AT-A-GLANCE
As artificial intelligence continues to permeate far reaching aspects of human experience at a rapid pace, the United Kingdom’s Financial Reporting Council (FRC) has been tracking developments and anticipating the implications for corporate reporting. Our first article highlights some of the findings and predictions from the ongoing multi-year Digital Present and Digital Future projects sponsored by the FRC’s Financial Reporting Lab.
The attainment and enhancement of effective audit quality is a never ending quest for the public accounting industry. Working to provide tools that support auditors in pursuit of that quest, the AICPA’s Center for Audit Quality recently published the Audit Quality Disclosure Framework. Our second article describes this new resource, which can benefit both public and private company auditors.
Finally, our Worldwide Update covers news from organizations across the globe.
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ARTIFICIAL INTELLIGENCE AND CORPORATE REPORTING
Financial Reporting Council report
considers the impact
The Financial Reporting Council (FRC) is the regulator of auditors in the United Kingdom, as well as the standard setter for corporate governance. The FRC’s goal is to promote transparency and integrity in business for the investors and others who rely on company reporting.
In response to the call for improved corporate reporting, the FRC established the Financial Reporting Lab (Lab) in 2011, as a means for investors and companies to together develop pragmatic solutions. To address technology related challenges, the Lab initiated two projects. Digital Present looked at the current state of technology tools and how to best employ them. Digital Future, building on the results of Digital Present, “is designed to identify what benefits the new mediums and technologies should offer, consider which technologies might do this and how companies can make the most of the digital opportunity.”
One of the findings of the Digital Present project report released in 2015 was that companies were not making the most of the available technology in the corporate reporting process. In what may sound a bit quaint today, the report also found that the use of the PDF format was the desirable digital medium for corporate reporting, and that expanded use could take advantage of “a series of beneficial features and attributes.”
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NEW FRAMEWORK ADDRESSES AUDIT QUALITY DISCLOSURES
Useful guidance for audit firms of all sizes.
The Center for Audit Quality (CAQ), an AICPA affiliate, describes itself as an autonomous public policy organization dedicated to enhancing investor confidence and public trust in global capital markets by fostering, among other things, high-quality performance by public company auditors. Time and time again, polls have given high marks for the public trust of accountants in various regards. For example, a January 2019 survey taken by three international accounting bodies found a much higher trust level in accountants than in governmental tax systems. Maintaining the high confidence of the public is critical for public accountants who hold the exclusive franchise for audit reports on financial statements.
Even though the resources generated by the CAQ are specifically directed toward public company auditors, they provide beneficial insights and tools that can be helpful to private company auditors as well. A point in case is the recently published Audit Quality Disclosure Framework (AQDF).
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Periodic roundup of recent and upcoming actions and activities by audit and accounting organizations throughout the world.
INTERNATIONAL
IASB
International Accounting Standards Board (www.ifrs.org)
No new developments.
IFAC
International Federation of Accountants (www.ifac.org)
- The International Auditing and Assurance Standards Board (IAASB) - Exposure Draft, International Standard on Quality Management 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, issued February 8, 2019, proposes “various enhancements to address firms’ systems of quality management, previously known as systems of quality control. This Exposure Draft includes a new proactive risk-based approach to an effective system of quality management that establishes the foundation for consistent engagement quality. Other enhancements include: increasing firm leadership responsibilities and accountability, and improving firm governance; modernizing the standard for an evolving and increasingly complex environment, including addressing the impact of technology, networks, and use of external service providers; and more rigorous monitoring of quality management systems and remediating deficiencies.” The comment period ends July 1, 2019.
- The International Auditing and Assurance Standards Board (IAASB) - Exposure Draft, International Standard on Quality Management 2, Engagement Quality Reviews, issued February 8, 2019, proposes “various enhancements to engagement quality reviews. This includes a new proposed standard on engagement quality reviews that includes enhancements regarding: the eligibility criteria to perform the engagement quality review; and the engagement quality reviewer’s performance and documentation. The requirements addressing the selection of engagements for review have also been strengthened…” The comment period ends July 1, 2019.
- The International Auditing and Assurance Standards Board (IAASB) - Exposure Draft, International Standard on Auditing 220 (Revised), Quality Management for an Audit of Financial Statements, issued February 8, 2019, proposes improvements to “highlight the importance of the public interest role of audits, and improve the emphasis on the importance of the appropriate application of professional judgment and exercise of professional skepticism; clarify the role and responsibilities of the engagement partner…; modernize ISA 220 for an evolving environment…; and clarify the relationship between ISA 220 and the International Standards on Quality Control/Management… The comment period ends July 1, 2019.
- International Public Sector Accounting Standards Board (IPSASB) - IPSAS 42, Social Benefits, issued January 31, 2019, “provides guidance on accounting for social benefits expenditure. It defines social benefits as cash transfers paid to specific individuals and/or households to mitigate the effect of social risk.” Effective generally in 2022 with early adoption permitted.
- International Public Sector Accounting Standards Board (IPSASB) - Exposure Draft 67, Collective and Individual Services and Emergency Relief (Amendments to IPSAS 19), issued January 31, 2019. “ED 67 forms part of the IPSASB’s broader non-exchange expenses project, proposing requirements for collective and individual services and emergency relief. The purpose of the IPSASB’s project on non-exchange expenses is to develop new or amended standards that provide recognition and measurement requirements applicable to providers of non-exchange transactions, except for social benefits.” The comment period ends May 31, 2019.
- International Public Sector Accounting Standards Board (IPSASB) - Long-term Interests in Associates and Joint Ventures (Amendments to IPSAS 36) and Prepayment Features with Negative Compensation (Amendments to IPSAS 41), issued January 30, 2019, “arise from consideration of the annual improvements and narrow scope amendments projects of the IASB.” Effective generally in 2022 with early adoption permitted.
- International Accounting Education Standards Board (IAESB) – IES 7, Continuing Professional Development (Revised), issued January 28, 2019, “clarifies the principles and requirements for how professional accountancy organizations measure, monitor, and enforce their continuing professional development systems. It makes it clear that all professional accountants must develop and maintain professional competence to perform their role.” Effective on January 1, 2020.
ACCA
Association of Chartered Certified Accountants (www.accaglobal.com)
- Integrated reporting in Turkey - current situation, stakeholders' perceptions and expectations, research report published February 7, 2019, in conjunction with the Center for Finance, Governance and Sustainability (CFGS) and KPMG Turkey, “aims to reveal views of the Turkish business world regarding integrated reporting and corporate reporting practices.”
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