement of the financial statements exists; or
• The auditor’s understanding of the entity & its environment needs to be updated

a) OI Materially Misstated - Request management to correct OI. If management refuse, inform TCWG.
If TCWG refuse, to include “Other Information” para before KAM para > REPORT

b) FS Materially Misstated - Request management to correct F/S. If management refuse, inform TCWG.
If TCWG refuse, modify auditor’s opinion in accordance with ISA 705 > REPORT

c) Auditor’s understanding outdated - Auditor to update his understanding of the matter

Question 4

ISA 720

Placement of “Other Information” paragraph

Answer 4

TAO - B – EMOKOO – RRR – Name - SAD

Module 1-3, page 147