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ASSIGNMENT COVER SHEET

Student ID: 1905504

Student Name: Patrick Chibabula

Course Code: ACC301

Course Title: Auditing 1

Instructor Name: Mr. Muyapekwa Namatama

Essay/Assignment Title: Discuss the IAASB and standard formulation

Due Date: 15th March, 2021

Declaration:
“I acknowledge that submitting this document binds me to the following:
To the best of my knowledge, I assert that no part of this assignment has been copied from the work of anyone else, be it another stude
or any other author or from any source except where due credit is given in the text below, or has been written for me by someone else
except where the relevant instructors and authorities have explicitly permitted such collaboration” .

SIGNATURE: P. Chibabula

Instructor’s Comments:

GRADE [ ]
Discuss the IAASB and Standard Formulation 2

This paper is going to discuss the International Audit and Assurance Standards Board

(IAASB) and standard formulation. The remainder of this paper is structured as follows; In the

first section, the paper will introduce auditing and its link to the IAASB. The second section will

discuss the International Audit and Assurance Standards Board (IAASB), the third section will

present the audit standard-setting process followed by an evaluation on how the standards have

helped the audit exercise around the world, and finally the conclusion in the last section.

Auditing

Auditing is an engagement where the auditor expresses an opinion to enhance the degree

of confidence of the shareholder other than the managers or directors on the outcome of an audit

report or measurement of financial statement against the auditing standards or statutory

requirements (ACCA, 2007, p.3-6). Auditing can be traced back as far as history may reckon, the

practice of auditing around the globe is governed by a set of standards designed to enhance the

objectivity, and professionalism of auditors. The standards and regulations of auditing around the

globe are set and monitored by an international body called the International Audit and

Assurance Standards Board (IAASB) respectively.

International Audit and Assurance Standards Board (IAASB)

In March 1978, the International Auditing and Assurance Standards Board (IAASB) was

established. Formerly recognized as the International Auditing Practices Committee (IAPC), the

IAASB comprises of the chairman, and 17 volunteers from around the world. The appointment

of members is done by the Board International Federation of Accountants (IFAC) based on the

recommendations from the nominating committee and approval from the Public Interest

Oversight Board (PIOB). It is therefore a mandatory for all the members to sign a statement of

declaration indicating that they will act with integrity in the interest of the public (IAASB, 2017).
Discuss the IAASB and Standard Formulation 3

The Objective of the International Audit and Assurance Standards Board (IAASB)

(2017, p.1) The main objective of the IAASB is setting international standards that serves

the interest of the public in auditing, review, quality control, other assurance, and related

services, and providing a platform to reconcile national and international standards. In this

regard, the board enhances the quality and conformity of practice throughout the world and

increases the confidence of the general public in assurance profession and global assurance

engagement. The following are the three main themes in public interest addressed by the IAASB.

Supporting Global Financial Stability. As a result of the late 1990s huge companies’

financial fraud and scandal, the IAASB have developed audit standards that addresses emerging

market financing in a global context. The auditing standards focus on current market conditions,

highlighting systemic issues that could pose a risk to financial stability such as the “Enron and

WorldCom scandals” and sustained market access by emerging market participants such as the

shareholders and the directors (Institute, 2021).

Enhancing the Role, Relevance and Quality of Assurance and Related Services.

Aside from supporting global financial stability, CFA Institute (2021) alludes to that the IAASB

enhances the role, relevance and quality of assurance and other related services by addressing the

objectivity of the assurance practitioner, enhancing public interest through sensitization on the

importance of assurance and other related services, and setting high quality standards.

Facilitating Adoption and Implementation of the Standards. With a view of creating

uniformity in the practice of assurance engagement around the globe, the IAASB facilitates the

adoption and implementation of the auditing standards. Which in turn enhances objectivity and

professionalism in the practice of auditing within a given jurisdiction, (Institute, 2021, para. 4).
Discuss the IAASB and Standard Formulation 4

Standard Formation (Due Process)

Due process is the fair treatment of everyone, by resolving legal issues with respect to

accepted principles and rules. To ensure that the views of those affected by the IAASB standards

are absolutely considered, an accurate due process is followed. Therefore, the development of all

the IAASB standards follow the outlined process below.

Research and Consultation

With the aim of enhancing an accurate due process, the IAASB establishes a project task

force. The project task force is charged with the responsibility of consulting from interested

parties and those affected by the standards. Based on the feedback gathered from stakeholder

consultations, the task force will conduct a research on areas that need standard formation and

the priority in regards to their selection. The outcome of the research and the ideas of the task

force to remedy the problem are set out in a discussion paper and presented for a transparent

debate.

Transparent Debate

After consultations and research, the task force will propose standards that will be

presented in form of an agenda paper for discussions and debates at the IAASB which is open to

the public. At this meeting, the general public will be invited to observe the discussions and

debates of the Interpretation Committee (IC) on how the proposed standards will serve the need

of a broader economy for the purpose of an assurance engagement. Once the transparent debate

finishes, the IAASB drafts the proposed standards into exposure drafts.
Discuss the IAASB and Standard Formulation 5

Exposure for Public Comment

Exposure drafts are then placed on the website of the IAASB and distributed widely for

the public to comment within a period of 120 days. During this period, comment letters are

received from companies, investors, and industrial associates across all the 11 sectors. The

comment letter addresses the financial material instability problems not spotted during the

transparent debate. This feedback ensures that the created standards consider the need of a

broader economy.

Consideration of Comments Received on Exposure. The general public is invited to

attend the second IAASB meeting where the comments and recommendations obtained as a

result of exposure draft are discussed, and the exposure draft is updated as required. If the

IAASB determines that the modifications made after exposure are significant enough to warrant

re-exposure, the amended paper will be reissued to the general public again for further comment

within a specified period of time.

Affirmative Approval. Affirmative approval is the last stage of the standard setting

process where two-thirds of the IAASB members (18 x 2/3 = 12) are required to establish an

affirmative vote of the exposure draft, the re-exposure draft upon consideration of the

modifications and recommendations received from comment letters across 11 sectors and finally

the international audit standard is made. In summary, the International Audit and Assurance

Standards Bord revises the international auditing standards every five year to meet with the

dynamics and needs of the market. In this regard, a rigorous due process is thoroughly

considered so as not to leave anyone behind but meet every stakeholder need despite their

jurisdiction
Discuss the IAASB and Standard Formulation 6

How the Standards have the Practice of Auditing Worldwide.

Conclusion